Provider Efficiency Measurement Review

Purpose of Efficiency Measurement Review

The Provider Efficiency Measurement Review offered by the Cave Consulting Group is designed as a cost-effective product to evaluate your current provider (practitioner or hospital) efficiency rating systems.¹ As leading experts in this field, the Cave Consulting Group will offer constructive feedback on ways for you to improve current provider efficiency measurement--increasing the accuracy and reliability of your existing measurement tools.

Who Should Perform a Provider Efficiency Measurement Review?

• Employers and other healthcare purchasers interested in understanding how their provider-network vendors (e.g., preferred provider organizations (PPOs), insurance carriers, HMOs) are monitoring and improving the overall efficiency of care--versus just obtaining network service price discounts.

• Insurance companies, health plans, and third party administrators (TPAs) interested in improving the efficiency of their provider networks and their medical loss ratios.

• Physician group and physician-hospital organization leaders interested in monitoring and improving the efficiency of their healthcare delivery systems.

• All companies that have selected or are in the process of selecting a vendor software system for measuring provider efficiency.

Why Perform a Provider Efficiency Measurement Review?

Most recent evidence has suggested that about 10%-to-20% of practitioners, across specialty types, practice inefficiently. The small percentage of practitioners is responsible for driving up to 20% of the unnecessary, excess medical expenditures incurred by employers and other healthcare purchasers--equating to billions of dollars nationally.

This finding translates into significant excess medical expenditures for you as a healthcare purchaser:

• If an employer's current healthcare expenses are about $4,500 per employee (and the employer has 5,000 employees), then this equates to $4.5 million in annual excess expenditures for the employer ($4,500 per employee x 20% excess expenses x 5,000 employees). Over a five-year period, the employer may experience about $30 million in excess expenditures, on a compounded interest basis.

• If a health plan's current healthcare expenses average $4,500 per subscriber (and the health plan has 50,000 subscribers--or about 115,000 unique members), then this equates to $45 million in annual excess expenditures for the health plan ($4,500 per subscriber x 20% excess expenses x 50,000 subscribers). Over a five-year period, the health plan may experience about $300 million in excess expenditures, on a compounded interest basis.

Many existing measurement systems inaccurately identify inefficient practitioners. Moreover, the chances of finding inefficient practitioners may be random.

These findings show that existing systems have significant error in attempting to accurately identify inefficient physicians. The error needs to be eliminated, or significantly reduced, if employers, health plans, and other purchasers are to save money by identifying and dealing with inefficient practitioners. Every physician falsely measured as efficient (or inefficient) leads to continued inefficiency in the healthcare marketplace.

Prior Project Experience

Over the years, the Cave Consulting Group has evaluated many different types of provider (practitioner and hospital) efficiency rating systems. As leading experts in this field, Cave Consulting Group has examined efficiency rating systems for organizations delivering care to more than 10 million members nationwide. We know the strengths and weaknesses of the marketed software, groupers, and systems.

Suggested Project Scope

• Determine whether the Provider Efficiency Measurement Review will involve practitioners, hospitals, or both.

• Perform an onsite visit to review your current provider efficiency measurement systems and methods.

• Review a discussion guide to determine sources of potential provider efficiency measurement error--whereby the guide reviews the applied software packages, methodologies, and efficiency rating techniques.

• Complete a provider efficiency measurement scorecard.

• Produce a final report that identifies the strengths and areas for improvement in provider efficiency measurement. We will identify sources of provider efficiency measurement error and suggest ways to reduce the measurement error.

Next Steps

Please contact us at the Cave Consulting Group for more information on the Provider Efficiency Measurement Review. You will gain valuable information from our cost-effective review process.

¹Efficient means using the least amount of medical resources to treat a medical condition and achieve a desired quality of patient care. Thus, efficiency is a function of unit price, volume of service, intensity of service, and quality of service.

²K. Grazier and J.W. Thomas. A Comparative Evaluation of Risk-Adjustment Methodologies for Profiling Physician Practice Efficiency. A report to the Robert Wood Johnson Foundation, September 2002.