Healthcare Analytics Proposal for Actuarial ServicesMasterpiece on the Mississippi
TO: The Honorable Mayor and City Council Members
FROM: Michael C. Van Milligen, City Manager
SUBJECT: Accept Healthcare Analytics Proposal for Actuarial Services
DATE: December 27, 2011
Dubuque
bierd
All-America City
1
2007
One of the City Council Management Agenda Items for 2011 -2013 was to pursue a
fixed fee arrangement for hospital services. The City received a proposal from the
health actuarial division of Gallagher Benefit Services Inc, Healthcare Analytics, to
analyze and develop a fixed reimbursement inpatient hospital discount arrangement for
both Finley and Mercy Hospitals. The following is a breakdown of their proposed fees:
Service
Analysis of current payment arrangement and
development of target pricing
Price
$3,000 per hospital
Conducting Hospital Negotiations $9,000 per hospital
Implementation of payment arrangements $5,000 per hospital
(if requested)
The fees quoted by Healthcare Analytics are pass through costs and nothing has been
added for the services provided by Gallagher Benefit Services. Anything they need to
do to support Healthcare Analytics with this project is included under the City's annual
retainer fee with Gallagher Benefit Services.
Personnel Manager Randy Peck recommends City Council approval of the acceptance
of the Proposal for Actuarial Services for the City of Dubuque prepared by Healthcare
Analytics and authorization for the City Manager to sign the Proposal memorandum.
I concur with the recommendation and respectfully request Mayor and City Council
approval.
Michael C. Van Milligen
MCVM:jh
Attachment
cc: Barry Lindahl, City Attorney
Cindy Steinhauser, Assistant City Manager
Randy Peck, Personnel Manager
2
Masterpiece on the Mississippi
TO: Michael C. Van Milligen, City Manager
FROM: Randy Peck, Personnel Manager
SUBJECT: Reimbursement Arrangements for Mercy and Finley Hospitals
DATE: December 7, 2011
Dubuque
bfril
All-America City
hill!
2007
One of the City Council Management Agenda Items for 2011 -2013 is to pursue a fixed
fee arrangement for hospital services. I received the attached proposal from the health
actuarial division of Gallagher Benefit Services Inc, Healthcare Analytics, to analyze and
develop a fixed reimbursement inpatient hospital discount arrangement for both Finley
and Mercy hospitals. The following is a breakdown of their proposed fees:
Service
Analysis of current payment arrangement and
development of target pricing
Price
$3,000 per hospital
Conducting Hospital Negotiations $9,000 per hospital
Implementation of payment arrangements $5,000 per hospital
(if requested)
The fees quoted by Healthcare Analytics are pass through costs and nothing has been
added for the services provided by Gallagher Benefit Services. Anything they need to
do to support Healthcare Analytics with this project is included under our annual retainer
fee with Gallagher Benefit Services.
Healthcare Analytics prepared an inpatient hospital analysis and recommendations in
2009; however, we will need to obtain a new analysis as the data is over two years old.
The Healthcare Committee recommends that we accept the actuarial services proposal
presented by Healthcare Analytics.
The requested action is for the City Council to approve a motion accepting the attached
Proposal for Actuarial Services for the City of Dubuque prepared by Healthcare
Analytics and to authorize you to sign the Proposal memorandum. City Attorney Barry
Lindahl has reviewed the proposal and finds the terms acceptable.
RP:tlb
Attachment
Cc: Health Care Committee
Jenny Larson, Budget Director
etet
Healthcare Analytics
November 30, 2011
Randy Peck
City of Dubuque
50 West 13th Street
Dubuque, IA 52001
Re: Proposal for Actuarial Services
Dear Randy:
Background
A Division of Gallagher Benefit Services, Inc.
The City of Dubuque (the "City ") provides health insurance to its employees through a
self- funded program administered by Medical Associates Health Plans (MAHP). MAHP
maintains a provider network and negotiates reimbursement levels with participating
providers.
There are two primary hospitals that provide the bulk of hospital care for the City's
employees and their dependents. It is our understanding that MAHP's current
agreements with both facilities base payment on a % of billed charges. The City believes
that reimbursement based on fixed per diem rates or case rates would result in lower
hospital expenses under the health plan today and would do a better job of controlling
the annual growth in hospital claim costs. The City has asked Gallagher Benefit Services
(GBS) for support in negotiating revised agreements with the local hospitals that would
convert the hospital reimbursement from a percentage discount to some form of fixed
reimbursement for inpatient services.
Healthcare Analytics ( "HCA ") is a division of GBS that specializes in actuarial, data
management, and claim and eligibility auditing services. HCA has experience in
evaluating and negotiating provider contracts.
Scope of Services to Be Provided By HCA
Analysis of Current Payment Arrangement and Development of Target Pricing
We will prepare a data request for MAHP that sets out the items needed to conduct the
negotiation. Once we receive the data, we will analyze the historical experience to
determine what the City is paying for inpatient services today under the percentage
discount arrangement. We will express prior hospital claim costs on both per admission
ca. b• Gallagher Benefit Services Inc.
chinking ahead
Healthcare Analytics
a division of Gallagher Benefit Services, Inc.
Healthcare Analytics
A Division of Gallagher Benefit Services, Inc.
and per diem bases for each of the two local facilities. We will compare those net
effective rates with market rates based on our normative data and other publicly
available data sources such as Medicare. We will then present the results of our
analysis to the City along with recommendations for target pricing with the hospitals.
The targets will contain some combination of per diem rates, DRGs or other case rates,
and potentially "outliers" that might be priced at separate rates, including percentage
discounts. It may be necessary to have separate per diems depending on the level of
care (medical /surgical, maternity, ICU, CCU, etc.), or separate DRG factors for different
classes of DRGs. We will have a better sense of this once we have reviewed the data,
and we will discuss this with the City prior to commencing the negotiations. The intent
will be to develop an agreement that results in lower average costs to the City today and
provides limits on the rate at which future payments to the hospitals will increase. Once
the City and HCA agree on appropriate targets, or perhaps a range of acceptable
outcomes, we will proceed with the actual negotiations. At this point, it will be
necessary to decide whether to pursue negotiations with both hospitals, or to focus only
on one facility. We will also need to ensure that MAHP is capable of administering any
arrangement that we are going to pursue with the hospitals.
Conducting Hospital Negotiations
HCA will develop a proposal for each hospital (or just for one hospital if the decision is
made to limit the negotiations to one facility) based on the targets identified above. We
will make contact with the individual(s) responsible for contracting with payers in each
hospital and initiate the discussions with them. Hospital negotiations typically take
several iterations, depending on how aggressive the initial proposal is and how
receptive the market is to competitive pricing. We will keep the City informed of our
progress and will not agree to anything without the City's approval. It is possible that
neither hospital will accept any form of fixed rate reimbursement, or that neither will
accept rates that are within the range that we have identified as our target. In such
case, we will work with the City to make sure than any opportunities for leveraging the
City's influence have been fully employed. .
Implementing the Payment Arrangements
Once agreements are reached with the hospitals, HCA will work as a liaison between
MAHP and the hospitals to make sure the arrangements are clearly understood and
implemented. We will develop summary reporting formats for MAHP, and we will
review the summary claim reports for the first 6 months following implementation to
make sure that the actual payments made are consistent with our expectations based
on the agreements reached. In the event we identify any problems with the
implementation, we will work with MAHP and the hospitals to resolve them.
Proposed HCA Fees
Gallagher Beneet Services, Inc. Healthcare Analytics
v t h i n k i n g a h e e d a division of Gallagher Benefit Services. Inc.
t
Healthcare Analytics
A Division of Gallagher Benefit Services, Inc.
To recognize the possibility that the City may ultimately elect to pursue negotiations
with both facilities, or with only one facility, we have developed the fee proposal based
on the number of hospitals that we are asked to negotiate with.
Analysis of Current Payment Arrangement and Development of Target Pricing. $3,000
per hospital.
Conducting Hospital Negotiations. $9,000 per hospital.
Implementing the Payment Arrangements (if requested). $5,000 per hospital.
Timing
The project timing will depend on the responsiveness of MAHP and the hospitals. From
our initial correspondence with MAHP, we do not anticipate any problems getting the
required data in a timely manner. Once we have the data, we will prepare the initial
recommended pricing targets within 2 weeks. We will allow an additional week to
review the targets with the City and get approval to go to the targeted hospitals. In
total, we expect that from the time we are asked to proceed with the project, it will take
approximately one month for us to be ready to approach the hospitals.
The negotiations themselves are more difficult to predict, as this will depend on many
things outside of our control. We would expect that at worst, however, we would either
reach an agreement or conclude there is no agreement to be had within two months of
first approaching the hospitals.
The effective date of any pricing changes will be part of the agreement itself, so once
the agreement is reached, any remaining timelines will be known.
CEO. CaRasher Benefit SeMoes Inc.
thinking ahead
Healthcare Analytics
a division of Gallagher Benefit Services. Inc.
Please let me know if you have any questions or need any additional information.
Sincerely,
Glen Volk
Consulting Actuary
Cc: Mark Rosenberg, HCA
Dutch Ross, GBS
Gallagher Benefit Services, Inc.
thinking ahead
Healthcare Analytics
a division of Gallagher Benefit Services, Inc.
GALLAGHER BENEFIT SERVICES, INC. ~ M ern o
To: Randy Peck, City of Dubuque
From: Dutch Ross, Denver Office
Date: December 7, 2011
Re: Actuarial Services Proposal
Randy,
As requested, attached, is the proposal from our health actuarial division, Healthcare
Analytics, to analyze and develop fixed reimbursement inpatient hospital discount
arrangements for the City's two local hospitals.
The fees quoted by HCA are pass- through costs and nothing has been added for my
office's involvement. Anything that we need to do to support Healthcare Analytics with
this project will be included under our annual retainer fee.
I hope that we have the opportunity to assist the City with this important project. If our
following proposal is acceptable, please sign below and return to my attention.
Regards,
Accepted on Behalf of the City of Dubuque, Iowa:
Mic . el C. Van Milligen
City Manager
City of Dubuque Insurance Requirements for Professional Services
1.
Insurance Schedule C
shall furnish a signed Certificate of insurance to the City of Dubuque, Iowa for the
coverage required In Exhibit I prior to commencing work and at the end of the project if the term of work
is longer than 60 days. Providers presenting annual certificates shall present a Certificate at the end of
each project with the final billing. Each Certificate shall be prepared on the most current ACORD form
approved by the Iowa Department of Insurance or an equivalent.
2. All policies of Insurance required hereunder shall be with a carrier authorized to do business In Iowa and
all carriers shall have a rating of A or better in the current A.M. Best's Rating Guide. .
3. Each Certificate shall be furnished to the contracting department of the City of Dubuque.
4. Failure to provide minimum coverage shall not be deemed a waiver of these requirements by the City of
Dubuque. Failure to obtain or maintain the required insurance shall be considered a material breach of
this agreement.
5. Subcontractors and sub subcontractor performing work or service shall provide a Certificate of Insurance
In accord with Exhibit I.
6. All required endorsements to various policies shall be attached to Certificate of insurance.
7. Whenever a specific ISO form Is listed, an equivalent form may be substituted subject to the provider
Identifying and listing in writing all deviations and exclusions that differ from the ISO form.
8. Provider shall be required to carry the minimum coverage /limits, or greater If required by law or other
legal agreement, in Exhibit I.
Page 1 of 3 Schedule C, August, 2011.Doc
City of Dubuque Insurance Requirements for Professional Services
Insurance Schedule C (continued)
Exhibit I
A) COMMERCIAL GENERAL LIABILITY
General Aggregate Limit $2,000,000
Products - Completed Operations Aggregate Limit $1,000,000
Personal and Advertising Injury Limit $1,000,000
Each Occurrence $1,000,000
Fire Damage Limit (any one occurrence) $ 50,000
Medical Payments $ 5,000
a) Coverage shall be written on an occurrence, not claims made, form. All deviations from the
standard 150 commercial general liability form CG 0001, or Business owners form BP 0002,
shall be clearly Identified.
b) Include ISO endorsement form CG 25 04 "Designated Location(s) General Aggregate Limit"
or CG 25 03 "Designated Construction Project (s) General Aggregate Limit" as appropriate.
c) Include endorsement indicating that coverage is primary and non - contributory.
d) Include endorsement to preserve Governmental Immunity. (Sample attached).
e) Include additional insured endorsement for:
The City of Dubuque, including all Its elected and appointed officials, all its employees
and volunteers, all its boards, commissions and /or authorities and their board members,
employees and volunteers.
using ISO form CG 20 10. Ongoing operations.
B) AUTOMOBILE LIABILITY $1,000,000 (Combined Single Limit)
C) WORKERS' COMPENSATION & EMPLOYERS LIABILITY
Coverage A
Coverage B
Statutory —State of Iowa
Employers Liability
Each Accident $100,000
Each Employee - Disease $100,000
Policy Llmlt- Disease $500,000
a) Policy shall Include an endorsement providing a waiver of subrogation to the City of
Dubuque.
b) Coverage l3 limits shall be greater if required by Umbrella Carrier.
D) UMBRELLA LIABILITY $1,000,000
E) PROFESSIONAL LIABILITY $1,000,000
Page 2of 3 Schedule C, August, 2011.Doc
City of Dubuque Insurance Requirements for Professional Services
Preservation of Governmental Immunities Endorsement
1. Nonwaiver of Governmental Immunity. The insurance carrier expressly agrees and states that the
purchase of this policy and the including of the City of Dubuque, Iowa as an Additional Insured does
not waive any of the defenses of governmental immunity available to the City of Dubuque, Iowa
under Code of Iowa Section 670.4 as it is now exists and as it may be amended from time to time.
2. Claims Coverage. The insurance carrier further agrees that this policy of insurance shall cover only
those claims not subject to the defense of governmental immunity under the Code of Iowa Section
670.4 as it now exists and as it may be amended from time to time. Those claims not subject to
Code of Iowa Section 670.4 shall be covered by the terms and conditions of this insurance policy.
3. Assertion of Government Immunity. The City of Dubuque, Iowa shall be responsible for asserting any
defense of governmental immunity, and may do so at any time and shall do so upon the timely
written request of the insurance carrier.
4. Non - Denial of Coverage. The insurance carrier shall not deny coverage under this policy and the
insurance carrier shall not deny any of the rights and benefits accruing to the City of Dubuque, Iowa
under this policy for reasons of governmental immunity unless and until a court of competent
jurisdiction has ruled in favor of the defense(s) of governmental immunity asserted by the City of
Dubuque, Iowa.
No Other Change in Policy. The above preservation of governmental immunities shall not otherwise
change or alter the coverage available under the policy.
SPECIMEN
Page 3 of 3 Schedule C, August, 2011.Doc