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There is a process for evaluating point solutions: data and an independent perspective are key.
Employers are often approached with “point solutions” to help improve their health and group benefits offerings for employees and lower healthcare costs. These point solutions are typically specific services that a vendor offers to an employer’s benefit program. Vendors are often focused on targeted improvement areas that range from specific condition management to digital solutions and apps to overall benefit program simplification.
If you have attended an employer-sponsored health and group benefits conference, such as the annual National Alliance of Healthcare Purchaser Coalitions conference, you have certainly seen the large number of sponsors and vendors. Many of these vendors are offering point solutions to employers as opportunities to potentially add value to a benefit program. These vendors are also regularly approaching employers and consultants directly to inform and educate them about the latest point solution developments.
As the number and variety of point solutions continues to grow, it is becoming increasingly overwhelming for employers to select the solutions that best fit their benefits program. How should employers evaluate these opportunities? Which ones can truly add value and potentially reduce costs? Which ones best fit into the overall benefit strategy for the employer? These are all important questions when it comes to point solutions, and questions that have answers.
There is a basic process for evaluating point solutions. Incorporating data and an independent perspective are both keys to success.
This process involves six steps that provide a feedback loop for continually evaluating and building on point solutions to ensure they are achieving the strategic benefit plan goals of the employer.
Step 1: Assessment
Step 2: Implementation
Step 3: Data collection
Step 4: Active monitoring
Step 5: Program evaluation
Step 6: Review and adjust
After assessment, the process cycles through Steps 2 through 6 to ensure the point solution continues to add value and is adjusted as appropriate.
As shown in Figure 1, this process leads to a cycle of ongoing evaluation. In each step of the process, having the right data is essential for success. It allows employers to obtain the necessary information to estimate the potential future impact of a point solution on their employee and dependent populations, as well as understand the historical impact a point solution has had. The second key in this process is to have an independent perspective. Often point solution vendors will provide case studies or estimated outcomes of a program. Because of misaligned incentives, both the vendor and the employer could benefit from having an independent third-party evaluation of the point solution. In fact, a third-party evaluation can be included as part of the initial contract and provide value to all parties involved. This is very similar to other financial contractual arrangements seen in the healthcare industry either as providers and payers contract on value-based arrangements or as employers contract with provider networks in arrangements that include performance guarantee provisions.
There is a range of approaches employers can take for this step, sometimes formally, often informally. They range from a high-level review by senior health and welfare management, to a more formal review that incorporates estimated savings from the vendor, to an in-house analysis that estimates the savings and value of the solution, and finally to bringing in an independent third party to evaluate the solution.
Ideally, the initial assessment will involve data specific to the employer’s population. Appropriately using this data will provide the best insights regarding the effectiveness and value of the proposed point solution.
Not all point solution assessments necessitate involving an independent third-party review. This largely depends on the cost and return of the proposed agreement for the solution. Generally, the higher the cost, the larger the promise of returns, or the more risk an employer takes with a point solution, the more appropriate it is to have an independent review.
Once the solution opportunity has been assessed and an employer decides to move forward, the next step is to implement the program. Vendors generally work closely with employers to ensure that the program is implemented effectively.
Once the decision is made to move forward, an employer should work with the vendor to identify key data that will need to be collected. To the extent possible, the collection and reporting on this data should be automated. This step doesn’t involve decision making about the program itself but will position employers to be successful later in the process.
Having a clear path for following Steps 4 and 5 will help inform the proper data that should be collected.
Often active monitoring is provided directly by the vendor. Employers should be proactive in negotiating with vendors to ensure that there is a process in place for receiving regular updates on the status and performance of the program. To the extent possible, this process should also be automated.
The data used in all the prior steps, from assessment to monitoring is used to evaluate the program. Similar to the assessment step, vendors will often provide a summary of results, but incentives are not always appropriately aligned for an employer to fully rely on those analyses. If an employer has preemptively addressed the potential inclusion of a third party to analyze the results, then the third party can easily be engaged to evaluate the programs and help the employer strategically decide the best path forward.
Finally, this is where it all comes together. Taking the information gathered, particularly from active monitoring and program evaluation, an employer can decide how to proceed. This typically involves a review of internal strategies, outcomes of the point solution, and the vendor's ability to modify the program going forward.
High-quality data is key to ascertaining the viability and quantitative value of a program. Employers should be actively engaged in understanding their data. This will allow them to filter out unnecessary or potentially less valuable point solutions before engaging in a formal preassessment of a program.
The availability and integrity of data is fundamental to evaluating and understanding any point solution. Employers will need to work with the vendor, their third-party administrator (TPA), internal data analysts, and/or a data warehouse to ensure that reliable data is accessible in a timely manner. With this data in hand, employers are prepared to not only conduct a preassessment to determine whether a given point solution should be pursued, but can continually monitor and evaluate the programs to assess whether the data shows the program is meeting goals and expectations.
With the prevalence of point solution programs, employers inevitably face the challenge of evaluating the ROI and value of a single program, while there is overlap with other programs. Using data in the initial review and final program evaluation can help employers to 1) strategically select programs that either do not overlap or overlap with a strategic purpose and 2) isolate the effect of concurrent point solution programs. While data will help with these challenges, it is not a perfect solution. Employers will need to understand program interdependencies and make sure any ROI measurements at a minimum recognize the overlap effect.
Point solution vendors believe in the product they are marketing. They have seen their product successfully implemented into employer plans, leading to improved employee satisfaction and/or savings for their employer clients. But these solutions are not one-size-fits-all. An employer will need to carefully ascertain how a point solution might work for them (in the preassessment stage) or how the point solution has worked for them (in the program evaluation step).
By performing an in-depth independent analysis of a point solution’s performance, an employer can assess whether the performance of the point solution is fulfilling the vendor’s performance claims. Because program results are typically reported by the point solution vendor, an independent analysis allows an employer to evaluate a program’s performance without any concerns that reported results are biased.
Not only are some point solution programs not the right fit for a given employer, but a program that was successful for an employer at one point in time may not continue to be successful for that employer in the future. By the same token, a program that was not a good fit for an employer in the past may now be a viable program for the employer. The demographics and morbidity of the employee and dependent population as well as what is valued by these populations change over time. An independent third-party analysis provides an employer with the information it needs to determine whether a program should be implemented, and the value of a program that has been implemented.
The two following case studies help highlight some of the key steps of this process.
An example of following this process occurred with a large national employer that implemented a wellness program. As part of the program, the employer offered financial incentives to employees to participate and the vendor had contractual guarantees that the program would generate savings for the benefit program.
The vendor established a clearly defined approach for evaluating the return on investment (ROI) for the program using a propensity score matching process and Milliman was brought in as an independent third party to review that methodology and provide a separate evaluation using risk scores to estimate the ROI of the program.
Each month, the employer was able to see which employees and dependents were qualifying for the wellness program incentives and, annually, the vendor provided detailed participation data and results of the ROI analysis. This provided the employer an opportunity to review and adjust the program to ensure that it was still consistent with its goals and was still providing a positive ROI.
The process followed by the employer was similar to the general process outlined in this paper. The employer assessed the program to ensure it was consistent with company goals, set up processes to collect data and monitor the program, then conducted annual financial reviews of the program to reevaluate whether it was meeting expectations or if any adjustments were necessary.
In another situation, a similarly sized national employer considered the adoption of a Centers of Excellence (CoE) point solution. A simple preassessment analysis was performed to ascertain if there was a potential need for the services being offered by the program. Milliman provided consulting support for the employer to perform its own preassessment of the CoE point solution. This particular CoE vendor offered four separate CoE products: spine surgeries, nonemergent cardiac procedures, knee replacements, and hip replacements. The employer’s preassessment determined that each of these CoE products had the potential to provide savings to the health plan.
At the end of the program’s first year, a robust analysis was performed by Milliman to determine whether each of the offerings had provided savings to the employer. The analysis revealed that the employer had captured significant savings (far in excess of the cost and evaluation of the program) for knee replacements, hip replacements, and nonemergent cardiac procedures. The analysis also showed a small cost attributable to the spine surgery services. After further consideration of the qualitative value of the point solution—namely improved patient (employee and dependent) satisfaction—the employer elected to continue with all four offerings of the point solution.
This program received follow-up evaluations at the end of each year to continually evaluate the financial performance of the point solution.
Similar to the prior example, this employer followed the process for evaluating the program to ensure it met its financial goals and expectations. Doing so led to an informed decision about next steps for the program.
As the number of point solution options for employers grows, there is clear value in having a defined process for evaluating these opportunities. Ensuring that appropriate data is used to evaluate opportunities and including an independent third party to help evaluate solutions are two keys to set up employers for success with point solutions.