Leveraging benchmarks to target best opportunities for improving medical cost management

Health plans and risk-bearing providers are under increasing pressure to explore business models that allow for the reduction of medical loss ratios (MLRs), strengthen clinical performance and enhance relationships with providers. New forces at the local, state and federal levels are requiring plans to rethink their business models and identify new approaches to growth, and business management and development.

Benchmarking is the best solution to identify these opportunities, however, many payers are unaware of its value in developing an accurate picture of current status. They are missing the opportunity to use benchmarking data to develop a measured strategy for improving operations and lowering costs.

A successful benchmarking strategy includes data from both a population level and clinical perspective. Given that plans are working with limited resources, it is critical they use the information they have at their disposal to prioritize opportunities for improvement. They must also have a robust process in place to remediate issues. Doing so helps to ensure investments are made in the right, and best, programs, as opposed to throwing darts at the wall and seeing what sticks.

Benchmark data should cover:

  • Prevalence costs
  • Cost and utilization profiles
  • Inpatient and outpatient facilities
  • Programs including disease management, care management, etc.
  • Network initiatives
  • Distribution of services across categories of care

Developing a plan of action

Benchmarks alone will not effect change — payers must organize resources to effect that change and maximize the improvements. This includes focusing on engagement and system change as plans move from collecting and analyzing data, to taking action. The following elements are integral to change:

  • Strategic plan
  • Executive support and investment
  • Program management
  • Measurement and tracking tools
  • Contracting evolution/aligned incentives
  • Network optimization
  • Population health — optimization

Plans should make benchmarking part of their regular business processes as it can continue to identify ongoing system change and help to refocus future priorities. It puts greater focus on being more effective from an operational standpoint, as well as enables plans to be stronger on clinical issues.

To learn more about the role benchmarking plays in improving medical cost management, download our article, “Leveraging Benchmarks to Target Best Opportunities for Improving Medical Cost Management.

About the authors

Steve GriffithsSteve Griffiths, PhD, MS, Vice President, Medical Informatics Consulting, Optum

With over 17 years of experience in the health care industry, Dr. Griffiths oversees the Medical Informatics consulting practice within Optum. His team focuses on provider support and improvement initiatives, care management consulting, and program evaluation. Griffiths has spoken nationally on statistical variation in outcomes measurement and works with other experts in the industry to develop recommendations for addressing small population sizes.


Derek PedersonDerek Pederson, MA, MBA, Vice President, Medical Informatics Consulting, Optum

Pederson is an informatics consultant at Optum. He has 19 years of experience in health care reporting and analytics applying episode- and population-based case-mix adjustment methods. He leads a team of informatics consultants that work closely with payer, provider and employer group clients to leverage data to answer complex business questions and improve operations.


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