Forecast of Medical Costs in Health Companies Using Models Based on Advanced Analytics

Abstract

Forecasting medical costs is crucial for planning, budgeting, and efficient decision making in the health industry. This paper introduces a proposal to forecast costs through techniques such as a standard model of long short-term memory (LSTM); and patient grouping through k-means clustering in the Keralty group, one of Colombia’s leading healthcare companies. It is important to highlight its implications for the prediction of cost time series in the health sector from a retrospective analysis of the information of services invoiced to health companies. It starts with the selection of sociodemographic variables related to the patient, such as age, gender and marital status, and it is complemented with health variables such as patient comorbidities (cohorts) and induced variables, such as service provision frequency and time elapsed since the last consultation (hereafter referred to as “recency”). Our results suggest that greater accuracy can be achieved by first clustering and then using LSTM networks. This implies that a correct segmentation of the population according to the usage of services represented in costs must be performed beforehand. Through the analysis, a cost projection from 1 to 3 months can be conducted, allowing a comparison with historical data. The reliability of the model is validated by different metrics such as RMSE and Adjusted R2. Overall, this study is intended to be useful for healthcare managers in developing a strategy for medical cost forecasting. We conclude that the use of analytical tools allows the organization to make informed decisions and to develop strategies for optimizing resources with the identified population.