As a large employer, you are in the health care business. You are also fiduciary under ERISA. This means ERISA's "exclusive benefit rule" requires the Plan be managed for the sole benefit of the participants and the "prudent-man rule" requires that the same care, skill, prudence and diligence be applied as a person acting in like capacity and with familiarity would apply. Accordingly, management and analysis are required accounting for the areas from healthcare metrics to the types of reimbursement methods noted below.

ALLOWED (Gross) Trend % =
( Allowed PMPM Period 2 ÷ Allowed PMPM Period 1 ) – 1
PAID (Net) Trend % =
( Paid PMPM Period 2 ÷ Paid PMPM Period 1 ) – 1

Billed Charges for Covered and Non-Covered Charges 
Billed Charges Not Eligible for Plan Reimbursement
Billed Charges Eligible for Plan Reimbursement
Provider Discounts
Negotiated Discounts from Participating Providers
Covered Charges less Provider Discounts
Employee Out-of-Pocket Liability
Employer/Plan Liability
Per Member Per Month
Allowed or Paid Amount ÷ Total Member Months

In the example above, the slope of the paid trend line (orange) is less than the slope of the allowed trend line (blue), reflecting a cost shift to the employees.
As noted below, these descriptions of metrics, programs, activities and contracts are noted to illustrate but a subset of the elements analyzed within each category.
Metrics useful in analyzing plan performance
for medical and prescription drugs.

• Average Hospital Length of Stay
• Number of Admits per 1,000
• Age, Gender, Demographic Analysis
• Emergency Room Visits per 1,000
• Medicine Possession Ratios
• Diagnoses as % of Total Cost
• Count and Dollars of High Cost Claims
• % of Specialty Drug Spend

Programs used in providing the most effective care for medical and prescription drugs.

• Precertification — Covered by Plan
• Preauthorization — Advance Authorization
• Preadmission  — Advance Medical Necessity
• Concurrent  — Appropriateness During Stay
• Retrospective  — Post Stay Review 
• Quantity Limits — Specific Rx Quantities
• Step Therapy — Specific Rx Sequencing  
• Formularies — Preferred Drug Lists
Activities to manage conditions to improve care
and reduce need for medical services.

• Case Management — Complex & Costly Cases
• Disease Management — Chronic Conditions
• Wellness Analysis — ROI, Outcomes Based
• Value Based — Transparent, Narrow Networks
• Clinical — Evidence Based Guidelines 
• Centers of Excellence — Designated Facilities
• Carveouts — PBM, Organ, Behavioral Health  
• Concierge Approach — Services Management
Contracts between payors and providers for inpatient, outpatient and professional services.
• Fee For Service — UCR + Fee Schedule
+ Discount from Billed Charges
• Capitation — Per Capita, Fixed Dollar Amount
+ Full Risk — Professional Services
+ Global Risk — Professional and Institutional 
• Incentives — Performance Based Funds Pool
• Case Rate — Single Fee, Certain Services
+ Episode Based Case Rates
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