When Pitney Bowes’ contract with its New York area health-care vendor came up for bid for 2004, Mahoney and Hom looked for a more proactive provider. "We needed a health plan to reach out to people, to help engage them before they become high-cost claimants," says Mahoney. Today, employees who sign up for the new plan get a call from a nurse whose goal is to identify the family’s health problems and offer resources to get them under control.

Treatment: Incentives To Stay Healthy

While DxCG was focusing on projecting costs by region, Medical Scientists was developing a model of a high-cost claimant-someone who costs the company $10,000 or more per year in medical claims, workers’ compensation, disability and absenteeism. The software uses several types of artificial intelligence, including neural net technology, to identify patterns among claimants that might otherwise be impossible to spot.

"Everyone has a theory of what drives future costs: smokers, people who don’t eat right, lack of immunizations," says Mahoney. Those theories tend to color people’s interpretations of the data, he explains. He sees artificial intelligence as a fresh set of eyes, unencumbered by preconceived notions.

Pitney Bowes gave Medical Scientists data on medical, disability and pharmacy claims; encounter data from its seven onsite clinics; and employee data-such as age, gender, ZIP code and salary level. The engine then searched for the combination of variables most likely to cause a person to rack up high expenses.

The analysis produced two findings. First, employees who spent more than $780 on health care were most likely to become high-cost claimants the next year, as were those who spent nothing because they weren’t getting checkups. Second, employees with asthma, diabetes, depression or hypertension who weren’t taking their medicine regularly were also at risk for becoming big spenders.

Hom and Mahoney convened a group of experts-including the chief medical officers of a pharmaceutical company and a health insurance plan-to review the findings. After validating the data, the group brainstormed ways to reduce expenses. Mahoney and Hom prioritized the ideas and launched sweeping changes to Pitney Bowes’ health plans.

First, they redesigned the plans to place greater emphasis on preventive care. Now, employees can get colonoscopies, mammograms and immunizations for free or for a minimal copay. To get employees with common chronic illnesses to take their meds, Mahoney and Hom took an even more radical course of action: They did away with the three-tiered pricing structure for drugs used to treat asthma, diabetes and hypertension. Instead of making employees kick in up to half the cost for brand-name drugs, Pitney Bowes would provide all asthma, diabetes and hypertension drugs at the generic rate of 10 percent. Overall, employees’ out-of-pocket costs for those medications were cut nearly in half.