How to Read Healthcare Reports: Analyze Employer Claims Data

This video provides an in-depth exploration of how to effectively read and extract actionable intelligence from complex healthcare claims reports, particularly from an employer's perspective. Dr. Eric Bricker emphasizes a strategic approach, advising viewers to first define the questions they want to answer rather than getting lost in the overwhelming volume of data typically found in 75-page reports. The core methodology centers on identifying "wheat" (useful information) from "chaff" (distracting data) by focusing on specific, high-impact areas of spend.

The presentation systematically breaks down the analysis into three key areas. First, it highlights the importance of focusing on high-cost claimants—individual people, not just individual claims—over longer periods (quarterly or annually) to capture the full scope of their healthcare utilization. Dr. Bricker introduces the "5/50" and "20/80" rules, noting that a small percentage of individuals drive a disproportionately large share of costs. He identifies a "sweet spot" for intervention among claimants with $20,000 to $100,000 in annual spend, as those above $100,000 are often too entrenched in the healthcare system for employer intervention, while those below $20,000 are too numerous to prioritize effectively.

Secondly, the video delves into analyzing the diagnosis (ICD-10) and procedure (CPT) codes for these high-cost claimants. This granular detail helps uncover the "clinical story" behind an individual's spend, allowing employers to differentiate between ongoing conditions (e.g., cancer, surgical complications requiring protracted care) and mostly complete events (e.g., many orthopedic surgeries, heart attacks with successful interventions). Understanding this distinction is crucial for accurate financial modeling and determining where future interventions might be most impactful. Finally, the analysis extends to facility-level spend, urging viewers to identify facilities with high dollar amounts but very few claims, as these often represent "low-hanging fruit" for cost reduction, such as out-of-network dialysis centers or specialized surgery centers. By prioritizing these areas, employers can identify specific plan design changes, network adjustments, or targeted programs to reduce future waste.

Key Takeaways:

• Prioritize Questions Over Data: Before reviewing any healthcare report, formulate specific questions you want to answer. This approach helps filter out irrelevant data and focus on actionable insights, preventing distraction by the sheer volume of information.
• Focus on High-Cost Claimants, Not Claims: Analyze healthcare costs by individual claimants (people) over longer periods (quarterly, annually, or multi-year) rather than by individual claims or monthly data. This reveals the cumulative impact of chronic conditions or recurring treatments, which might be missed by shorter-term, claim-level analysis.
• Identify the "Sweet Spot" for Intervention: The most opportune area for employer intervention lies with claimants whose annual healthcare spend is between $20,000 and $100,000. Claimants above $100,000 are often too complex for direct employer action, while those below $20,000 are too numerous to address individually.
• Understand the "5/50" and "20/80" Rules: A small percentage of employees drive a large portion of healthcare costs. Specifically, 5% of employees typically account for 50% of healthcare costs, and 20% of employees account for 80% of costs. This highlights the importance of targeting high-cost individuals.
• Analyze Diagnosis (ICD-10) and Procedure (CPT) Codes: For high-cost claimants, examine their diagnosis (ICD-10) and procedure (CPT) codes to understand the underlying clinical story. This detail helps determine the nature of their conditions and potential for future costs.
• Differentiate Between Ongoing and Complete Claims: Classify high-cost claims as either "ongoing" (e.g., cancer, surgical complications with prolonged recovery) or "mostly complete" (e.g., many orthopedic joint replacements, heart attacks with successful initial treatment). This distinction is vital for accurate financial modeling and budget forecasting.
• Scrutinize Facility Spend for High-Dollar, Low-Claim Instances: Identify facilities where a significant amount of money is spent on a very small number of claims. These often represent opportunities for cost reduction, such as out-of-network providers or specialized high-cost services like dialysis, where alternative arrangements might be possible.
• Learn from Stop-Loss Carriers: The methodology presented for analyzing high-cost claimants and their clinical stories mirrors how stop-loss carriers assess risk and set premiums. Adopting this perspective can provide valuable insights for employers.
• Allocate Time Strategically: Dedicate approximately 80% of report analysis time to these high-impact areas: high-cost claimants, their diagnosis/procedure codes, and high-spend facilities with few claims.
• Actionable Outcomes: The goal of this analysis is to identify specific opportunities for plan design changes, network adjustments, or the implementation of targeted programs to reduce healthcare waste and optimize costs.

Key Concepts:

• High-Cost Claimants: Individuals whose cumulative healthcare spend over a period (e.g., a year) significantly contributes to overall plan costs.
• 5/50 Rule: A common observation in healthcare where 5% of individuals account for 50% of total healthcare expenditures.
• 20/80 Rule: Also known as the Pareto principle, applied to healthcare, suggesting 20% of individuals account for 80% of total healthcare expenditures.
• ICD-10 Codes (International Classification of Diseases, Tenth Revision): Standardized codes used to classify diagnoses and health problems.
• CPT Codes (Current Procedural Terminology): Standardized codes used to describe medical, surgical, and diagnostic procedures.
• Stop-Loss Carriers: Insurance companies that provide coverage to self-funded employers for catastrophic claims that exceed a certain threshold.

Examples/Case Studies:

• Rural Illinois Dialysis Facility: An employer with 3,000 employees had one individual at a rural Illinois dialysis facility costing $1 million per year. This highlighted an extreme case of high spend on a single claimant, prompting questions about alternative care options or plan design changes.
• Out-of-Network Orthopedic Surgery Center: Another employer faced huge bills for orthopedic procedures performed at an out-of-network surgery center. This example underscored the potential for significant savings through network design changes or client-specific networks to steer members towards in-network, cost-effective providers.