1. Mac McCarthy, FSA, FCA, MAAA Middle Atlantic Actuarial Club September 13, 2013

2. Mac McCarthy, FSA, FCA, MAAA McCarthy Actuarial Consulting Mac@McCarthyActuarial.com 804-651-5293 Tom Persichetti, ASA, FCA, MAAA Persichetti & Associates Tom.Persichetti@PersichettiLLC.com 202-321-5426 www.McCarthyActuarial.com1

3. Current State of Healthcare Claim Data Affected Parties’ Issues –Buyers –Payers –Researchers & Policymakers –Providers Consequences Why Consolidated, Shared Data Makes Sense Potential / Emerging Solutions Impediments & Concerns Audience Q&A www.McCarthyActuarial.com2

4. Each payer has proprietary database –Payers include government programs, insurance companies (including HMOs), and employers State all-payer databases Data warehouse services No central repository –Little or no information sharing 3 www.McCarthyActuarial.com

5. Buyers = –Individuals / Consumers / Patients –Employers Inability to ascertain providers’ and competing treatments’ value Information overload & credibility deficits Frustration due to: –Poor communication between care providers –Inconsistent billing and benefit statements –Lack of accountability Distrust is widespread www.McCarthyActuarial.com4

6. Payers = –Insurers –Employers –Governments Projecting future costs Fraud and waste Assuring value for clients/employees/constituents Managing financial risk www.McCarthyActuarial.com5

7. Credible data on alternative treatments for specific conditions –Prevalence, effectiveness & costs –Stratified by population characteristics –Considering comorbidities Reliable information on the impact of: –Plan design –Alternative payment strategies –Wellness & disease management programs –Provider consolidation & density Quantification of fraud, abuse and waste in the healthcare industry www.McCarthyActuarial.com6

8. Inappropriate / unmanageable risk assumption Demand anticipation Revenue protection Reputation Control www.McCarthyActuarial.com7

9. FBI estimate for 2009 fraud 1 : 3% - 10% of total health spending ($75–$250 billion) –Recoveries in 2012? Only $4.2 billion 2 Truven Payment Integrity Analysis 3 : –Annual fraud and abuse = $125 – 175 billion –Lack of care coordination = $25 - $50 billion –Provider inefficiency and errors = $75 - $100 billion www.McCarthyActuarial.com8 1: Health Affairs, 28, no.5 (2009): Combating Fraud In Health Care: An Essential Component Of Any Cost Containment Strategy 2: HHS/DOJ Healthcare Fraud and Abuse Control Program, FY2012 3: Truven Health Analytics: Payment Integrity Analysis, April 2013

10. Time for recommended evidence-based practice to be fully implemented 4 : 9 years National Health Expenditures increase, relative to GDP growth, 2000 - 2011: Double www.McCarthyActuarial.com9 4: Commonwealth Fund: Blueprint for the Dissemination of Evidence-Based Practices in Health Care

11. Fraud payment avoidance Consumer Driven Health Plans Shared risk models –ACOs, PCMHs, Bundled Payments Efficient capital investments and provider workforce development Comparative effectiveness studies Enhanced disease tracking for early identification of emerging epidemics and localized “hotspots” www.McCarthyActuarial.com10

12. Verisk Health –Pooled-Data Alliance between health insurers –“For the first time, healthcare payers will be afforded the same comprehensive view of suspect providers and schemes that has proved so successful for the property/casualty industry.” –Applies fraud detection tools developed in the property & casualty insurance markets, adapted to the healthcare environment www.McCarthyActuarial.com11

13. HealthcarePays –Member-owned “industry utility” Membership is open to healthcare payers and providers –“The HealthcarePays network connects employers, payers, providers, banks, key government agencies and waste and fraud systems to provide a level of transparency that enables unparalleled waste and fraud detection.” –Mirrors fraud avoidance techniques used by credit card industry –Cross-payer / cross-provider claims data will be available to members, subject to member defined governance and applicable privacy regulations www.McCarthyActuarial.com12

14. www.McCarthyActuarial.com13 No one understands me What do you mean?

15. www.McCarthyActuarial.com14 You have Questions We have Answers