The beginning of the year is always a good time to revise your budget. I was looking at the different expenses at home when I realized that some of the same principles that apply to personal spending also apply to organizations that manage healthcare expenses for a population.
A good budget starts by looking at different categories of expenses: known expenses, unpredictable expenses, and potentially reducible expenses.
- Housing, for example, is a large known expense that comes up every month whether you have a mortgage or rent payment. Car payments, insurance, and gym memberships all fall into this bucket of “predictable” expenses. Healthcare companies also have foreseeable costs, especially for patients with chronic conditions.
- There are also unexpected expenses. A good budget can help prepare you for unpredictable, “random” expenses. For example, there is no way to completely predict or control weather damage to your home or a broken car part. The only way to plan for such unexpected spending — for both personal and healthcare budgets — is to set money aside for emergencies in advance.
- The last type of expense is “discretionary” or potentially reducible costs. You need to spend money on groceries and entertainment, but you have control over how much you spend. You can spend less in this category by making different choices, such as clipping coupons and planning your meals and preparing a grocery list instead of impulse-buying at the store. This bucket is where healthcare companies can better manage their resources.
Many case workers are spread thin, and it can be hard for them to know where to focus their time and energy. Healthcare companies are now turning to predictive analytics for insight on which patients may need more care intervention. This data can be used to help case workers put patients on a personal care plan that is right for them. Rather than lumping all patients together and looking at an average cost (or even risk-adjusted average cost), we should be more concerned with the chance a patient will exceed that average cost, and by how much. That’s the risk that needs to be identified and quantified. Where can a case worker have the most impact?
Just like the mobile apps that monitor your spending when grocery shopping, there are tools that can help identify how healthcare companies are exceeding their budgets.
A good tool might look at:
- How likely it is that a patient’s healthcare expenses may exceed the average – the “actuarial risk” for a member.
- How much patients’ actual healthcare expenses could be over that average – the “expense volatility for a member.
- How likely it is that some of the healthcare expense are potentially avoidable.
These tools are improving efficiencies in our healthcare system by aiming to better allocate time and resources while honoring individual privacy. Gaining actionable insight can help align resources with patients and initiatives that can yield the most benefit – enabling providers to deliver more sophisticated care in less time.
What do you think? Will data analytics help streamline the budget?