Medicare is slowly moving forward on risk, but commercial risk is more of a wild card and the health care industry has yet to land on a clear model for the population. Radio Advisory's Rachel Woods sat down with Advisory Board's Clare Wirth and Alex Tallian to discuss their research on commercial risk and why they believe commercial risk is possible for the health care industry.

Read a lightly edited excerpt from the interview below and download the episode for the full conversation.

Rachel Woods: Let me take a step back for a second to start with, how did the two of you even go about answering the question, is commercial risk possible?

Alex Taillian: It was something that at the Advisory Board, something that Clare and I were really excited to partner on with our research and data teams. We've gotten access to a really exciting new database of commercial claims that covers over 20 million covered lives. It's a really robust national dataset that covers the entire country from there.

What we wanted to do was dig into the data to surface key areas of opportunity for commercial risks. So what are the specific service lines or subservice lines that we can focus on or draw the conversation to that are going to be really rich starting points as different providers, payers, entities in this space enter into that conversation?

Woods: I don't want to hide the ball here. Is commercial risk actually possible?

Clare Wirth: It's possible. It may just look different than the Medicare path, which is why I think we should get into the data first.

Woods: Okay, let's do that. Alex, when it comes to the commercial population, what did you find were the top opportunities for savings?

Taillian: Just to ground us in the analysis—so we dug into a robust series of professional claims focusing on ambulatory costs and how those would present to the payer. And so what we found in our analysis is that there's a lot of things that you'd expect at the top, outpatient E&M, supplies and DME, but then also some really interesting secondary categories, like chemotherapy, psychiatry, delivery.

And so a lot of these are key subservice lines, and we can dig into them more in a second, but that we see changing how they might be managed or those associated costs as we enter into more risk-based contracting or more of a value environment across the next year.

Wirth: As we talk with folks around the industry, we get some common questions around what's excluded from this dataset. So Alex, can you comment on that?

Taillian: Yeah, absolutely. So since we're focusing on professional claims, a lot of the facility costs that you'd expect, so surgeries, some costs associated with delivery. We're also digging into DME or durable medical equipment, which is a whole different cost category and presents pretty differently in the data.

But I think what we've surfaced is the key medical or surgical subservice lines that may be early movers or lead indicators for us of what's possible. And so I think that's what's most exciting now that we have the data to double click on as we're going forward in our research.

Wirth: So to be really explicit on what Alex just said, what in this analysis is not included is things like surgeries and prescriptions. We understand those are big cost drivers, but that's not where this dataset is going to point us toward.

Woods: But in the dataset that we have, I'm not sure that I'm all that surprised in what we found. Maybe with the exception of labor and delivery, we would expect things like ED utilization to be a top opportunity in the Medicare population, like in the commercial population.

Wirth: Yeah. I've been researching population health for a number of years now, and ED utilization is always a top priority in Medicare. The issue is in commercial that a lot of the ED utilization is simply not avoidable—it's accidents, it's injuries—and so those folks are in the ED because it's a true emergency.

Woods: So it's a top cost, but it's not actually an actionable cost. It's not something that we can really address.

Wirth: Right. Not as such.

Woods: What were some of the emerging opportunities that you saw in the data?

Taillian: When looking at any source of data, the way that you identify opportunity to move is that you see variability, you see a change in trend, you see different people, different players doing different things.

So taking chemotherapy as an example, we've seen almost a doubling of chemotherapy costs in the commercial population in the last five years. We have to dig into that more. But it's such an outlier compared to all these other subservice lines that we're seeing, it seems like there's a trend there.

Just taking that as an example, those service lines that have seen disruption, seen a lot of change or seen rising costs, I think are some of the first ones that we would want to look at.

Wirth: Alex, I'm glad you hit on chemotherapy, because it's a complicated one. It is sensitive, it is something that employers may or may not want to get involved in. We have already identified, especially collaborating with our researchers who study oncology in and out, some clear opportunities there, like site of care shift. Chemotherapy is a tricky one, but an emerging opportunity nonetheless.

Woodsb: I'm glad you bring up sensitivities. Are there any areas that leaders should avoid, that should be maybe at the bottom of the to-do list?

Wirth: So it's a bit counterintuitive, because some of these areas are places where we'd see costs decrease. We mentioned ED utilization, for example, but some of these are places we'd expect costs to increase when you better manage this patient population.

So for example, immunizations is in the top 20 list. We'd expect those to increase in a better managed population, or just preventive care, so outpatient utilization, also something we'd want to see increase.

Woods: And this is why I really value your partnership as a data and analytics team, but also as a health care business research team, because it's not enough to just look at the top 20 numbers. There are nuances, where are there sensitivities, like chemotherapy, where are there not actionable opportunities like ED utilization, and where might you actually want to see costs go up instead of go down?

Taillian: Yeah, really excited about this partnership with Clare. I think combining the skills that our data team has with the terrain and expertise that she has in the value-based care area, we have a second set of analyses that we would like to pursue in the back half of this year.

The first I think that we're going to look at is if you think about value-based care, the entire concept is delivering value on some time horizon. So across a one, two, or three year period that you have, either with a beneficiary or pool, what are all the levers that you can pull to drive value and lower cost for them? We'll be using the data that we have to build those analyses and look longitudinally across those years and see some of the trends that we can service.