Q&A: Connecting the dots from medical loss ratio to HIEs
The Patient Protection and Affordable Care Act’s Medical loss ratio requirement, finalized Monday, requires insurers to spend at least 80 to 85 percent of consumers’ premiums on direct care for patients and efforts to improve care quality. With the law going into effect Jan. 1, 2011, providers and payors alike should start connecting the dots between medical loss ratio and health information exchanges (HIEs), said Karen Van Wagner, PhD, executive director of North Texas Specialty Physicians (NTSP), an independent physician association of nearly 600 family and specialty doctors in North Central Texas.

The reason is simple: If HIE services, data analysis, population health management capabilities and membership fees are defined as healthcare costs, HIEs could benefit from the medical loss ratio requirement, Van Wagner told CMIO in a interview.

What is the status of medical loss ratio requirements right now?
The real devil is going to be in the details of the formula, although the regulations are quite detailed in terms of how the formula is going to work. An analogy can be made to the Medicare cost report. This is not going to be the only set of regulations that are out there; there are going to be overarching regulations and then there are going to be a whole series of finer interpretations for the regulations that will actually start filling what variables apply to what formula and what those definitions mean. And it will take two to three years at a minimum to get that part worked out.

How does medical loss impact NTSP?
We are a provider group, we have our own HIE [Sandlot], but we also have our own insurance company. So we are affected by medical loss ratio on both sides of the equation: We have an insurance company that meets the medical loss ratio and then we have [the HIE] that is, for lack of a better word, a possible beneficiary of payors’ contributions because of the medical loss ratio.

With my Sandlot hat on, we are looking at medical loss ratio very positively, and have already been contacted by three of our payors in our community to talk about how Sandlot can help them now that there’s regulations out there that indicate contributing to the development [an HIE] is an acceptable way to spend their money. Those discussions have been rather wide-ranging, but they seem to center around point-of-care quality prompts and getting evidence-based medicine guidelines into the hands of providers.

Do you foresee instances where something might be considered both a healthcare cost and an administrative cost?
I think the feds are going to be pretty clear about saying, ‘if you take this amount of money and you apply it in this way, it’s going to contribute to your medical loss ratio.’

If you submit a proposal or tell them you have $100 that went to medical loss, auditors might sit down and say, ‘look, $15 of this is probably not a medical cost; we consider this administrative.’ I think a whole set of reviews will occur.

What will the medical loss requirement mean for CMIOs?
We’re seeing a lot of anticipation and maybe some early planning efforts going on. If you give a certain amount of funds to an HIE development, to getting EMRs out there—to improving quality models, for example—all of these are going to be looked at as OK things to do.

From a CMIO point of view, it’s really [time to say], ‘let’s go ahead and do what we think will qualify, and the sooner we do it, the more likely it is that it will [qualify]. As this program ages, the definitions will become more concrete, more siloed. But for now, CMS is looking for help in defining as much as we are looking for help in saying ‘OK, this is good, this is not good.’ Because people just don’t know.

What first steps are CMIOs taking?
They’re talking to us about compatibility of systems. We had a payor come over [recently] who wanted to know how to integrate not only his claims data into Sandlot, but also facility formularies, and would that qualify for medical loss ratio? Could we go ahead, and by use of color and forms, identify that there are three outpatient surgery centers and we have quality, cost and utilization rankings on those three facilities? When doctors are sending referral requests, can that pop up in some way that clearly identifies that one is better than the other, or there is no difference?

[CMIOs] have their own short list of problem areas. They’re coming to entities like us, and they’re asking, ‘what is it going to take to make this happen, and what do you think it will cost me to incorporate that?’ We’ve not heard from these folks ever before with that kind of conversation.

On the other hand, there does not seem to be a big understanding out in the EMR vendor field, as to what medical loss ratio will do to help them sell their products. I truly got the deer-in-the-headlights look every time I asked at a recent symposium what medical loss is going to do for sales and marketing approaches. No one knew what I was talking about.

There’s so much out there right now on regulations coming out, ACOs, meaningful use, the list just keeps going on and on. I can see why we’ve lost track of which program means what. This is a big deal—as a payor, I have to get to that 85 percent med loss ratio, and [contributing to an HIE] can be a very helpful way to do that.