It's safe to say that data analytics are transforming every industry. The more data that an organization can glean actionable insight from, the more room there is for making improvements. Such is the case with insurance. With massive amounts of data collected on a daily basis, the business opportunities that are available after sorting and analyzing that data are even greater. It's a practice that many carriers are adopting for a variety of benefits, but most notably, to drive down costs.
Today, companies are using data analytics to proactively implement tactics to improve business processes rather than reacting to problems after they happen. Since data sets are more granular, easier to access and integrated with many other business systems, businesses are able to be much more strategic in their tactical implementation than ever before. With medical spend in particular, analytics allow payers to look at more detailed data sets to identify costs by unit, procedure code or provider type, to name a few. By categorizing medical spend, key cost drivers are more clear and corrective solutions, such as ancillary network services to manage specific types of medical services, can be put in place to reduce spend in those areas.
Ancillary networks encompassing supplemental coverage areas outside of general care, such as diagnostic services, durable medical equipment or physical therapy, are not groundbreaking advancements in the insurance industry. They've been used to reduce medical spend for quite some time; however, in the past few years there has been a noticeable increase in adoption. Payers are more frequently incorporating ancillary network services into their cost containment programs and as a result of new tools and technologies, making them easier to deploy. Another noticeable change in the use of ancillary network services is the growing focus on strategy, thanks to more sophisticated analytics initiatives. Payers are more accurately identifying key cost drivers and therefore, strategically determining which services are most appropriate for delivering overall business benefits.
While payers themselves have become more sophisticated in ancillary network service approaches, the service providers are becoming more sophisticated as well. Rather than only offering value through discounts, ancillary networks are now positioning themselves as strategic business partners by providing other cost control advantages. This is especially true for expense areas such as pharmacy and physical therapy that are notoriously known for being problematic and costly.
Pharmacy
More carriers are evaluating and investing in pharmacy benefit management (PBM) solutions since medication (Rx) is such a significant portion of medical spend. All injuries have downstream issues associated with Rx, such as addiction or abuse that can extend the life of a claim or create new claims. It's a huge area for control – sometimes up to 20% of costs can be recouped. More frequently, PBMs aim to flag savings areas and automatically address them without payer involvement to increase their partnership value. For example, a PBM may automatically detect when generic versus brand medication can be used based on physician instruction, or when a patient is trying to fill a prescription before the fill period is over. This immediately saves on cost and does not require additional resources.
Physical therapy
Likewise, physical therapy is a significant cost category in most claims programs. It's an area that is prone to over utilization and has many different therapy categories. By working with an ancillary network, payers not only receive contracted discounts on needed and approved treatment, but these networks place a more focused control around utilization review and provider management.
As with any industry, expanded use and growth in a specific sector boosts market share for companies operating in that space. This is precisely what is taking place among ancillary network providers. Now that ancillary offerings are critical components of cost containment strategies, there has been a lot of overall market activity around these solutions, making it one of the busiest sectors in the P&C industry.
As a result, there have naturally been a lot of acquisitions and consolidations – some good, some bad. Acquisitions by larger companies can result in better technology or more favorable customer service, which ultimately benefits the end user. On the other hand, with an increase in mergers and acquisitions, there are far fewer vendors to choose from and that is more often than not reflected in price. While prices might skyrocket, P&C providers can also rest assured that innovation and value offerings will as well. With so few competing in the market, ancillary service providers will be fighting for differentiation, and that's a huge benefit for the end user's business.
|Want to continue reading?
Become a Free PropertyCasualty360 Digital Reader
Your access to unlimited PropertyCasualty360 content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Breaking insurance news and analysis, on-site and via our newsletters and custom alerts
- Weekly Insurance Speak podcast featuring exclusive interviews with industry leaders
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical converage of the employee benefits and financial advisory markets on our other ALM sites, BenefitsPRO and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
