It's safe to say that data analytics are transforming everyindustry. The more data that an organization can glean actionableinsight from, the more room there is for making improvements. Suchis the case with insurance. With massive amounts of data collectedon a daily basis, the business opportunities that are availableafter sorting and analyzing that data are even greater. It's apractice that many carriers are adopting for a variety of benefits,but most notably, to drive down costs.

Today, companies are using data analytics to proactivelyimplement tactics to improve business processes rather thanreacting to problems after they happen. Since data sets are moregranular, easier to access and integrated with many other businesssystems, businesses are able to be much more strategic in theirtactical implementation than ever before. With medical spend inparticular, analytics allow payers to look at more detailed datasets to identify costs by unit, procedure code or provider type, toname a few. By categorizing medical spend, key cost drivers aremore clear and corrective solutions, such as ancillary networkservices to manage specific types of medical services, can be putin place to reduce spend in those areas.

Ancillary networks encompassing supplemental coverage areasoutside of general care, such as diagnostic services, durablemedical equipment or physical therapy, are not groundbreakingadvancements in the insurance industry. They've been used to reducemedical spend for quite some time; however, in the past few yearsthere has been a noticeable increase in adoption. Payers are morefrequently incorporating ancillary network services into their costcontainment programs and as a result of new tools and technologies,making them easier to deploy. Another noticeable change in the useof ancillary network services is the growing focus on strategy,thanks to more sophisticated analytics initiatives. Payers are moreaccurately identifying key cost drivers and therefore,strategically determining which services are most appropriate fordelivering overall business benefits.

While payers themselves have become more sophisticated inancillary network service approaches, the service providers arebecoming more sophisticated as well. Rather than only offeringvalue through discounts, ancillary networks are now positioningthemselves as strategic business partners by providing other costcontrol advantages. This is especially true for expense areas suchas pharmacy and physical therapy that are notoriously known forbeing problematic and costly.

Pharmacy

More carriers are evaluating and investing in pharmacy benefitmanagement (PBM) solutions since medication (Rx) is such asignificant portion of medical spend. All injuries havedownstream issues associated with Rx, such as addiction or abusethat can extend the life of a claim or create new claims. It's ahuge area for control – sometimes up to 20% of costs can berecouped. More frequently, PBMs aim to flag savings areas andautomatically address them without payer involvement to increasetheir partnership value. For example, a PBM may automaticallydetect when generic versus brand medication can be used based onphysician instruction, or when a patient is trying to fill aprescription before the fill period is over. This immediately saveson cost and does not require additional resources.

Physical therapy

Likewise, physical therapy is a significant cost category inmost claims programs. It's an area that is prone to overutilization and has many different therapy categories. By workingwith an ancillary network, payers not only receive contracteddiscounts on needed and approved treatment, but these networksplace a more focused control around utilization review and providermanagement.

As with any industry, expanded use and growth in a specificsector boosts market share for companies operating in that space.This is precisely what is taking place among ancillary networkproviders. Now that ancillary offerings are critical components ofcost containment strategies, there has been a lot of overall marketactivity around these solutions, making it one of the busiestsectors in the P&C industry.

As a result, there have naturally been a lot of acquisitions andconsolidations – some good, some bad. Acquisitions by largercompanies can result in better technology or more favorablecustomer service, which ultimately benefits the end user. On theother hand, with an increase in mergers and acquisitions, there arefar fewer vendors to choose from and that is more often than notreflected in price. While prices might skyrocket, P&C providerscan also rest assured that innovation and value offerings will aswell. With so few competing in the market, ancillary serviceproviders will be fighting for differentiation, and that's a hugebenefit for the end user's business.