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Data analytics helps health insurer lower costs rather than cut benefits

Jeff Kelly

Americans spend a higher percentage of GDP on healthcare -- 16% – than just about any other country on earth. One Midwestern health insurer is using data

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analytics to do its part in reducing that percentage.

Blue Cross Blue Shield of Kansas City (BCBSKC) insures more than 1 million people in northwest Missouri. In 2003, after two less-than-successful data warehouse deployments, executives at the insurer decided it was time to get their data management house in order.

BCBSKC wanted to break down analytic data silos that had cropped up across its various business units to ensure that everyone was working with the same set of numbers, according to Darren Taylor, the insurer’s vice president of integrated business systems.

“We had a lot of desktop data integration out in the business units for analytics,” Taylor said. A centralized enterprise data warehouse would also help the insurer create repeatable analytic functions so that BCBSKC workers weren’t essentially starting from scratch each time they set out to do data analysis.

More importantly, though, the insurance firm wanted to harness the power of data analytics to better manage member care and improve patient health – and BCBSKC’s financial health. “The healthier our member population is, the more financial savings there will be for the health plan,” Taylor said.

Thus began a multi-year effort. The first two phases included building a truly enterprise-wide data warehouse (EDW) -- a single source of truth that all departments could access -- then integrating data from 45 disparate sources into that warehouse.

By 2004, the insurer had built out its EDW and data integration functions, both based on IBM technology. Taylor then turned his attention to data analytics.

Until then, BCBSKC relied mostly on historical reports to monitor patient care. Executives might review a report, for example, on how much diabetes patients cost the company to insure year-over-year. It was mostly “after the fact” reporting, Taylor said.

Now that it had a functioning EDW, BCBSKC wanted to be more proactive in terms of member outreach, helping members manage chronic diseases or manage the complex healthcare system after an accident, he said. So in late 2004, the insurer deployed data analytics technology – BCBSKC uses a variety of analytics tools from SAP BusinessObjects, IBM SPSS and specialized healthcare applications -- on top of its EDW, not just to monitor patient outcomes but to get more involved in patients’ day-to-day care.

Take diabetes patients, for example. It’s generally accepted by doctors that diabetes patients should have their eyes examined at least once a year, as the disease is the leading cause of blindness in adults aged 20 to 74.

Diabetes patients who forget to have their annual exam are more likely to develop serious eye problems, which are costly to treat, costs borne by BCBSKC. So the insurer analyzes member data in its EDW to determine when a diabetes patient is due for an annual eye exam and sends a reminder via email, text message or some other method, Taylor said.

Data analytics technology also helps BCBSKC identify which members are at risk for other diabetes-related complications, including foot and nerve damage, and recommends treatments accordingly.

With historical reporting, executives were informed but unable to react in real time to change patient outcomes, Taylor said. BCBSKC has applied similar data analytics techniques to help members better manage other chronic diseases like congestive heart failure, asthma and obstructive pulmonary disease.

The results of BCBSKC’s data analytics initiative are nothing to sneeze at. Patient health has improved, Taylor said, and BCBSKC has saved an estimated $7.2 million on patient care costs. The bottom line, he said, is that healthier people are cheaper to insure.

The insurer is also using data analytics to improve operational efficiencies and reduce internal administrative costs, according to Taylor.

“We have specialized analytic tools for predicting future healthcare costs, for provider profiling, for employer group reporting, for determining ROI of disease management programs, for helping with provider reimbursement transformation,” he said.

All told, BCBSKC’s data management and data analytics initiatives have helped it save an estimated $23 million since 2005.

“It’s about doing the right thing for our [insurees] to improve their lives,” Taylor said, “and our bottom line as well.”


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