HEALTHCARE COST REDUCTION

HOW A MIDWESTERN MANUFACTURING COMPANY REDUCED THEIR PER CAPITA HEALTHCARE

EXPENSES BY 14% FROM 2013-2014

Topics

• Executive Summary

• Background

• Study Methodology

• Results

• Takeaway

• About Us

Executive Summary

ObjectiveThe average annual premiums for employer sponsored family health coverage increased by 80% since 2003*. Companies are seeking ways to increase benefits to employees while decreasing their healthcare costs. A midwestern manufacturing company, Pride of the Hills (“PHMI”), increased their number of employees by 22% from 2013-2014 while decreasing their health care costs by 9% using telehealth.

The purpose of this study is to determine how and why they succeeded in reducing their costs and how this strategy can be used to help other companies.

ResultsThe study demonstrates that PHMI enjoyed a 47% decrease in primary care payments, and a 26.5% decrease in specialist payments during the study period. There were also a number of other cost savings.

Some of the multiple reasons that the integration of a telehealth program saved the company money are:

• An overall decrease in the utilization of the emergency room

• A reduction in the number of primary care visits ( -33.5%) and specialist visits (-39.5%)

• A shift in plan mix (more employees elected high deductible plans)

• An insurance discount offered by the insurer because the company added the telehealth program

• Additional reasons mentioned in the study

*Utilization can vary dramatically by provider. Average CMDNow first year utilization is 15-25%. Teladoc first year utilization is below 3%

Procedure/Methodology

• ProcedureA rapidly growing manufacturing company PHMI with locations near Wooster and Millersburg Ohio was selected for the study. They were studied for the period June 2012 through May 2013 and for June 2013 through May 2014. Reports were obtained from their major medical provider – Medical Mutual of Ohio and their Director of Human Resources. Parameters studied were claimants, claim records, payments, provider specialty, plan participation, place of service, and absenteeism. Their telehealth was provided by CMDNow – a subsidiary of PSC Technology Inc.

• Key assumptions• In the 2012-2013 period, PHMI had 105 employees; in the

2013-2014 period, PHMI had 135 employees

• PHMI began their telehealth program in March 2013.

• All variables were recorded and tracked on a monthly basis

• The study was completed July 2014

Key findings/results

• The key features of the telehealth program were:

• 24/7 access to a physician via phone/cell phone or video consult

• Employees were encouraged to take advantage of the program

No co-pay, No deductible Employee education at the time of enrollment

AND periodically throughout the year

• Access to the doctor was convenient On a 24 hr basis average wait time was about

20 min During normal business hours average wait time

was under 5 min Employee could consult the doctor at work

Key findings/results

• When given the choice between a more expensive major medical plan or a high deductible plan coupled with a telehealth program, the number of people choosing the more expensive program dropped from 88% to 52%.

2012

/201

3

2013

/201

40

0.51

1.52

2.53

3.54

4.55

ExpensiveHigh De-ductible

Key findings/results

• The change in plan mix in Year 2 resulted in a savings to PHMI of $71,680 when 58 employees chose an HDHP that cost PHMI $103 less per month.

Key findings/results

• The program was designed for high utilization and was successful.

• PH utilization the first year of the program was 63% *

*Utilization can vary dramatically by provider. Average CMDNow first year utilization is 15-25%. with a high of 86% Teladoc average first year utilization is below 3%.

Key findings/results

• The result of high telehealth utilizations was a dramatic reduction in the payments for all physicians (-31%) and in the payments for primary care (-47.1%)

Key findings/results

Because many patients tend to use the emergency room instead of a primary care physician, the emergency room visits also plummeted in Year 2 saving PHMI 8% on their emergency room costs despite having 13% more employees.

Key findings/results

• The convenience of the telehealth service meant that employees actually sought care earlier and resolved health issues more quickly also parents could consult with a doctor on behalf of a sick child from work. Paid time off plummeted. From $53,505 in year 1 to $25,682 in year two with 13% more staff.

• The average paid time off for illness in Year 2 was approximately 50% of that of Year 1.

0.8 1 1.2 1.4 1.6 1.8 2 2.2012345

Paid Time Off For Illness in Days

Key findings/results

• For all of the reasons above, PHMI was able to negotiate a 1.5% discount with its major medical provider resulting in savings substantial enough to pay for almost 50% of the telehealth service.