Predictive Model for Health Care Can Help Property/Casualty Insurers Contain Medical Costs

JERSEY CITY, N.J., Sept. 19, 2005 — Property/casualty insurers may soon be able to control spiraling medical costs using a predictive analytic model to identify high-risk individuals with serious medical conditions so they may be treated before requiring more serious treatment or hospitalization.

The predictive model, based on insurance claims data for 2.8 million individuals, has been developed by DxCG, ISO's health-care analytics company.

The model identifies groups of individuals who will use far more than average high-level care in the future because of their serious medical conditions, such as heart problems, hypertension and diabetes. The model also identifies groups of individuals with medical conditions that can be treated with preventive-care programs before those conditions become more serious and more expensive to treat.

DxCG uses analytic software based on medical- and pharmacy-claims information to develop models with predictive capabilities that are far superior to the basic demographic information typically used to project health-care costs. By adding comorbidity (other existing medical conditions that may affect a person's recovery), DxCG models can more accurately predict time lost and time spent in hospitals.

In a recent study, DxCG analyzed medical-claims records spanning one year of baseline data for two groups to predict hospitalization or home-care service use for six months in the future. The data contained detailed, person-level information on age, sex and type(s) of disease, medications, emergency room use and other resource utilization.

With such information, the DxCG model was able to estimate the probability of each person being admitted to a hospital or receiving home health care during the following six-month period. The highest-risk individuals — the top 1 percent — were considered prime candidates for active intervention. The model was able to help case managers identify which of these individuals should be actively managed and predict how many would require hospitalization in the future in the absence of such special interventions.

Medical-care costs are one of the most significant drivers of escalating claim severity in the property/casualty industry — especially in workers compensation. Going back to 1950, the Consumer Price Index (CPI) for medical care has increased 1,800 percent, nearly three times more than the 650 percent increase for all items in the index.

DxCG models are used by private health plans, providers and employers, as well as the federal government. Since acquiring DxCG last year, ISO has been helping DxCG develop its predictive modeling capability to assist casualty insurance companies.

"The challenge for many property/casualty lines of business, such as workers compensation, is to identify in advance the group that is most likely to require expensive future care and take steps to prevent or delay hospitalization while these individuals are still relatively healthy," said Arlene Ash, Ph.D., the study's author and DxCG cofounder. "Our models predict high-risk cases that are likely to become high-cost cases. That information is key to holding down losses," she added.

For more information on the DxCG predictive model, contact Diane Laurent at (617) 896-5909.

About DxCG, Inc.
DxCG, a unit of ISO, promotes fair and efficient health care by providing software solutions to more accurately plan, budget and evaluate health-care management programs. DxCG has more than 200 clients in the U.S. and abroad. The company's Diagnostic Cost Group (DCG) and RxGroups® predictive models are used to negotiate health-based payments, identify opportunities for disease management, profile physicians and evaluate managed-care programs. Recognized by leading independent researchers as the most proven models available, DxCG's methodologies are used by the federal government to set payment rates for the U.S. Medicare program.

About ISO
ISO is a leading provider of products and services that help measure, manage and reduce risk. ISO provides data, analytics and decision-support solutions to professionals in many fields, including insurance, finance, real estate, health services, government and human resources. Clients use ISO's databases and services to classify and evaluate a variety of risks and detect potential fraud. In the U.S. and around the world, ISO's services help customers protect people, property and financial assets.

Release: Immediate

Contacts:
Giuseppe Barone / Erica Helton
MWW Group (for ISO)
201-507-9500
gbarone@mww.com / ehelton@mww.com