Case Study Sponsored by - StarChapterincreases medication adherence Formulary designed to reduce cost without overinflating rebates Pass-through pricing shared with members 14 2020:

Carrie Rust – Chief HR Officer, ELLWOOD Group

Case Study #1 - Journey to Cost and Quality Transparency

Case Study Sponsored by

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Journey to Cost and Quality Transparency

September 9, 2020 Carrie B. Rust

Chief Human Resources Officer

This session summarizes ELLWOOD Group, Inc.’s journey to cost and quality transparency through their

data-driven decisions. Taking control of health insurance cost through plan design and direct employer

contracting is possible and can lead to greater employee engagement with their health insurance.

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Family owned business founded in 1910

Grown organically and via acquisition to become the leading vertically-

integrated supplier of quality metals and custom-engineered components

for critical applications worldwide

From raw materials through finished machined and coated products ready

for assembly, we provide the products our customers require in the

world’s most demanding applications, including those supporting our

nation’s defense

Expanded operations to Texas in 1990

ELLWOOD footprint currently spans 25 locations across North America

Background on ELLWOOD

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Healthcare

The field concerned with maintenance or restoration of the health of the body or mind

Provided by doctors, nurses, dentists, therapists, hospital systems and pharmaceutical companies

Health Insurance

The insurance that compensates for incurred medical expenses (payment)

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Healthcare vs. Health Insurance


Monitor High ClaimsLowered monitoring levels in January 2015 to:− Medical $25k

− Rx $10k

Innovu Data Warehouse Implementation began in July 2016Eligibility, Medical, Rx, Vision, and Workers Compensation data

RAND 2.0 Study in October 2018

Data-driven Decisions

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Health Indicators

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LaggingFinancial

# Medical Claims over $25k

# Rx Claims over $10k

Claims by Member

− EE vs Spouse vs Child

“Our philosophy is that the world is changing too fast for us to look at

incremental benefits, and we need to really be thinking

exponentially,”

-Ben Huffman, ELLWOOD CEO

Financial

Actual vs Budget

EE vs ER Cost Share


Health Indicators

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Leading

Utilization

Preventive Services

Medication Adherence

Diagnosis

Chronic Conditions

Other

# Enrolled in Case & Disease Management

Cost as % of Medicare

“Our philosophy is that the world is changing too fast for us to look at

incremental benefits, and we need to really be thinking

exponentially,”

-Ben Huffman, ELLWOOD CEO

PREVALENCE OF

CHRONIC CONDITIONS

NUMBER OF CHRONIC

CONDITIONS BY

MEMBER


A few ELLWOOD Lessons Learned & 2018-2019 Actions taken

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Pharmacy Spend and UtilizationHigh Utilization at rural PA pharmacy -> No Change, member benefits

Compound Strategy -> Early adopter to require PA for claims > $300

Emergency Room Usage –> “Know where to Go” Campaign

and On-site Clinics“Frequent Fliers”, one member had 10 ER visits in 2016

Out-of-Area Providers -> Added RBP to Out-of-NetworkHIGH Substance Abuse Treatment cost

Musculoskeletal Conditions -> Slips, strains, & sprains

program with Safety department

Metabolic Syndrome -> added Wellness/Health Coach

Narrow Network implemented in 2018

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Optimization and

Prescriptive Analysis

Raw Data

Standard Reporting

Ad-hoc Reporting

Descriptive Analytics

Logic-driven Monitoring

Predictive Analytics

Us

er

En

ga

ge

me

nt

Collective Insight and

Value

We are here

Where are we on the Analytics Maturity Curve?


Medical

TPA: This is to notify you of a high claim released to ELLWOOD

Paid Charge: $90,240.14

Billed Charge: $59,813.18

ELLWOOD: Why is Paid Charge higher than Billed Charge?

TPA: The amount paid is based on our hospital contract. We pay contract rate even if the contract rate is higher than the billed charge.

Pharmacy

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Monitoring High Claims:The Burning Platform for Change

ELLWOOD EE: Why is my brand name prescription four times less expensive than the generic version?

TPA: Pharma will launch a different dose or change the dosage form from a capsule to a tablet. Most likely sometime after launch they will have a series of price increases and then the brand product will exceed the generic price. They may be trying to squeeze some of the smaller generic companies out of the business. Pharma companies make billions for a reason, guaranteed once they have a certain market share the price will change significantly.


2020 Identify a Solution that:

3. Reduces Cost

2. Provides Cost and Quality Transparency

1. Maintains or Improves Employee Engagement with Health Insurance

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ELLWOOD Health Insurance Strategy

• HDHP/HSA

• Narrow Networks

• Rx Management

• On-site Clinics

• Data Analytics

• Tobacco and Spousal Surcharges

• Personal Coaching

• Mandatory 2nd Opinion for certain surgical procedures

• Opt-out (vs opt-in) Disease Management

• Outcomes-based Wellness Programs

• Move to “niche” Third-Party Administrators

Medical:

• Reference Based Pricing and/or Direct Provider Contracting

• Incentivize use of Quality Providers

Pharmacy:

• Rx Pass-Through Pricing & Rebates

• Eliminate Rx Spread Pricing

• Variable Copay Program

Expand Wellness

Cost & Quality Transparency

Consumerism

2017-2019 Strategy


QUALITY PRICE HOSPITAL MILES FROM 2ND

LARGEST FACILITY

95% $87,500 Hospital A 49

92% $59,500 Hospital B 29

88% $49,000 Hospital C 89

86% $70,000 Hospital D 56

83% $91,000 Hospital E 32

76% $91,000 Hospital F 21

Smart Health Decision Opportunities

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ELLWOOD opportunity for quality impactExample: Major Cardiac Surgery - $35,000 procedure

Quality data based on Medicare patient safety and outcome measure from Quantros CareChex Quality Rating System

2018 ELLWOOD claim repricing performed by Payer Compass, data analysis limited to PA providers only


Medical

Shift away from HDHP to Copay plan design

$0 copay or deductible for services received at Smart Shopper providers

Lower deductibles and out-of-pocket maximums

Lower employee contributions

Pharmacy

Copay (vs coinsurance) increases medication adherence

Formulary designed to reduce cost without overinflating rebates

Pass-through pricing shared with members

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2020: Incentivize Consumerism, Increase use of Low-Cost/High Quality Providers, and Reinvest in our Employees


… to create Future State:

SHIFT FROM VOLUME TO QUALITYAlign reimbursement with value, eliminating fee for service and delivering the right care at the right time, in the right setting, error free.

ENGAGE THE RAPIDLY CHANGING WORKFORCELeverage better data and technology to engage employees in the right behaviors — more choice, more information and more control.

EMBRACE INNOVATIVE DISRUPTIONAccelerate positive change in the system — full transparency, Amazon-like shopping experience; focus on all factors playing a role in influencing our health and health care choices.

Health Care and Insurance Transformation

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Sources: Health Policy Brief: Reducing Waste in Health Care, Health Affairs, December, 2012; The Future of Employer-Sponsored Health Care: A Call to Action, American Health Policy Institute,

2015; Employer-Led Healthcare Transformation, Mercer, October , 2016.


Hopes Concerns

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Considering a new health insurance model?Communicate, Communicate, Communicate

I hope the

Program …

I am concerned

that …


To switch to something great, you have to change.

CONFIDENTIALCONFIDENTIAL This presentation is the confidential property of ELLWOOD Group, Inc. Not to be disseminated without prior written consent.

www.ellwoodgroup.com

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CODE: CASE200

Documents

Case Study Sponsored by - StarChapterincreases medication adherence Formulary designed to reduce cost without overinflating rebates Pass-through pricing shared with members 14 2020: