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Purpose of Briefing. Provide information on calculation and drivers of MHS's primary efficiency metric Medical Cost per Prime Equivalent LifeAlso known as PMPM/PMPY (per member per month/year)Explain metricDefine PMPM/PMPYUnderstand some common pitfalls when first reviewing metricUnderstand how metric is calculatedDissect drivers of yearly increase from FY04 to FY05.

Per Member Per Month PMPM

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**1. **Per Member Per Month (PMPM) Metric Methodologies

**3. **

**4. **What is PMPM/PMPY? The accumulated medical costs associated with enrollees by enrollment site each month
Inpatient, Outpatient, Pharmacy, Ancillary
Wherever DHP care is received
Direct Care, Purchased Care, TRICARE Mail Order Pharmacy
Direct Care costs calculated at MTF where care is delivered but assigned to enrollment site
Divide total cost by number of enrollees adjusted for age/gender/beneficiary category
Reflects differences in underlying demographics
Done on a per person basis, not total volume
Only reflects cost for enrolled individuals

**5. **Some Potential Misconceptions PMPM metric is looking from an insurance point of view
We both manage enrollee utilization like an insurance company and produce care
So we have Enrollee Unit costs, and MTF Production Unit Costs
Enrollee cost are based entirely on my MTFs rates
Enrollee Direct Care Unit cost is not for your facility alone
MTF Production costs are just being applied to enrollees
MTF Production Unit costs are based on all care produced, and applied to enrollees based on amount used
If I reduce my enrollee utilization my MTF Production Unit costs automatically increase
Since MTF Production unit cost is based on all care, unit costs only rise if MTF overall production decreases

**6. **How PMPM is built Direct Care cost information is based on cost allocation algorithms
MTF Production Inpatient Unit Cost
Inpatient Cost per RWP
MTF Production Outpatient Unit Cost
Outpatient Cost per APG
Purchased Care based on claims data
Pharmacy costs are based on PDTS
Enrollee Equivalent Lives are based on DEERS adjusted for Age/Gender/Bencat

**7. **MTF Production Inpatient Unit Cost (Inpatient Cost per RWP) Cost of producing one weighted unit of care at each MTF
RWP is common weighted unit for MHS
Based on all care produced at MTF
This includes Active Duty, Prime, Standard, Tricare for Life
Total RWPs are summed for all categories of care
Expense data is from MEPRS
Inpatient is based on MEPRS A codes with step downs
Depreciation costs are then removed
Labor expense is based only on current month
All other expenses are based on Rolling 12 month
Total Expenses are divided by RWPs to get
MTF Production Inpatient Unit Cost

**8. **MTF Production Outpatient Unit Cost (Outpatient Cost per APG) Cost of producing one weighted unit of care
APG is used to associate Ancillary with encounter
Based on all care produced at MTF
This includes Active Duty, Prime, Standard, Tricare for Life
Total APGs are summed for all categories of care
Expense data is from MEPRS
Inpatient is based on MEPRS B codes with step downs
Depreciation costs and pharmacy are then removed
Labor expense is based only on current month
All other expenses are based on Rolling 12 month
Total Expenses are divided by APGs to get
MTF Production Outpatient Unit Cost

**9. **MTF Production Unit Cost

**11. **DACH Enrollee Inpatient Care

**12. **Equivalent Lives Developed to adjust for health utilization differences across populations
By adjusting enrolled population, comparisons can be made across MTFs and Services
Initial adjustment done by DMIS age group, but problems quickly developed for large age groupings
Relooked at all care provided and developed Age/Gender/Beneficiary Category adjustors
While this is an overall adjustment, it may not be appropriate for just one component of PMPM
(i.e. Inpatient/Outpatient/Pharmacy)

**13. **PMPM Eq Lvs – Other Males

**14. **Enrollees vs. Equivalent Lives

**16. **PMPM Calculation Example

**17. **Drivers of PMPM Utilization of Services
Average Cost of Services
Enrollee Direct Care Unit Cost
Enrollee Purchased Care Unit Cost
Direct/Purchased Care Market Share

**18. **Analysis How much of total increase is driven by each factor
Contribution by driver is a function of the increase in driver and contribution toward total PMPM
For example, a driver that had a large increase but was only a small percentage of PMPM may not contribute much to overall increase

**19. **FY04/05 Prime Enrollee PMPY Comparison

**20. **FY04/05 Prime Enrollee PMPY Cost Increases by Care Categories

**21. **FY04/05 Prime Enrollee PMPY Cost Increases by Utilization and Average Enrollee Unit Cost

**22. **MHS Prime Enrollee PMPY Increase Factors

**23. **Summary Utilization increased for all sectors after adjusting for Age/Gender/Bencat
Inpatient/Outpatient/Pharmacy
55% of Total Change
Direct Market Share declined
42% to 40% for inpatient
51% to 46% for outpatient
75% to 69% for Pharmacy
Drivers significantly different across enrollment service
Most likely different by enrollment site

**24. **

**25. **
BACKUP SLIDES

**26. **PMPM Spreadsheet

**27. **Issue: Ages that didn’t work with DMIS Age Groups Age 0-4
Break into two Groups 0-1 2-4
Female ADFM/Other 13-18
Developed Linear Estimate
Other Male 24-38/Female 24-29
Medical disabled Active Duty
Developed Linear Estimate
All Groups 35-44
Developed Linear Estimate
All Groups 45-64
Used Other Category to develop slope
Linear Estimate based on value at Age 45 Plus Slope

**28. **PMPM Eq Lvs - Other Females

**29. **PMPM Eq Lvs - Other Females

**30. **PMPM Eq Lvs – Other Males

**31. **Eq Lives Factors

**32. **Average Unit Cost Increases Three Factors
Direct Care Unit Costs
Purchased Care Unit Costs
Plus TMOP for Pharmacy
Market Share Shifts

**33. **MHS Prime Enrollee PMPY Increase Factors

**34. **Prime Enrollment Service Observations Army
Significant increased Enrollee Unit Cost for outpatient (42% of Total Change)
Shifting of workload to purchased care
Navy
Increased direct care inpatient Utilization and Enrollee Unit Costs (41% of Total Change)
Air Force
Shift to purchased care in all areas
Most utilization management
MCSC
Large increase in Outpatient Utilization (36% of Total Change)
Less direct care across all areas

**35. **Service Prime Enrollee PMPY Factors

**36. **FY04/05 Prime Enrollee PMPY Cost Increases by Utilization and Average Enrollee Unit Cost

**37. **Prime Enrollment Beneficiary Observations Active Duty
Increases in Utilization 53% of Increase
Majority focused on Inpatient 26% and Outpatient 23%
Direct Care Unit cost 45% of increase
Outpatient cost 34%
Active Duty Family
Outpatient Utilization 31% of Increase
Shift to purchased care in all area
Retiree and Family
Outpatient Utilization 36% and Rx Costs 33% largest drivers
Shift to purchased care in all areas
Most utilization management

**38. **Summary Utilization increased for all sectors
Inpatient/Outpatient/Pharmacy
49% of Total Change
Direct Market Share declined
44% to 41% for inpatient
51% to 46% for outpatient
75% to 69% for Pharmacy
Drivers different across beneficiary category
Outpatient utilization up across all

**39. **Inpatient Prime Enrollee Information

**40. **Outpatient Prime Enrollee Information

**41. **Pharmacy Prime Enrollee Information

**42. **FY04/05 Care Utilization and Unit Cost Driving Prime Enrollee PMPY Cost Increases

**44. **Medical Cost per Prime Equivalent Life Percent of Total by Care Category