IF THE VHI takes a more proactive role in limiting the amount of inappropriate medical treatments it is paying for, there are likely to be “significant consequences for some private hospitals”, according to a report commissioned by the Department of Health.
The Milliman review of VHI claims cost controls, published in redacted form last evening, also noted that a 3 per cent reduction in the prices the health insurer paid private hospitals for procedures in January 2010 was the largest cut the VHI believed could be implemented without forcing many private hospitals into financial unsustainability. But the VHI went on to impose further price reductions for 2011.
The report said there was considerable potential for the VHI to make further savings “both through avoiding unnecessary admissions and reducing length of stay” of patients.
But it said the company “may have missed opportunities to manage claims and thus limit premium increases and improve financial performance” as a result of being overly focused on assessing the contribution its older client base has had on claims.
Having reviewed data presented by the insurer, actuarial adviser Milliman concludes that the largest contribution to the claims increases that the VHI has experienced was not ageing, although this has had a reasonably significant impact on claims cost.
Overall the amount paid out in claims per member per month increased by nearly 19 per cent between 2008 and 2009 while premiums paid per member per month increased by only 13 per cent. “This led to the significant deterioration in loss ratio and the poor underwriting performance in 2009.”
The report says the VHI believes the additional bed capacity in private hospitals is a significant driver for the increase in claims it has experienced.
“It appears that the biggest contributor to increases in inpatient claims costs is the increase in patients in high-tech facilities where average costs per stay and average lengths of stay on a severity adjusted basis are actually increasing,” the report states.
It also comes to the conclusion that up to 10 per cent of all inpatient hospital admissions may be medically unnecessary and “hospitals should not therefore be paid to perform these procedures”.