Using Analytics to Revolutionize the Dental Payer Market
As with many industries, 2009 was a difficult year for the dental payer market. The higher rates of utilization and cost trends caught many payers off-guard and overall profitability is several percentage points lower than in previous years. Claim trends, which had been less than five percent for several years, began creeping back into the high single digits (ranging from seven to nine percent). In addition, growth in both market penetration and revenue was minimal.
As dental payers try to recover, they are frequently turning to data-driven analytics to power their decision making and enhanced profiling tools are quickly emerging as one of the industry’s hottest trends. Although dental payers have previously incorporated data into pricing and underwriting, profiling tools that utilize provider-specific trend data are revolutionizing the decision-making process as payers look for effective ways to manage overall spending.
These enhanced profiling tools offer a better way to understand utilization and cost differences by identifying the most costly providers (with respect to utilization patterns, fee levels or both). The information resulting from these tools allows payers to:
• Improve their recruitment and contracting processes
• Tier providers and offer benefit incentives to members utilizing a preferred group of dentists
• Adjust claim utilization review and adjudication processing workflows at the dentist level instead of the more typical procedure code level
CONSTRUCTION OF PROFILING TOOLS
Before examining the benefits of utilizing profiling tools in detail, let’s take a deeper look at how the dental industry’s profiling tools have previously been constructed.
Historic Methods
Historically, those plans that have engaged in profiling have done so by using their own limited data,
with no attempt to normalize this data for patient, provider or plan-specific variables. The use of single payer data severely limits the statistical significance of such tools. The reason for this is that outside of MetLife and Delta Dental’s affiliated companies, no dental payer has more than a ten percent market share. In fact, most top-ten payers are only in the range of two to five percent of market share.
Given these small percentages, it is virtually impossible for a plan to have credible data if they limit profiling to their own population. Additionally, when defining peer groups for an outlier analysis, plans typically compare all dentists against one another regardless of specialty and, sometimes, independent of location. This results in an “apples and oranges” comparison since a dentist with an office in a retirement community is going to have a different practice pattern than a dentist with an office in a neighborhood heavily populated with young families.
Best Practices
Normalizing the data or constructing benchmarks that minimize the potential for bias produces more accurate and robust results, which allows for better, more informed payer decisions. The inclusion of fee data is the latest enhancement for best practice dental profiling tools.
Best practice tools include scores for each dentist across both the utilization and fee dimension. Fees are reviewed on a “submitted and allowed” basis across the full spectrum of dental procedure codes.
The following reports, which are from the Ingenix Consulting Dentist Compare and Dentist Fee Profile product set, show the components of a best practice profile:
ADVANTAGES OF PROFILING
Dental profiling tools offer companies the opportunity to make significant advances in some of their key strategic objectives, including:
• More effective utilization and overall spending management
• Better results-oriented network recruiting
• Consumer pricing transparency
• More detailed budgeting and forecasting
More Effective Management
The dental consulting industry has defined a series of approximately 50 ratios that can be utilized in profiling tools to compare the practice patterns between dentists. These ratios are not reflective of quality, but rather focus on effective cost management. Since dental contracts define coverage around the least expensive alternate treatment (LEAT), most dental payers already review certain procedures for medical necessity and the potential application of a LEAT provision. However, by utilizing a profiling tool built on a multi-payer database rather than a single-payer database, they can now identify those providers with the best and worst cost management practices. This allows payers to make exceptions to the claim review process. For example, those providers identified as the most cost effective might be exempted from the need to submit x-ray documentation for specific types of claims, while those with the worst cost management profiles might require a higher degree of scrutiny for all claims. In addition, those with the worst profiles can be watched for potential fraud, waste and abuse recovery investigations.
Better Recruiting
Companies spend significant resources on recruiting and maintaining competitive dental networks. However, even the best networks are limited to fewer than 50 percent of the dentists in a market. Due to the competitive nature of these markets, dental providers often ask for and receive custom fee schedules in order to entice them to join a network. Data profiling allows a company to prioritize its resources and focus on those providers most willing to join a network. Additionally, by reviewing both the utilization and cost patterns of a dentist, a payer can more effectively target those dentists who will holistically reduce the overall claims cost of their membership base. This provides the business intelligence needed for successful fee negotiations, both initially and on an ongoing basis. For example, a payer may choose to offer a slightly higher fee arrangement to a dentist with a favorable practice pattern, and conversely, more aggressively negotiate with a dentist with an unfavorable practice pattern.
Consumer Pricing Transparency
The consumer-driven health care movement is fueled by payers taking proactive steps to entice members into keeping cost trends to a minimum. This necessitates a greater amount of data transparency, which can be provided by dental profiling tools. In order for payers to “win” the cost equation, members need access to provider-specific utilization, fee profiles and expected overall treatment of out-of-pocket claims. Traditionally, the ability to steer members away from out-of-network providers has met with modest results. Only with improved data transparency and education pertaining to cost-to-member differentials will payers achieve the desired level of redirection. Ultimately, both members and employers will select dental providers based upon a combination of factors, including cost.
More Detailed Budgeting and Forecasting
With the greater transparency around fees and utilization provided by well-constructed tools, dental payers can be more precise in their trend forecasting and ability to pinpoint future problem areas before they fully materialize. Additionally, by following reimbursement trends, payers can more readily identify the range of fees being accepted within the provider community to more accurately forecast claims trend on a market and provider level.
RESULTS
What separated the strong and weak performers in the dental industry in 2009? The speed at which the strong performers were able to spot a utilization uptick and their subsequent ability to drill down to the data that showed which providers were “dragging” new and existing patients into their offices based on economic and business considerations as opposed to clinical reasons.
The use of well-constructed profiling tools allowed for this quick response. A simple and inexpensive investment in profiling tools will aid dental payers
This article was prepared for general information purposes only to permit you to learn more about Ingenix Consulting and its services. It is not intended as a basis for decisions in specific situations, may not be current, and is subject to change without notice.