Medical Cost Control Techniques

By Christine, Brian | Risk Management, April 1993 | Go to article overview

Medical Cost Control Techniques


Christine, Brian, Risk Management


Today, medical costs have become a top concern among U.S. corporations. In order to determine the extent to which self-insuring companies utilize medical cost containment techniques, professors Richard B. Corbett, Claude C. Lilly, Robert A. Marshall and Nancy Sutton-Bell of the department of risk management and insurance at Florida State University conducted a mail survey of major industrial firms selected at random from the Fortune 500. "A large number of management and cost control techniques are popular among companies that self-insure all or part of their medical expense plans," says Dr. Corbett.

The survey, which contains the responses of 58 member firms of RIMS, catalogued the management and cost control techniques used by the respondents. These techniques were divided into six categories: utilization review (UR), alternative providers, cost containment measures, wellness programs, financing strategies and other techniques. In the category of UR, the responses indicate that self-insuring firms use several UR techniques, but to varying degrees. For example, 90 percent indicate that they use continued stay review, 79 percent indicate they make pre-admission second opinions mandatory and 48 percent say they utilize retrospective stay reviews. Another 36 percent of the respondents have review programs for non-hospital benefits.

Many of the respondents also report that they use alternate providers in their self-insurance plans. Among these providers, the most popular are health maintenance organizations (HMOs), with 88 percent of respondents claiming they use them. Another 66 percent of respondents use preferred provider organizations (PPOs) or preferred provider corporations (PPCs), and 36 percent provide access to non-MD providers such as chiropractors. As for cost containment measures, 72 percent report using outpatient testing, 60 percent use a prescription drug plan, and 55 percent utilize contract provisions.

In the category of wellness programs, the respondents were asked about their use of various wellness strategies. Here, the assumption was that self-insurers would utilize a wide variety of measures presumed to cut health care costs. The survey found that 79 percent use employee assistance programs (EAPs), 55 percent use smoking cessation programs, 43 percent employ wellness education, and 40 percent utilize preventive health care programs. Another 34 percent offer well baby care programs, while 33 percent provide nutrition workshops and 5 percent offer family planning.

Respondents were also asked about their use of two financing techniques, capitation arrangements with providers and risk-based (lifestyle) pricing. The survey indicates that so far, few self-insuring firms use either approach, since only 24 percent and 5 percent reported the use of capitation arrangements and risk-based pricing, respectively. However, risk-based pricing may be so new that many firms are unwilling to try it until they learn that other companies have had some success with it. The survey also explored a few other techniques. These include pre-employment physicals (64 percent), Section 125 premium sheltering (57 percent) and 401 (k) plans (22 percent).

OTHER TECHNIQUES

Besides reporting on their firms' use of these cost containment measures, the respondents were also asked to state whether they used any techniques that were not listed on the survey form. The responses reveal that several companies have taken creative approaches to managing and controlling the costs inherent in self-insured, as well as other, plans. …

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