EBMS, Inc. Value Based

Benefit Strategy

2005-2009

IntroductionChallenges and ReactionsYearly Plan AnalysisProgram Initiatives Chronic Condition/Disease Management Wellness miCare ClinicPlan SummaryResults

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EBMS Core ValuesExcellencePassionInnovationCommitmentIntegrity

Contents

EBMS Value Based Health Plan InitiativeMaximize member benefits at the least cost, significantly impacting both the personal and fiscal health of our organization.

EBMS Mission StatementEBMS is an innovative benefit administration and management company. We are dedicated to providing superior quality and cost-effective, personalized services.

EBMS developed an integrated, value-based health strategy as a potential solution to the health care financing crisis. Value – the clinical benefit achieved for the money spent – had been absent from any former solutions EBMS developed to solve rising healthcare costs. Instead, the dialogue focused on two trends in benefit design – cost containment and quality improvement – which often created a conflict of incentives for members.

Much like other employers, EBMS increasingly enrolled beneficiaries in disease management programs designed to improve patient self-management, often by intervening to enhance compliance with specific medications. However, at the same time EBMS negated these efforts with increased copayments and greater cost-sharing, creating financial barriers that discouraged the use of recommended services needed to keep members compliant.

When individuals are required to pay more for their healthcare, it is well known that they buy less – of both essential and excessive therapies alike. A value-based health strategy adjusts out-of-pocket costs on an assessment of the clinical benefit to the specific patient population and aligns financial incentives to encourage the use of high-value care.

Introduction

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ChallengesEBMS’ Billings, MT corporate office employs 260 of 320 employees; the remaining sixty employees are spread throughout satellite offices in Portland, OR and Aurora, CO, with remote employees, home-based, in Salt Lake City, UT. Like many of the organizations for whom EBMS administers health benefit plans, maintaining a benefit plan that encourages the personal health of employees and the financial health of the organization has become a challenging balancing act.

Until 2006, EBMS used similar strategies many of employers in the United States still use today. If costs increased, EBMS increased deductibles, co-pays, and employee contributions to offset those increases. Though this strategy allowed EBMS to stay in front of the costs, EBMS continued to average a 9% increase each year between 1999-2005, with peaks as high as 24%. It became apparent that for EBMS to shift the paradigm, a change in strategy was needed.

ReactionsTransforming EBMS’ benefit culture would require significant energy and resources from EBMS leaders. Once established, however, EBMS was confident this energy would permeate throughout the organization and eventually shift the benefit philosophy from cost management to consumer (employee) engagement. Any culture change takes time; EBMS stayed realistic in expectations and began with subtle changes.

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2005

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2006

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2007

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2008

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2009

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Chronic Condition and Disease Management

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Wellness

* Though EBMS offers wellness education and activities to all employees, the data is only reflective of plan members.

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EBMS values innovation. But innovation comes with a certain amount of risk. EBMS regularly tests concepts on our own benefit plan before rolling them out to clients. In 2005, EBMS began exploring the concept of on-site, employer sponsored clinics. These clinics would be operated for the sole use of the covered employees and dependents of the employer. This model, though not a new concept for large companies, had not been widely tested until the early 2000’s for smaller companies. In April, 2006, after forming miCare, LLC, EBMS opened an on-site clinic at its Billings, MT corporate office.

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Employees and their dependents drive the care they receive. Rarely do these decisions relate to the cost of the care provided, only the expected outcomes from the care/treatments received. The miCare clinic model brings the following:

Clinic space at location of employer’s choice.•Clinic funded by employer, managed by m• iCare.Services offered:•

– Routine medical care – Laboratory testing-all results are electronically loaded

into the Electronic Medical Record and available within 24 hours

– Physical examinations – Preventive screenings – Health education, consultation, and wellness (nutrition

counseling, cholesterol screening, prenatal programs) – Basic adolescent and child care, including back-to-

school and sports physicals – Chronic disease management – Case management– Dermatology– Prescriptions– Annual Health Risk Assessment

Twenty minute appointments with no waiting, scheduled online •or telephonically by the patient at a time convenient for them.Labs and office visits are offered at no cost to the employee •because the employer can access these services at the wholesale (direct) costs. There is no provider or facility in the middle to mark up costs. Clinic is staffed with a Family Practitioner, a mid-level Nurse •Practitioner or Physician’s Assistant, and a Medical Assistant or LPN. Malpractice insurance is carried by the practitioners, and miCare provides general liability coverage.

Model

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CostsCosts are broken down into two categories:1. Fixed Administrative Costs - miCare charges a flat administrative fee

per employee per month. This fee covers:a. Electronic Medical Recordb. Communicationsc. 24 hour Nurse Call Lined. Coordination of Services/Development of New Servicese. Recruitment and Staff Managementf. Supply Managementg. Reporting

2. Variable Expenses-Remainder of costs are passed through monthly to the employer. There is no mark up of the charges.a. Staff contracted hourly rates will include prorated costs for

malpractice insuranceb. Suppliesc. Medicationsd. Lab tests outside of the Annual Health Risk Assessment

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Savings EngineLab tests are contracted through LabCorp, a national laboratory services provider. miCare directly contracts with LabCorp at a rate that is comparable with what they provide to practitioners within the same community. miCare completed an evaluation of lab tests within the Yellowstone County community and discovered that there is a significant savings opportunity when lab services are obtained through miCare.

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Savings Engine (cont.)miCare is a licensed pharmacy for all medication types except Controlled Substances. Prescription medications are provided pre-packaged. Upon prescription by a Practitioner, the miCare Pharmacist dispenses the labeled medication. During evaluation, it has been determined that a plan can save up to 65% off of standard Pharmacy Benefit Manager savings.

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EBMS Value-Based SummaryIn summary, EBMS created a holistic approach toward its benefit plan with a strategy that focused first on the patient/member, and second on the financial health of the organization. The approach accomplishes the following:

1. Supports the health and well being of the member by wrapping a benefit design that supports prevention and wellness, with the ability to support the patient in the event of an unplanned or unexpected illness or injury. This is done through the wellness benefit available at first dollar, the Health Reimbursement Account that can be carried over from year to year, reasonable out-of-pocket expenses, and generous in-network co-insurance.

2. Engages the member by incentivizing completion of an annual Health Risk Assessment and additional funding by EBMS into the Health Reimbursement Account.

3. Empowers the member through Disease Management and Wellness initiatives geared toward their personal needs, with specific coaching and guidance to encourage compliance.

4. Encourages members to receive appropriate care by offering an onsite practitioner, which allows for timely, convenient patient care and support at no cost. In addition, the practitioner works closely with the benefit plan to close the loop between benefit plan management and the services the patient is actually receiving.

5. Educates members on needs which are specific to their personal health status. EBMS found that obesity and nicotine use were issues among our population. Through smoking cessation and wellness initiatives, EBMS has seen a positive impact, and a reduction in illnesses tied to both of those behavior issues.

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EBMS Health Plan Savings

2005 Baseline Costs: $422.92 PEPM

2006-2009 Projected Average

Plan Trend*: 9%

2006-2009Actual Average

Plan Trend: 1.99%

2006 2007 2008 2009 YTD**

$300

$400

$500

$600

2006-2009 PEPM Expense - Projected* vs. Actual

*Based on a 9% annualized expected trend**2009 YTD reflects 1/1/09 - 6/30/09

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