Healthcare Horizons: Case Study 2



		A small 1,400 employee school district on the west coast engaged us to assist them with their escalating medical expenses. They had recently switched claims payers, and their costs were increasing rapidly. Annual medical expenses were running between $7 million and $8 million per year and were on pace to quickly reach $10 million. Our client suspected that the new claims payer was not paying claims appropriately. Healthcare Horizons was able to identify over $200,000 of overpayments, but neither payer was able to ensure collections of these errors. With little assistance from the previous or current claims payer, we were able to collect approximately $140,000 of the overpayments through our internal efforts. These errors did not explain the vast majority of the cost increases. The source of the escalating medical expenses was mostly due to the contract differentials between the new and the old networks. During the transition, claims were paid under the new network rates even though the old rates were still in effect. Through our analysis, we were able to show that most of the cost increases had little to do with payment errors but were related to poor or no discounts at key, heavily utilized facilities, and a benefit design that did not incentivize members to remain within their contracted network. Armed with these facts, the client was able to properly address these issues and implement a strategy to reduce their medical expenses.