HEALTHCARE COST REDUCTION HOW A MIDWESTERN MANUFACTURING COMPANY REDUCED THEIR PER CAPITA HEALTHCARE EXPENSES BY 14% FROM

Topics Executive Summary Executive Summary Background Background Study Methodology Study Methodology Results Results Takeaway Takeaway About Us About Us

Executive Summary Objective The average annual premiums for employer sponsored family health coverage increased by 80% since 2003*. Companies are seeking ways to increase benefits to employees while decreasing their healthcare costs. A midwestern manufacturing company, Pride of the Hills (“PHMI”), increased their number of employees by 22% from while decreasing their health care costs by 9% using telehealth. The purpose of this study is to determine how and why they succeeded in reducing their costs and how this strategy can be used to help other companies. Results The study demonstrates that PHMI enjoyed a 47% decrease in primary care payments, and a 26.5% decrease in specialist payments during the study period. There were also a number of other cost savings. Some of the multiple reasons that the integration of a telehealth program saved the company money are: An overall decrease in the utilization of the emergency room A reduction in the number of primary care visits ( -33.5%) and specialist visits (-39.5%) A shift in plan mix (more employees elected high deductible plans) An insurance discount offered by the insurer because the company added the telehealth program Additional reasons mentioned in the study *Utilization can vary dramatically by provider. Average CMDNow first year utilization is 15-25%. Teladoc first year utilization is below 3%

Procedure/Methodology Procedure Procedure A rapidly growing manufacturing company PHMI with locations near Wooster and Millersburg Ohio was selected for the study. They were studied for the period June 2012 through May 2013 and for June 2013 through May Reports were obtained from their major medical provider – Medical Mutual of Ohio and their Director of Human Resources. Parameters studied were claimants, claim records, payments, provider specialty, plan participation, place of service, and absenteeism. Their telehealth was provided by CMDNow – a subsidiary of PSC Technology Inc. Key assumptions Key assumptions In the period, PHMI had 105 employees; in the period, PHMI had 135 employees In the period, PHMI had 105 employees; in the period, PHMI had 135 employees PHMI began their telehealth program in March PHMI began their telehealth program in March All variables were recorded and tracked on a monthly basis All variables were recorded and tracked on a monthly basis The study was completed July 2014 The study was completed July 2014

Key findings/results The key features of the telehealth program were: The key features of the telehealth program were: 24/7 access to a physician via phone/cell phone or video consult 24/7 access to a physician via phone/cell phone or video consult Employees were encouraged to take advantage of the program Employees were encouraged to take advantage of the program  No co-pay, No deductible  Employee education at the time of enrollment AND periodically throughout the year Access to the doctor was convenient Access to the doctor was convenient  On a 24 hr basis average wait time was about 20 min  During normal business hours average wait time was under 5 min  Employee could consult the doctor at work

Key findings/results When given the choice between a more expensive major medical plan or a high deductible plan coupled with a telehealth program, the number of people choosing the more expensive program dropped from 88% to 52%. When given the choice between a more expensive major medical plan or a high deductible plan coupled with a telehealth program, the number of people choosing the more expensive program dropped from 88% to 52%.

Key findings/results The change in plan mix in Year 2 resulted in a savings to PHMI of $71,680 when 58 employees chose an HDHP that cost PHMI $103 less per month. The change in plan mix in Year 2 resulted in a savings to PHMI of $71,680 when 58 employees chose an HDHP that cost PHMI $103 less per month.

Key findings/results The program was designed for high utilization and was successful. The program was designed for high utilization and was successful. PH utilization the first year of the program was 63% * PH utilization the first year of the program was 63% * *Utilization can vary dramatically by provider. Average CMDNow first year utilization is 15-25%. with a high of 86% Teladoc average first year utilization is below 3%.

Key findings/results The result of high telehealth utilizations was a dramatic reduction in the payments for all physicians (-31%) and in the payments for primary care (-47.1%) The result of high telehealth utilizations was a dramatic reduction in the payments for all physicians (-31%) and in the payments for primary care (-47.1%)

Key findings/results Because many patients tend to use the emergency room instead of a primary care physician, the emergency room visits also plummeted in Year 2 saving PHMI 8% on their emergency room costs despite having 13% more employees.

Key findings/results The convenience of the telehealth service meant that employees actually sought care earlier and resolved health issues more quickly also parents could consult with a doctor on behalf of a sick child from work. Paid time off plummeted. From $53,505 in year 1 to $25,682 in year two with 13% more staff. The convenience of the telehealth service meant that employees actually sought care earlier and resolved health issues more quickly also parents could consult with a doctor on behalf of a sick child from work. Paid time off plummeted. From $53,505 in year 1 to $25,682 in year two with 13% more staff. The average paid time off for illness in Year 2 was approximately 50% of that of Year 1. The average paid time off for illness in Year 2 was approximately 50% of that of Year 1.

Key findings/results For all of the reasons above, PHMI was able to negotiate a 1.5% discount with its major medical provider resulting in savings substantial enough to pay for almost 50% of the telehealth service. For all of the reasons above, PHMI was able to negotiate a 1.5% discount with its major medical provider resulting in savings substantial enough to pay for almost 50% of the telehealth service.