@How-To for MCOL paid members

Primers on Key Selected Topics      |     March/April 2010     |   Volume 13 Issue 2

 
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2010 Health Plan Contracting Summit

 
A dministrative Operational Metrics for Health Plans: In today's health care environment, "bending the cost curve" is becoming perhaps the most oft-repeated mantra, and health plan administrative costs and performance have become a particular focus for all stakeholders. Given the relationship between administrative costs and efficiency, The following is a summary of selected health plan administrative operational metrics, that are typically applied in comparative evaluation of health plan administrative performance and efficiency, compiled from information provided by the Sherlock Company.
     
Primer
 
Key functional categories for applicable administrative operational metrics
 
 
The following are key health plan administrative functional categories typically used in development of analytics of health plan administrative operations:
  • Sales and Marketing
  • Account and Membership Administration
  • Customer Services
  • Provider Network Management and Services
  • Claim and Encounter Capture and Adjudication
  • Information Systems
  • Corporate Services

Benchmarks for applicable metrics in each function are typically analyzed by various population categories, such as product line (Group, Individual, Medicare, Medicaid, etc); and by sub-functional areas.
 

 
Calculation and relationships for applicable operational metrics
 

 

The following is a summary of how primary demand, productivity, unit costs, staffing ratios and costs per employee are calculated and inter-relate for desired administrative operational metrics in any applicable functional category (using sample data for illustrative purposes.)
  

Transactions per Member

x

Members per FTE

=

Transactions per FTE per Year

x

Cost per Transaction

=

Cost per FTE 

x

FTEs per 10,000 Members

=

Cost PMPM

1.1

x

9,000

=

9,900

x

$7.50

=

$74,250

x

1.11

=

$0.69

Primary Demand

 

Staffing Ratio

 

Productivity

 

Unit Cost

 

Per FTE Cost

 

Staffing Ratio

 

Cost PMPM


     

 
Sales and Marketing
 

 
Functions often incorporated under this category include: Rating and Underwriting; Product Development/Market Research; Sales and Marketing; Commissions; and Advertising and Promotion.

Below are various selected benchmark metrics for Sales and Marketing:

  • Number of broker members sold/broker
  • Number of final quotes/broker
  • Number of renewal quotes/broker
  • Number of new business quotes/broker
  • Percentage of final quotes by brokers that were renewal quotes
  • Percentage of total final quotes by brokers
  • Percentage of total renewal quotes by brokers
  • Percentage of total new business quotes by brokers
  • Total broker commissions as a percent of premium equivalents for broker members
  • Total broker commissions per broker member per month, excluding overrides
  • Total broker commissions, excluding overrides as a percent of premium equivalents.
  • Broker overrides and bonuses per broker member per month
  • Broker overrides and bonuses as a percent of revenue
  • Commission costs per broker member per month
  • Commission costs/broker
  • Members sold/broker
  • Average group size/broker
  • Total success rate per broker (measured by the total groups sold as a percent of final quotes)
  • Group persistency rate: the proportion of groups that remained with plans from the prior year
  • Total renewal quotes (internal and broker) declines as a percent of total quotes
  • Total new group business quotes (internal and broker) as a percent of total quotes
  • Percentage of individual members sold internally
  • The average size of all groups (and by large/small) sold internally; and externally
  • The number of members sold per total sales FTE
  • Final quotes per total sales and marketing FTE
  • The number of members sold per internal sales FTE
  • Sales and Marketing costs (excluding commissions) per sales FTE
  • Sales and Marketing costs PMPM (excluding commissions)
     
 
Account and Membership Administration
 
 
Functions often incorporated under this category include Enrollment; Membership Processing; and Billing. Billing focuses on the processing, recording and maintenance of the relationship of the members for the Enrollment portion. Membership is the recording of any changes in demographic information and Billing is the process of calculating, documenting and the submitting of invoices. Member transactions include additions,
changes and deletions for members of existing groups.

Below are various selected benchmark metrics for Account and Membership Administration:
  • Number of Transactions per group
  • Percentage of total transactions that were group; and member
  • Number of member transactions per member
  • Number of non-online electronic member transactions per member
  • Non-online electronic member transactions per member
  • Average Group processing days for renewals; and for new groups (date of receipt of renewal/sale to when the group was enrolled)
  • Percentage of group transactions that were processed within 15 calendar days; (and within 30; and over 30 days)
  • The average age of membership
  • Percentage of local membership compared to national membership (“National” is defined as groups with more than 5,000 employees and more than 10% of membership out of the plan’s service area
  • Average member processing days (the number of days to enroll a member from the receipt of the application to the date of eligibility)
  • Percentage of member transactions processed within 15 days
  • Number of member applications per member
  • Percentage of member applications returned (incomplete)
  • Member enrollment accuracy rate (percent of accurate member-level transactions)
  • Group enrollment accuracy rate (percent of accurate group-level transactions)
  • Percent of members satisfied with the Enrollment function
  • Percent of cards received within 30 days of receiving paperwork
  • Cards issued per member per year
  • Number of total bills issued per member per year
  • Percent of group bills going out on time
  • Enrollment costs per FTE
  • Enrollment transactions per member
  • Enrollment non-staffing costs per FTE
  • Enrollment costs per member per month (PMPM)
     
 
Customer Services
 

The functional area of Customer Services responds to, processes, resolves and provides information for
transactions or inquiries of customers.
  • Automated electronic inquiries per member (inquiries via web handled by an automated system)
  • Manual inquiries per member per year; and Total inquiries
  • Percentage of paper / written inquiries; and total Manual inquiries (including manual electronic- which are
    inquiries via the web or e-mail that are responded to by a human)
  • Total costs per Customer Services inquiry
  • Number of total inquiries per member
  • Percentage of total inquiries received and answered by a rep
  • Inquiry accuracy rate (percent of inquiries that were closed accurately)
  • Average speed of call answer (ASA)
  • ASA level at 30 seconds (percent of calls answered within 30 seconds)
  • Call abandonment rate (percent of calls that are terminated by the callers before the rep answers)
  • Percentage of calls received with busy signals
  • Percentage of calls transferred from the original rep
  • Percentage of calls that were put on hold
  • Average length of time required for each call
  • Percentage of calls blocked
  • Number of days required to resolve inquiries
  • Percentage of inquiries that  resolved within 7 days
  • Cycle time to close appeals, grievances and complaints
  • Email response time to inquiries
  • Percentage of appeals overturned (completely or partially)
  • Appeals per member
  • Employee productivity: Manual inquiries per FTE per year
  • Customer Services costs per manual inquiry
  • Total Customer Services costs per FTE
  • Non-Labor and Staffing Costs per FTE
  • Customer Services costs PMPM
 
Provider Network Management and Services
 
Provider Network Management and Services functions include handling of: provider inquiries; the recruiting and credentialing of providers; contracting; and the auditing and review of medical records and billing.
  • Number of manual provider inquiries per member
  • Number of manual provider calls per member
  • Percentage of total provider inquiries that were manual electronic inquiries
  • Percentage of total provider inquiries that were manual calls
  • Average speed of answer (ASA)
  • Percentage of provider calls answered within 30 seconds
  • Percentage of provider calls were terminated by the caller before the rep answered
  • Length of time required for each provider call
  • Total number of providers per 1,000 members
  • Number of primary care physicians per 1,000 members
  • Number of professional specialists per 1,000 members
  • Total number of facility providers
  • Length of time it to enroll new providers.
  • Length of time to credential new providers
  • Cycle time to on system for new providers (number of days from the date of credentialing to when a provider is on the system)
  • Contracting costs PMPM
  • Contracting costs per Contracting FTE
  • Number of members per Contracting FTE
  • Number of providers per Contracting FTE
  • Contracting cost per provider
  • Number of members per Provider Relations FTE
  • Provider Relations Productivity, measured as manual inquiries per FTE
  • Provider Relations costs per manual inquiry
  • Provider Relations costs per FTE
  • Provider Relations costs per member per month (PMPM).
 
 
Claim and Encounter Capture and Adjudication
 
 
The functional area of Claims and Encounter Capture and Adjudication primarily focuses on the coordination
of benefits and treatment of claims submitted, including the routing, resolution of disputes, the
payment of claims and other various activities.
  • Claims receipts per member
  • Number of adjudicated claims per member
  • The autoadjudication rate (the percent of total claims processed that did not require manual intervention)
  • Percentage of adjudicated claims that required manual intervention
  • Number of paper receipts per member
  • Percentage of total receipts that are electronic; and paper
  • Percentage of adjudicated claims that are reworked
  • Average days from claims incurred to receipt
  • Average days from claims receipt to approved
  • Average days from approved to payment
  • Percentage of claims paid over 30 days old
  • Percentage of claims paid in less than 7 days
  • Customer claims satisfaction level
  • COB and Subrogation recoveries per dollar of COB cost
  • Percentage of total recoveries that are COB; subrogration; and other
  • Coordination of Benefits (COB) and Subrogation costs PMPM
  • COB and Subrogation costs per FTE
  • Health care costs per COB FTE
  • Overall cost per claim processed
  • Claims processing staffing costs per FTE; and non-staffing costs
  • Claims processing costs per member per month (PMPM)
 
Information Systems
 
 
Functional area for Information Systems includes Operations and Support Services; Applications and Maintenance; Application Acquisition and Development; and IT Security Administration and Enforcement. These areas together keep infrastructure running for the plan, developing software and supporting it, growing the business through new developments and maintaining the security of the information systems.
  • Cost per production job
  • Number of production jobs per member
  • Number of production jobs per FTE
  • Capital expenditures per member
  • The average life of platforms
  • The overall book value of total IS
  • Overall book value of hardware per member
  • Overall book value of software per member
  • Number of users supported for the voice network & telephony platform; and annual cost per user supported
  • Number of users supported for the data network platform, and applicable cost per user
  • Number of helpdesk calls per user
  • Number of users per helpdesk FTE
  • Number of calls per helpdesk FTE this year, and cost per call
  • Helpdesk cost per FTE
  • Helpdesk cost PMPM this year
  • Call ASA for desktop helpdesk; first level problem resolution rate; and average handle time
  • Activities of Information Systems, by Supported Function (Percentage of applications that are for each of the functional administrative categories)
  • Non-staffing costs per FTE
  • Staffing costs per FTE
  • The IS costs per total FTE
  • IS cost per IS FTE
  • IS costs per total FTE
  • Number of total FTEs per IS FTE
  • Total Information Systems Costs, Accrual Basis, PMPM
  • Internal personnel costs PMPM
  • Consultant contractor costs PMPM
  • Hardware depreciation and maintenance costs PMPM
  • Overall software amortization costs PMPM
  • Outsourced IS costs PMPM
 
Corporate Services
 
 
The functional area of Corporate Services is primarily composed of human resources, legal, facilities, other post employment benefits, audit, purchasing, imaging, printing and mailroom and other various areas.
  • Facilities costs PMPM
  • Amount of square feet of usable space per FTE
  • Facilities cost per total usable square foot
  • Facilities costs per FTE
  • Facilities costs of rent, depreciation and other Leasehold improvements
  • Facilities costs per FTE for depreciation, heat, light and taxes and security
  • Average days in accounts receivable
  • Incoming mail volume per member
  • Out-going mail volume per member
  • Legal costs PMPM
  • Legal costs per Legal FTE
  • Internal and external Legal costs per Legal FTE
  • Human Resources costs PMPM
  • HR non-staffing costs per FTE
  • HR staffing costs per FTE
  • Number of FTEs per HR FTE
  • Retention rate of employees (Retention is the number of employees retained through the year where the employees are able to switch jobs, but remain with the company)
  • Total separations per 1,000 FTEs
  • Voluntary separations per 1,000 FTEs (Voluntary separations are separations initiated by the employee, excluding retirement, leaves, layoffs and deaths)
  • Involuntary separations per 1,000 FTEs (Involuntary separations are separations initiated by the employer)
  • Number of hires per 1,000 FTEs
  • External hires per 1,000 FTEs; and internal hires per 1,000 FTEs
  • Number of days worked per FTE this year; and number of days missed per FTE.
  • Number of missed days per FTE classified as Family and Medical Leave Act (FMLA) days
  • Number of missed days per FTE classified as workers compensation days
  • Percentage of the workforce that was classified as:  managerial; clerical; sales; professional; technical; and service
  • Number of training hours per FTE
  • Training costs per FTE
  • Percentage of total compensation for: health benefits; salaries; overtime; Sales and commissions; bonus and incentive pay
  • Total compensation costs per FTE
  • Salary compensation costs per FTE
  • Health benefits compensation cost per FTE.
    Bonus and incentive plans compensation costs per FTE
  • Pension compensation costs per FTE
  • 401 (k) compensation costs per FTE
    Internal staffing costs per internal FTE
  • Percentage of total FTEs that were outsourced
  • Corporate Services costs PMPM
  • Cost of Corporate Services per FTE
  • Number of total FTEs per Corporate Service FTE
 
Source
 
 
The health plan administrative cost benchmark information utilized in this edition of @How-To was compiled from recent editions of the Sherlock Company's Plan Management Navigator, a free e-newsletter published by the Sherlock Company that discusses analytics for health plan administration, and provides commentary and observations on the management of health plan expenses under the direct control of the management team. Sherlock Company provides informed solutions for health plan financial management. Sherlock Company assists health plans, their business partners and their investors in the treasury, strategic and control functions of finance. For more information on the Sherlock Company, their Navigator e-newsletter, and their products and services, go to: www.sherlockco.com

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