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New Project Puts an Actuarial Eye on Big Data, Healthcare Costs

Healthcare administrators, economists, and actuaries are leveraging big data analytics to identify potential causes and solutions for rising care costs.

New project puts actuarial eye on big data, healthcare costs

Source: Thinkstock

By Jessica Kent

- Healthcare costs in the US are on the rise, with the industry spending billions each year to combat chronic disease, manage administrative tasks, and advance medical treatments. Although organizations have increasingly sought to improve care and streamline processes with big data analytics tools and research initiatives, healthcare spending continues to surge.

According to the Society of Actuaries (SOA), the US currently spends roughly 18 percent of its gross domestic product on healthcare, while other developed countries spend approximately 11 percent. However, despite high costs of care, the US still falls short on important quality measures: a 2017 study from the Commonwealth Fund ranked the US last in terms of overall quality of care compared to 10 similar countries.

To address rising costs of care, SOA has partnered with the Kaiser Family Foundation and the Healthcare Financial Management Association (HFMA) to launch Initiative 18/11, a collaborative effort that will leverage big data analytics and research capabilities to reduce unnecessary healthcare spending.

Brian Pauley, fellow of Society of Actuaries and Chair of Initiative 18/11 Source: Xtelligent Healthcare Media

Last year, the organizations gathered a group of key stakeholders, including hospital administrators, employee benefits experts, and healthcare economists, for the inaugural event of Initiative 18/11.

“In March 2018, we brought together 30 people that we felt were some of the best minds in the healthcare cost conversation,” Brian Pauley, fellow of SOA and Chair of Initiative 18/11, told

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“Together with the Kaiser Family Foundation, we held a daylong summit where we began phase one of the initiative, which focused on the principal drivers of healthcare costs, as well as potential solutions.”

Stakeholders identified chronic disease management as a major reason for high care costs. SOA stated that 86 percent of healthcare spending is attributed to patients with one or more chronic conditions, and that chronic diseases cause seven out of ten deaths in the US.

Pharmaceuticals and administrative costs also contribute significantly to increased spending.

Promising solutions for combating healthcare costs include improving medical imaging technology, exploring advanced genomics, and leveraging big data analytics to support value-based reimbursement models and more proactive interventions, the group said.

“The United States has a higher prevalence of obesity, for example,” Pauley said. “If we're going to tackle the obesity problem, we need to get an idea of the value of obesity interventions, such as weight loss or exercise programs.”

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“When we look at all those types of things, we have to identify how the healthcare system can leverage data and knowledge to achieve financial outcomes projected by research efforts.”

Over the next few months, stakeholders will focus on developing priorities for phase two of the Initiative, which will include three projects led by the three 18/11 partners.

“We formulated three initiatives that will establish some defined strategies to address the identified problems,” said Pauley. “One initiative, called Managed Care 3.0, will explore the promise of value-based reimbursement, with an emphasis on understanding analytical techniques.”

“The second will aim to increase transparency in the pharmacy development and pricing process. The third is an SOA-sponsored initiative, called the 5/50 Research Project, which will focus on the five percent of the population that incur 50 percent of healthcare spending in the United States.”

The 5/50 Research Project is based on a statistic found in a 2016 study from AHRQ. The project will leverage predictive analytics to determine which patients will fall into the five percent cohort and how to target treatments to eliminate or reduce the costs associated with these individuals.

READ MORE: Using Big Data, Machine Learning to Reduce Chronic Disease Spending

While there most likely isn’t a single way to reduce spending, Pauley emphasized that these research projects will play an essential role in generating and sharing impactful solutions with the broader healthcare industry.

“No one agrees that one potential solution is going to be the overall fix, but what we're hoping is that these initiatives bring us closer to lowering care costs,” he said.

“To put some meat behind things like value-based reimbursement models, in terms of research reports and data visualization, we can put actionable information at healthcare stakeholders’ fingertips. Nothing coming out of this is going to be the silver bullet, but with data, research, and concrete information, we can start to form viable solutions.”

The collaboration between SOA, the Kaiser Family Foundation, and HFMA will accelerate the generation of innovative cost reduction solutions. Although initial focus will be on the three projects described, the Initiative will continue to use resources to advance research in other areas and further work to improve care costs.

“Our policy expertise, combined with SOA’s analytic firepower and industry knowledge, can hopefully move the discussion of how to address healthcare costs forward on multiple fronts,” said Larry Levitt, Senior Vice President for Health Reform at the Kaiser Family Foundation, in a press release.

Leveraging big data analytics and conducting healthcare industry research will help pave the way for reduced care costs.

“The big advantage of including actuaries in this conversation is that we can bring our research abilities, our analytics capabilities, and big data to the conversation. Our aim with these initiatives is to be unbiased and generate unbiased results, so that we can come forward with information that people can use,” Pauley concluded.

“There is so much healthcare data, and by bringing it all together and concentrating our efforts around improving care costs, we think Initiative 18/11 is going to represent a positive move towards a future solution.”


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