Disease Management

MANAGED CARE September 2004. ©MediMedia USA

The pharmaceutical giant contends that soon-to-be-released data will verify its program's effectiveness.

John Carroll

From the start, Pfizer's pitch to Florida's Medicaid program was startlingly bold: In exchange for getting all of its drugs on the state's preferred drug list without offering supplemental cash rebates, the big drug company would create a disease management program that would deliver $56.3 million in proven savings in slightly more than three years.

But even before the drug company could produce figures on its second year, the program has been pronounced dead on its feet. Hit by a state agency report in the spring that questioned Pfizer's first-year results, the Legislature slammed the door on Pfizer and several other pharmaceutical companies — Bristol-Myers Squibb, AstraZeneca, and GlaxoSmithKline — that had followed the pharma giant into value-added DM programs. The governor signed off in May and now Medicaid officials say it's time to close the books.

"That is a done deal," says Connie Barnes, a spokeswoman for the Agency for Health Care Administration, which manages the state's $14 billion Medicaid program. "Value-added cannot be used. We're just waiting for these [second-year] figures to be reconciled."

Adding a nail to the coffin was an earlier report from the Office of Program Policy Analysis and Government Accountability — a public watchdog group that reports directly to the Legislature — that simply said that the state had a lot more to gain by demanding discounts from drug manufacturers than asking for a better way to manage the drugs.

The decision in Florida is likely to have a big effect on how the other 49 states line up for savings of their own. And with a growing confederacy of governors stridently demanding reimportation to tap into Canada's single-payer discount system, their spotlight is likely to be pointed squarely on the acquisition cost. Outcomes among the chronically ill — which is where the pharma industry wants to center the public's attention — may well be relegated to a less significant category.

"Florida's abandonment is more than a straw in the wind," says Alan Sager, an economist who runs the Health Reform Program at Boston University School of Public Health. "It's a signal that, as Medicaid budgets tighten, states will be demanding more meds at lower prices and the challenge to pharma is to recognize that their entire high-price strategy is doomed — something they know anyway."

Most health experts can agree that disease management is a good thing, says Sager. But for states like Florida, where an older population is seeing drug costs gobble up an ever-growing share of their income, sensitivity over the price of drugs trumps DM outcomes.

"Prescription drug spending is doubling in the country every five years," says Sager, "and governors, legislators, and Medicaid program managers have to worry at least as much about spending as about outcome."

No concessions

Pfizer, though, is making no such concession and isn't about to write off its Florida program.

"It was never out of play," insists Pfizer spokesman Jack Cox. The second year report will come out just about any day now (though not by Managed Care's deadline), he adds, and the results will be "pretty impressive." Bottom line, says Cox: Its DM program saves lives and money.

"The results will show a significant improvement in the health of thousands of Medicaid beneficiaries," the company said in a statement after legislators took action, "the demonstrated success of a new, patient-centered approach to health care delivery and medical cost savings exceeding the guaranteed savings. We anticipate that these results will clearly communicate the value of this innovative community partnership between Pfizer and the state."

Pfizer will continue with its DM contract into next year, says Cox. And the company says it looks forward to talks about continuing the program after that.

Scathing report

The disconnect between Medicaid, Florida lawmakers, and Pfizer hinges on a scathing report put out by the Office of Program Policy Analysis and Government Accountability several months ago. In a roundhouse blow to Medicaid DM in general, the OPPAGA said that the Legislature's big hopes for disease management never panned out; big savings weren't being realized, the numbers that were reported were suspect at best, agency oversight was weak, and many of the recipients that were supposed to be in the program weren't. In fact, only about a quarter of the chronically ill patients ever made it into DM. Their penetration of disease categories were:

Based on OPPAGA methodology, DM did pay back $1.46 in savings for every $1 spent. LifeMasters, for example, was credited with saving slightly more than $5 million for its CHF program, comparing the $7.63 million in program costs with $12.66 million in gross savings. Pfizer produced $900,000 in net savings in a program that cost $7.5 million. And in a field where there are no "perfect methodologies," OPPAGA said that Pfizer's calculations for determining gross savings were fundamentally flawed, seriously inflating its earliest returns. Just don't tell that to Pfizer, which fires back that OPPAGA is the one that's guilty of fuzzy math.

"The report is not accurate," counters Cox. "It had several glaring errors in it. They didn't even recognize that Pfizer was paying for the program."

But perhaps even more convincing for state legislators, OPPAGA had already rendered a negative verdict on the kind of value-added program that Pfizer championed. Not only were drug companies avoiding discounts or supplemental cash rebates if they offered value-added programs, the state agency maintained, so were their competitors. Any drug company with a competing product didn't have to discount its price significantly to get a drug on the preferred drug list if Pfizer and the others weren't discounting at all.

OPPAGA looked at a variety of drugs, charting how drug companies cut prices to get a product on the PDL. Eliminate value-added contracts, says OPPAGA, and the state would chalk up more than $64 million a year in additional savings.

And these were hard-dollar estimates, the agency noted, not the questionable cuts tied to DM. Considering that the project had exempted drugs that accounted for 34.8 percent of the $1.3 billion Medicaid spent on its top 50 drugs, the agency maintained, the potential savings were just too big to ignore.

Good experience

Chalk it up to experience, say some DM leaders who still see a big future for DM in Medicaid and Medicare.

"It was different, unique," says Bob Stone, executive vice president of the Nashville-based disease management outfit American Healthways, about the Pfizer project. "It's good that it was tried. There's a wide variety of program solutions, some of which will prove to be effective, some won't," adds Stone, who isn't offering a DM program for Florida Medicaid. "As the industry grows and matures, we'll see certain approaches succeed and others go by the board."

Perhaps, he adds, the program was too narrowly based. And again, he adds, you also have to consider the population. With a high rate of churn in Medicaid, he says, it can be difficult for a DM program to gain the kind of ongoing commitment that's needed to demonstrate significant results.

John Carroll, a freelance writer living near Austin, Texas, has been a contributing editor to Managed Care for four years.

MANAGED CARE February 2004. ©MediMedia USA

When American Healthways posted a collaborative methodology on its Web site, not everyone in the industry applauded.

John Carroll

Contributing Editor

One year ago, Victor Villagra had good reason to believe the disease management industry was on the threshold of embracing a standard method for evaluating just how well DM programs work.

Villagra, the former president of the Disease Management Association of America (DMAA), had responded to an invitation to join 150 doctors and other health care professionals in Nashville to inspect the "Standard Outcomes Metrics and Evaluation Methodology for Disease Management Programs" assembled by a group of researchers at the prestigious Johns Hopkins University in collaboration with American Healthways.

With some input from attendees, the results were publicly posted on the American Healthways Web site and all were invited to hear Villagra, now president of Health & Technology Vector Inc., give this outspoken blessing: "This document will become an invaluable reference for private and public payers, consultants and disease management organizations seeking both methodological rigor and real-world practicality."

Sense of urgency

Adding to the urgency of the metrics summit was a deep-seated belief (subsequently justified by Medicare reform) of many of the attendees that if DM companies weren't able to seize the high ground on methodology, an inquisitive Medicare agency that had already begun to probe the workings of disease management would wind up doing the job for them — which could present a host of unexpected challenges.

A year later, though, DM vendors around the country remain deeply skeptical of the jointly developed standard and even less likely to identify themselves with an industry standard than in the months leading up to that meeting in Desert Springs, Calif., where Villagra made his hopeful statement.

The one point everyone now seems ready to agree on is that the American Healthways' meeting marked an important milestone along a still unmapped journey to industry standardization. Who will lead the way forward, and what direction they will take, remain to be seen.

"I'm not sure that the industry is at a point in its development in which it can adopt a single standard for how to measure outcomes — largely because we are only now at a point where we have multiyear outcomes on the same populations that we can study and report on," says Christobel Selecky, CEO of LifeMasters Supported Care and the president-elect of the Disease Management Association of America. "There is so much learning going on that it may be premature to adopt one single standard. In addition, we have customers who have their own ideas about how they want to measure standards."

Not on radar screens

Ken Mays, an analyst for Mathematica Policy Research, recently completed an exhaustive survey of DM practices around the country.

"For now, at least, large employers don't have it on their radar screens," says Mays. "From my perspective, we did not get any evidence that employers are aware of this activity. My sense is it's probably too new to have penetrated very deeply."

If a sampling of opinions from around the DM industry is any indication, American Healthways is unlikely to gain much immediate help in promoting the effort. At best, DM officials in a broad range of positions give American Healthways a pat on the back for taking on the exercise, and then start to illustrate either where the methodology goes wrong or tout their own alternatives — or both.

Some who never received an invitation to the California conclave are also in no mood to lend it unequivocal support.

"People were upset that they didn't include us and the rest of the industry," says Derek Newell, vice president for outcomes at LifeMasters. "We would have liked a more collaborative process."

The Hopkins methodology draws its sharpest criticism from those who say that it is still far too inexact in its pre/post approach to measuring outcomes. Without randomized, controlled trials — the gold standard for authenticating any health care product — there can be no undisputed evidence that a DM program works.

And in an imperfect world, many of the biggest DM players in the country are willing to settle for alternative methods that crudely demonstrate or imply bottom-line effectiveness. Also, DM companies still pursue radically different strategies for handling the chronically ill. The American Healthways method of evaluating entire populations may fit in with its own widely touted approach, but it is particularly controversial for outfits that specialize in working with specific disease groups.

"It gives us a starting place," offers Newell, "which I don't think we had before."

And Villagra, for one, thinks that that is a good sign for the future of a methodology that he remains as firmly committed to now as the day it was posted.

"As the industry matures," says Villagra, "my hope is that it sees the benefits of huddling around this document as a starting point, as the best and most explicit and most real-world-friendly method that is available anywhere. If that happens, then I think the methodology will stick."

Not to be outdone, the Disease Management Association of America (DMAA) has also issued a white paper on evaluating methods in disease management (see "The DMAA's Own Approach").

Converting the skeptical

It all started two years ago when Bob Stone, the executive vice president of American Healthways and 2003 president of the Disease Management Association of America, launched an ambitious effort to rally the DM industry around the flag of standardization.

American Healthways, as a major player, has "a responsibility to be constantly raising the bar and increasing the credibility of the entire industry," says Stone. "The skepticism around disease management outcomes is very real. It ranges from health plans to stories in the New York Times and Wall Street Journal. The Congressional Budget Office is skeptical.

"That skepticism is warranted and exists because disease management is a nice-sounding homogeneous term, but disease management is not homogeneous. There are different methods of delivery, different outcomes methodologies. From our perspective, there's no way the industry could address that skepticism without a uniform methodology."

The answer, Stone felt, could be provided by the Hopkins methodology. And, he adds, American Healthways has found support outside the ranks of its own company hierarchy.

"I think we are making progress," adds Stone. "I think we would have been naïve to assume that every disease management provider would immediately leap on a methodology that was not its own. You have to be able to crawl before you walk. Or run. It's better to have something than nothing. Now we have something. The most important aspect of the methodology is that it sets out a framework for the base period population, which is identified and tracked and measured in exactly the same way as the intervention period population. So there is no ability when you follow this methodology to inappropriately shift costs to make the results look better, no ability to subset the population, focusing only on a high-risk subset."

The lukewarm reception from the industry, he says, comes from the fact that the Hopkins methodology has the American Healthways name on it, and from the likelihood that there are "companies that if they use the methodology would not have reportable positive results and therefore didn't want to adopt it themselves."

Villagra thinks that there is more acceptance of the standard than most DM companies are willing to make public.

"I think there may be some reluctance on the part of some disease management companies to acknowledge this particular methodology as a standard," he says. "But I have been told that many people working in the field feel that the contents of the document are superb."

Health plans take notice

Signs of support: The National Business Coalition on Health has endorsed it, says Stone. The Disease Management Journal has published a document on Hopkins. And, he adds, "a number of health plans are at least making reference to this methodology. The methodology has been shared with the Centers for Medicare and Medicaid Services, but it remains to be seen to what extent it will find its way into requests for proposals coming out of the federal government."

Stone may never find many others in the industry cheering for the leadership of American Healthways in this matter, but he does gain approval for taking a very public step by posting the methodology on the company's Web site.

"To say this is a standard suggests that everything you need to know is known," says Barry Zajac, vice president for clinical informatics at Airlogix. And without some testing "in the real world," he adds, "that just can't be proven."

"It's a really good effort," offers Selecky as she cautiously weighs in, "but...."

For starters, she says, there are several issues that need to be taken into account when you do a pre-post evaluation, not the least of which are things like yearly changes in the mix of the population, changes in the physician network, changes in payments to providers, and the introduction of new medical technologies and treatments.

"It's a valid way of doing it," she continues, "but what we have seen is that there are several valid ways of doing it."

One of the most frequently leveled charges against pre/post is that any before-and-after comparison in DM suffers from a regression to the mean. Sick people have a habit of either getting better or dying, which gives DM programs a statistical advantage by showing a return on investment that isn't earned.

"Frankly, I think that the Hopkins methodology does recognize the regression-to-the-mean issue," says Selecky.

Anyone insisting on a rigidly exacting methodology demands a randomized control methodology over a long period.

"Until we do randomized, controlled trials," says Gordon Norman, MD, PacifiCare's vice president for disease management, "it won't be perfect."

The problem, of course, is that randomized, controlled trials take time and money, something a lot of customers don't feel they have nearly enough of. "But you also can't let the perfect be the enemy of the good," insists Norman. "If you have good data that indicates significant improvements, the best way forward now is to get quality DM programs in place and help the chronically ill and let scientifically tested industry standards take shape over time."

Too good to be true?

A threat to everyone, he adds, are programs that wildly overstate the returns they can deliver.

And that's why Stone got started.

Stone cited one DM company that was clearly stacking the deck in its favor. "All the cost of hospitalization went into the base period. And then patients were tracked individually." Stone calls that "gaming the system" — artificially inflating costs for chronically ill patients by including high-cost hospitalizations, and making the comparison costs of those in the program fraudulently low.

Often the numbers don't add up. Just listen to Al Lewis, says Stone. Lewis, the head of the Disease Management Purchasing Consortium, is always warning purchasers against companies that offer returns that are simply too good to be true.

Stone is less likely, though, to share Lewis's thoughts about the Hopkins methodology.

"The enemy of innovation"

Early on, says Lewis, he and Healthways shared many of the same notions on tracking outcomes.

"We both thought that these were the most valid ways of measuring outcomes," he says. "The consortium and Healthways were the first to have the outcomes measured validly."

But Hopkins, says Lewis, just doesn't measure up. Using data sets from two vendors that follow the Hopkins methodology results in "producing outcomes that don't pass the test of possibilities."

In one case the outcome was impossible and in another case the outcome showed a dramatic reduction in cardiac-related cases, whereas the incidence rates actually went up.

"I give Hopkins a huge A for effort here," says Lewis, "but this is an evolving science. Standards are the enemy of innovation. Standards imply that there is a gold standard. Anytime you're in an evolving industry, it's probably not a good idea to bet on any one standard. That's why we use two methodologies in the consortium's RFPs."

But Lewis isn't willing to reveal just what those standards are. "If a whole coalition of people got together, I would put mine out there," he explains, "but right now it's a benefit of membership in the Disease Management Purchasing Consortium."

By advising a large number of buyers on how to contract for DM, Lewis has considerable influence over standards. "If he suggests the methodology is a good idea, it'll show up in RFPs as a requirement," says Zajac.

Stone's response: Lewis can join him in the public spotlight any time he likes.

"I think the difference in perspective between the importance we see for this industry and what the consortium sees is reflected in the fact that we made ours public and he's chosen not to," says Stone. "One of the things that is in these documents is a form for interested parties to provide feedback. I'd be delighted to have feedback to look at, for inclusion in the next version. We meet with Hopkins all the time and when we have enough input or enough perspective to make changes warranted, we convene a steering committee."

As of now, though, there are no immediate plans to convene a new standardization conference — with Lewis or without him.

Accepted principles

Like many in the business, Pacificare's Norman gives the Hopkins methodology high marks for relying on a set of general principles that are widely accepted in DM. "The general principles are probably indisputable," he says. "I think the methodology codified what the people who were doing the best work were already doing."

But there are also plenty of reasons why he wouldn't include the Hopkins methodology in one of Pacificare's RFPs without modifications.

In particular, Norman takes exception to Hopkins's reliance on applying a program to an entire population rather than narrowing it down to simply high-risk members.

Take that principle and apply it to all patients with diabetes, says Norman. "It makes sense from a societal point of view," he says, "but it doesn't necessarily make sense from a business point of view, or a health plan that has 17 percent membership turnover."

Customer always right

Customers want Pacificare to lower cost and control premiums, adds Norman. "They're not necessarily asking us to raise costs now to reduce expenses 10 years off. That's a laudable thing to do. It's an interesting societal debate. But customers don't want us to raise costs for anything" — which is one big reason why managed care companies have been migrating in ever-increasing numbers to DM.

It would be great for a customer to come along and commit to a 10-year contract so Pacificare could do all the things that work in the long run, he adds. But he isn't holding his breath until one comes along, either.

"The crisis of health care today in every survey I see is health care costs," says Norman. "It's 1990 all over again." Businesses want short-term strategies to cut costs and give them some alternative to passing on a greater share of costs to their workers.

So when Norman willingly settles for cruder standards of measurement to judge the outcomes for clients, the critical need is being served: DM, applied properly, works to save money. Just look at CHF, he says, the subject of pioneering DM programs that have been studied repeatedly.

"If we've gotten to the point that doing CHF in a variety of settings and methodologies has returns of 3 to 1 to 5 to 1," says Norman, "is there a need for more compelling proof beyond that? My answer is frankly 'no.'" But on the other hand, "if these results can be replicated by conscientious people using an imperfect but adequate methodology for business purposes, then after a while, you have to believe that ROI is there."

The moral to the story, says Norman: "Keep it real."

But experts are quick to add that the day is coming when some sort of uniform methodology becomes standard operating procedure — whether DM companies like it or not. The industry can take a big hand in creating that methodology, or watch the government impose one.

"In fact, the Medicare reform bill that was signed into last year does establish randomized control as the method of evaluation — at least for the first phase," says Selecky. Still, the primary concern for now is about what customers want and patients need.

Further study needed?

Says Selecky: "I'm not going to go to a customer and ram a methodology down his throat. This doesn't mean that at some point down the road, we won't be able to migrate toward a common approach, but that's going to require a lot of further study and education of the market."

Says Norman: "I frankly don't know if it will be any easier 10 years from now. We can't achieve the level of pristine purity that the New England Journal of Medicine would like to see in a peer-reviewed article, nor can we wait to leverage DM until that happens."

But the important goal, he says, is "doing the right thing for the patient." For now, at least, all signs indicate that "doing the right thing" will remain the single most influential — if still hazy — industry standard in the DM business.

MANAGED CARE November 2003. ©MediMedia USA

Blue Cross and Blue Shield of Minnesota and American Healthways score a hat trick by improving outcomes and satisfaction while saving money.

William R. Gold, MD

Chief Medical Officer and Vice President of Blue Cross and Blue Shield of Minnesota

Peter Kongstvedt, MD

Vice President, Cap Gemini Ernst & Young

Two years ago, Blue Cross and Blue Shield of Minnesota faced issues common among health plans. Its disease management programs had resulted in reasonable successes in controlling costs for diabetes and cardiovascular disease, but health costs overall were continuing to increase and employers were asking for explanations as well as methods to help stem the rise.

As the largest health plan in the state, covering 2.5 million members in Minnesota and nationally, BCBSMN was no stranger to innovation, and it was in this context that a meeting between the leaders of BCBSMN and American Healthways Corp. (AMHC) proved to be a milestone for the two organizations.

The objectives were clear: Improve clinical outcomes and compliance with care standards, lower total health care cost, and achieve member and provider satisfaction.

10-year agreement

In December 2001, the two companies signed a 10-year agreement for a population health management program called BluePrint for Health Care Support.

Population health management programs are part of the arriving generation of disease management. Over the past decade, health plans have worked hard to identify methods to better manage the health of their patients.

True population health management goes beyond traditional utilization and disease management; it seeks to better manage the care and health of both chronically ill patients and those patients who are at high-risk but have not had an acute event. This new model of care leverages innovative technology and resources to strengthen the physician-patient relationship while improving care for the small percentage of the patient population that incurs the highest expenses.

Population health management programs focus on the whole person and that person's propensity to develop one or more diseases. They focus on a larger number of illnesses than typical disease management programs, and consider both chronically ill and high-risk healthy patients, as opposed to traditional disease management that focuses solely on chronically ill patients. Furthermore, traditional disease management programs are typically segregated by disease, and they target people who already have one or two specific diseases or chronic conditions (e.g., diabetes or heart disease).

Compounding that, many traditional disease management programs, both internally and outsourced, use different personnel and systems for different conditions. Since many of the chronically ill have more than one condition, it is not uncommon that the same patient hears from two or more disease managers from the same health plan.

Beyond disease management

Population health management programs are more holistic, looking at the total profile of individuals, who are often at risk of developing multiple medical conditions (e.g., diabetics developing heart disease, stroke, or renal disease). These programs are more complex than typical disease management programs and cut across clinical specialties

Population health management goes far beyond the typical 4 to 6 clinical conditions managed by typical disease management programs. In the case of BCBSMN, 17 chronic diseases or conditions were addressed.

Population health management uses a variety of proactive interventions, many of which are used as well in typical disease management programs — for example, personal nurse care managers assigned to high-risk patients such as those suffering from diabetes and/or cardiac illness. These nurses and health care professionals, working with the patient's physician, tailor treatment programs for the various clinical conditions — e.g., blood sugar testing, retinal eye exams, weight and diet management, smoking cessation, daily weight checks and usage of aspirin or beta blockers — to help reduce the occurrence of acute episodes of care caused by these diseases.

Population health management uses new point-of-care clinical tools and especially advanced data modeling to identify and work with at-risk patients. Information systems, technology, and databases are critical for these programs to be effective. To start with, a health plan must understand its current claim experience and which diseases pose the biggest problems. Population health management involves analyzing data on a broad population and doing predictive modeling, which has become very robust in recent years, to identify individuals who are at risk for developing a particular clinical condition or a complication. Based on this information, health managers can reach out to those people to work with them ahead of time to prevent acute episodes.

What sets population health management apart then from typical disease management is the integration of three key elements: a far broader scope of chronic conditions and diseases, the application of "one stop shopping" in which patients with multiple conditions are managed through a single point of contact and coordination, and the rigorous application of predictive modeling across multiple clinical conditions. The use of continually updated clinical practices and strong academic support is also necessary since, in the end, the clinical interventions must improve outcomes.

In March 2002, BCBSMN launched its population health management program. A team of 120 nurses supported the program. They had an average of 15 years experience and diverse clinical backgrounds. They shared relationship-building, empathy, and behavior change skills. And through American Healthways, they received continuing clinical and technical training and advice.

Engagement model

BCBSMN identified members eligible for the program based on claims and pharmacy data, and referrals from members, physicians, and case managers. BCBSMN used an engagement model, in which members were automatically enrolled in the program unless they decided to opt out (versus an opt-in model in which members must enroll themselves). Engagement models typically have a 95 percent participation rate; BCBSMN's BluePrint for Health Care Support program had 97 percent participation.

Enrollees were stratified into 1 of 4 risk levels. BCBSMN worked with American Healthways to develop algorithms based on claims, prescriptions, self reports, physician, and care calls. For example, the algorithms included data such as cholesterol and triglyceride levels, history of heart disease, and perceived health status. The algorithms were fluid, allowing stratifications to change daily.

At the cornerstone of the program were personalized member interventions. Enrollees interacted with the program through multiple points of contact and multiple formats (i.e., telephone, mail, internet). All enrollees received an initial telephone call, general health assessments, depression screenings, education materials, and regular telephone calls (the frequency and timing of which were based on their risk stratum). Enrollees had around-the-clock access to care managers through a toll-free number.

Physicians were actively involved in the program as well. They received regular reports on medications and alerts, as well as care guidelines. They too had around-the-clock access to care managers through a toll-free number. A sophisticated software system provided care managers with complete member records, goals, and assessments. Tracking software was integrated with a telephone dialer system.

BCBSMN classified the initially selected 17 conditions or diseases into one of two groups. The first group included what BCBSMN termed "core conditions," traditional disease management programs that it had offered before. These included: diabetes, coronary artery disease, congestive heart failure, chronic obstructive pulmonary disease (COPD), asthma, and end stage renal disease (ESRD).

The second group included what BCBSMN termed "impact conditions," which were new to the program and included: osteoarthritis, acid-related stomach disorders, low back pain, osteoporosis, fibromyalgia, atrial fibrillation/anticoagulant therapy, chronic hepatitis and cirrhosis, incontinence, irritable bowel syndrome, pressure ulcers, and inflammatory bowel disease. BCBSMN is the only payer in the country to address many of these impact conditions with disease management techniques.

These conditions affect 12 percent to 15 percent of BCBSMN's commercial population and account for between 40 percent and 45 percent of all claims costs. (Typical approaches to disease management programs, in contrast, reach less than 3 percent of the population.)

During the first year of operation, all fully insured groups, Medicaid, and certain self-insured groups were eligible to participate in BluePrint for Health Care Support. Shortly after the program started in March 2002, BCBSMN began marketing it to self-insured groups.

The program was implemented by a team led by executives from both BCBSMN and AMHC. There was an operations work group consisting of department heads in affected areas; its job was to design and institute the program.

An advisory council of community physicians monitored the program's clinical integrity, reviewed care support treatment guidelines, communicated developments to the provider community, and recommended improvements.

Because of the program's size and scale, BCBSMN and American Healthways faced challenges. When implementation began in March 2002, the program had 70,000 members with chronic diseases. A few months later, there were more than 100,000. Neither company had taken on a program of this magnitude. For example, BCBSMN and American Healthways had to:

• Transfer several million records.
• Conduct multiple mailings with separate branding requirements.
• Build a call center in Minnesota.
• Establish a complaint tracking and resolution process.
• Staff and train clinicians and managers.
• Customize products for BCBSMN.
• Ensure staffing and establish processes to satisfy contractual obligations.
• Address unique requirements in the Minnesota market.

A common criticism of disease management programs of any kind has been a perceived inability to demonstrate genuine differences in outcomes and cost. Critics have said that savings could have occurred due to other changes, such as the introduction of new drugs or overall changes in physician practice behavior. The introduction of BluePrint for Health Care Support provided BCBSMN with an excellent opportunity to measure accurately the effect of the innovative new program.

Because a health plan cannot simply apply a new program to a self-funded client, such a client must pay for the cost of the program since it will gain all the benefits of lowered health care costs. This difference in clients allowed BCBSMN to measure differences in two cohorts of otherwise similar individuals (i.e., they had similar distribution of age, diseases, and clinical conditions).

The first cohort was made up of fully insured groups (with a small number of self-insured groups that joined early); the second was made up of groups that were not enrolled in the new program, but continued with the typical disease and medical management programs that they had been using. Groups in both cohorts were continuously enrolled for two years, and there were approximately 60,000 individuals in each cohort.

The first-year results show dramatic improvements in health outcomes, resulting in average claims savings estimated at nearly $500 for each member when compared to members in the control cohort. In 12 months, BCBSMN has experienced reduced hospital admissions, reduced emergency room visits, a 2 percent to 3 percent projected reduction in its fully-insured, commercial health care expenditure.

BCBSMN also saw an overall return on investment of at least $2.90 for every dollar spent. Based on the results from the first year of operation, the potential future effect is considerable and could easily grow even higher.

Improved health

Clinical utilization, cost, and satisfaction outcomes from the first year of the program were statistically significant when compared to the control cohort, and include:

• Significant improvement in diabetics' hemoglobin A1c levels.
• A 14-percent decrease in the overall rate of hospital admissions.
• An 18-percent reduction in emergency room visits.

Savings

• Average savings in excess of $36 million, or $41 per program member per month, or about $500 per year.
• A return of at least $2.90 for every dollar invested.
• A projected 2 percent to 3 percent reduction in total fully-insured, commercial health-care expenditure rate.
• Indirect savings: More than 7 percent of chronic members and 11 percent of impact condition members report decreased days absent from work or school as a result of the program.

Member satisfaction

BCBSMN surveyed enrollees and physicians annually regarding their satisfaction with the program. Findings include:

• More than 95 percent of eligible members are participating in the program.
• Ninety percent of core disease members and 74 percent of impact condition members were very satisfied or somewhat satisfied with the program, according to an independent survey of members enrolled for at least six months.
• Eighty-four percent of core disease members and 64 percent of impact condition members report they had more control of their health.
• Fifty-seven percent say the program helps them communicate better with their doctor.

Third-party organizations will review (and, it is expected, validate) the results in 2004. They include Johns Hopkins University, Milliman USA, and Ernst &Young. In the meantime, BCBSMN is strongly considering increasing the number of impact conditions from the current number of 17.

Since BluePrint for Health Care Support was initiated, BCBSMN's biggest challenge has been in meeting the needs of the ASO (administrative services only) market.

These accounts have unique and distinct needs compared to fully-insured business. They often want the services specifically branded and customized to their needs.

Frequently, outcomes reports need to be tailored to the employers' specific experience vs. aggregate outcomes data for all of the plan's participating members. Some employers have multiple health plans for their employees as well as multiple data sources for claims.

BluePrint for Health Care Support provides a model for other health plans to consider in their attempts to rein in medical costs. For the program to be successful requires full support of senior management, good data from medical and pharmacy claims, and a solid infrastructure.

BCBSMN also points to its selection of an experienced partner as a critical success factor. American Healthways had extensive experience in disease management and was ready to stretch to a new model of comprehensive population health management. Both Blue Cross and American Healthways were driven by the joint vision they had developed to change the way people with chronic disease experienced the system and the outcomes they achieved.

William R. Gold, MD, is chief medical officer and vice president of Blue Cross and Blue Shield of Minnesota, a not-for-profit company that is the largest health plan based in Minnesota, covering 2.6 million members nationally through its health plans or plans administered by its affiliated companies.

Peter Kongstvedt, MD, is a vice president of Cap Gemini Ernst & Young, whose health practice is the nation's largest health care consultancy. In association with American Healthways, among the largest providers of disease management and related services, CGE&Y helps reposition health plans' care management programs. For more information, see «www.us.cgey.com/health» and «www.americanhealthways.com».

MANAGED CARE June 2003. ©MediMedia USA

DM is God's gift to managed care. Or is it? Here is a discussion of areas that make evaluating a DM program a complex, if not ineffable, proposition.

Alison Johnson, RN, MBA

Disease management, embraced by both Wall Street and the medical world, is the most rapidly growing sector of the medical management industry. There are approximately 150 vendors currently providing disease management programs in the marketplace and many Medicaid, Medicare, and commercial insurance carriers all list their services among their offerings.

Why are DM programs flourishing?

Medical care and health care insurance premiums are skyrocketing yet again even as insurers and providers alike diligently search for effective strategies to control costs. Shorter hospital stays, fears about patient safety, and the rise of interest in consumers directing their own care have created an atmosphere where new ideas for care delivery and medical management can be considered.

The chief driver in the growth of DM programs is the dramatic rise in chronic diseases and the need for methods to coordinate and sustain effective medical care for people with chronic illnesses. The Health Policy Studies Division of the National Governors Association Center for Best Practices reports that 78 percent of the nation's total medical care costs can be attributed to the treatment of patients with chronic conditions who represent:

• 76 percent of all hospital admissions,
• 88 percent of all drug prescriptions, and
• 72 percent of all physician visits.

Such alarming statistics illustrate the need to measure and prove the efficacy of new approaches to medical management. A good idea that makes sense is not enough basis for launching innovative management programs, or even for sustaining old ones. Rigorous measurement of results, including cost, utilization, clinical improvement, functional status, and patient satisfaction must be undertaken. At their most basic, DM programs strive to help chronic disease patients manage their condition in ways that reduce or delay the detrimental effects of the disease, and diminish the need for, and cost of, medical care. Reputedly, DM programs achieve this either by delaying or avoiding complications of the disease or preventing acute flare-ups. Emphasis is also placed on wellness and self care, and enrollees are encouraged to be key participants in improving their health status.

Can DM programs reduce the cost of care delivery, produce superior clinical results, improve functional status and satisfy members and providers?

It depends. DM programs have reported remarkable early results, including slashing hospitalization rates and emergency department visits by as much as half of the baseline rate. But, so far, anecdotal evidence suggests that the effect on overall health plan costs is negligible.

Savings don't always affect the plan's bottom line immediately and maybe not for years. DM programs can report cost reductions based on positive patient outcomes for a particular year, whereas the health plan may see this benefit eroded by the next wave of chronically ill DM enrollees. The success of many DM programs is also contextual, and dependent on the business model of the health plan that engages the service and the structure of the contract.

Lack of credible data

The Pacific Business Group on Health recently concluded that there was a "lack of credible and comparable population-based outcomes data on which to evaluate [health] plans' disease management programs."

It is simply too early to tell if DM programs work, that is, if they reduce the financial and human cost of disease. One needs to evaluate an interrelated set of variables. However, we do have a clear picture of how vendors and providers are currently measuring results, and what the strengths and problems are with their methods.

Three Ways To Calculate DM savings

Milliman USA's recent survey of DM companies, Disease Management: The Programs and the Promise, identified three methods used to calculate cost savings:

1) Compare pre-enrollment to post-enrollment medical expenses.

Disease management companies may calculate the total cost of medical claims for all enrollees for the year prior to enrollment in their program and compare it with the same enrollees' medical claims during the first year of DM services. A variation on the method is to adjust post-enrollment claims so that the numbers are more comparable. They may include:

• Adjustments for change in contracted payment amounts to providers.
• Adjustments for change in benefits.

2) Compare the DM group to a control group.

The medical claims experience of disease management enrollees is compared to that of a group of patients who have not enrolled in disease management, but have the same health problems as enrollees. The control group may be people whose insurance benefit does not include disease management, or it may comprise those who do not wish to participate.

3) Compare requested services to approved services.

Some companies offer disease management along with their utilization management program. During the course of managing a member's disease, they also approve or deny payment requests for medical services, using internal protocols.

Confounding factors

These companies measure savings by comparing services requested for enrollees to services approved. For example, if a provider requests 10 physical therapy visits for an enrollee, but the protocol indicates that after six visits no further improvement can be expected, the program nurse will approve six visits. The expense of the nonapproved visits is counted as a cost savings by the program. As expected, all programs report cost savings regardless of their method for calculating those cost figures.

There are several issues that make these types of cost analysis problematic:

Regression to the mean. Simply stated, this is the tendency for things to return to normal. Disease management programs may identify members when they have incurred significant health care costs, for example after a hospitalization, or after several emergency department visits. Utilization of these services can return to normal without any intervention. If those members are enrolled in a DM program, the reduction in utilization can be attributed to both regression to the mean and to the efforts of the program. Claiming all differences in cost as the effect of the disease management program would overstate the financial and utilization impact. While the magnitude of regression to the mean is uncertain, it may be considerable if enrollees are identified at the peak of expensive treatment.

Selection bias. Enrollees who agree to participate in a disease management program may be different from members who decline. A disease management program might analyze the difference in cost of treatment and utilization between the enrollees and the nonparticipating group (Method 2), and attribute lower costs of the disease management enrollees to the program. The difference could have more to do with underlying variations between the groups, such as readiness to manage their own care.

Projecting utilization. Estimating utilization of services based on provider requests for services may overstate savings, as providers could routinely request the highest number of services they think an enrollee might need. In actual practice, they may expect the enrollee to need fewer services. The provider requests the higher number to avoid the administrative need to re-request additional services for the member.

Methods for measuring other effects

DM programs also report gains in the functional status of patients (such as ability to perform activities of daily living, and increased enjoyment of life), and improved clinical parameters (such as hemoglobin A1c results for diabetics). The chart below illustrates some of the areas where various companies are measuring the outcomes of their efforts.

Producing results in these areas is dependent on the DM program's abilities to provide services and affect the enrollee's medical care. While the interaction of all factors is not yet clear, we do have a good idea of the typical problems that can affect results and their measurement.

Many difficulties with the accurate measurement of the effect of disease management programs relate to operational problems.

Solving measurement problems

Difficulty identifying and enrolling members. Disease management companies generally use health risk assessment forms, predictive modeling, referrals, and claims analysis to identify members.

DM programs have found these identification methods problematic in accurately determining who will benefit from DM. Data from claims can be misleading and incomplete; health risk assessments have a poor rate of return; and predictive models can't always identify members at risk for costly health care events.

Lack of pertinent information. It is difficult to obtain, easily and accurately, the information that nurses need for effective disease management. Information from claims does not include lab values, and details about pharmacy utilization are rarely integrated with medical claim data.

Other important facts, such as a member's visual status, nutritional state, or living arrangements, may only be determined from a conversation with the member. Capturing this information is important for two reasons: the outcome measures can show the effect of a DM program, especially in the case of lab value information; and the information may be critical to effective interventions. The fact that a member's sight is limited may explain why that member has not managed a chronic illness effectively. Health plans and others intending to measure the outcomes of DM programs must evaluate the need for this type of information, and develop ways to collect it.

Operational and infrastructure issues. The recent Milliman USA survey of DM companies revealed wide variation in program operations and infrastructure. DM requires the coordination of services across many health care settings. This approach is best implemented when the DM company has certain key functions and tools in place, including: Information technology that provides the company with the ability to aggregate and analyze claims and other data to identify members for enrollment; an interactive medical management system, an important accuracy and efficiency tool that provides automatic reminders and cues to nurses about when to offer services; and Web site services for physicians and/or enrollees. These tools require a significant capital investment in hardware and software.

Shifts in utilization. Disease management programs may drive utilization of some services down. Emergency room visits and hospitalizations can drop as members gain control over their chronic illness. However, the utilization of other services may rise. Typical methods for supporting members in the control of chronic illness include: more physician office visits for symptom monitoring, education, and support; increased lab tests to monitor disease and medication use; and increased medication use, as members become more compliant.

Prediction and measurement of cost and utilization must include both expected savings from reduced utilization and the offset for increased utilization of other services. Medication and physician visits may also be more costly per unit. New medications might offer more acceptable dosing schedules. For example, the patient could be required to take medication just once a day instead of several times a day, taking advantage of new drug formulations or capsule designs. Medication may be available in easier-to-use vehicles, such as patches or inhalers, possibly producing fewer side effects. While these enhancements can boost patient compliance with a medication regimen, they frequently carry a higher price tag.

The cost of physician office visits might also increase if patients seek services from more highly paid specialists rather than from their primary care physician.

Management of comorbidities. The most costly and complex patients are those suffering from multiple chronic and acute illnesses. Approximately 60 million Americans have two or more chronic illnesses.

Measuring the effect of DM programs on these members is especially difficult. They could be enrolled in several programs for various diseases, and thus be counted more than once. They might need a more customized (and therefore more expensive) approach to management, or require closer medication supervision, as drug treatment for multiple conditions may create side effects and compliance issues. The chart above summarizes some of the approaches used by DM companies with these members.

The type of interventions used and the number of members with comorbid conditions will influence how outcomes are measured and what goals are set.

Time frame for outcomes. Typically, program effect is measured annually. This is appropriate for some diseases where an immediate decrease in services, especially emergency services, is expected. For example, a DM program may aim at better recognition of symptoms of fluid overload in patients with congestive heart failure, and treatment in the outpatient setting. If successful, this would reduce emergency department visits and hospitalizations for fluid overload.

Other programs are aimed at longer-term results. DM for diabetics is intended to improve lasting control of blood glucose levels and eventual reductions in the complications of diabetes, such as vision loss and circulation problems. In this instance, the control achieved this year is expected to result in better functional status and fewer expensive complications many years in the future. In fact, patients may incur higher expenses for medications, doctor's visits, and supplies as part of achieving better control of their blood glucose levels. They could even suffer a decrease in functional status, due to noncompliance brought on by the inconvenience of frequent monitoring of their glucose levels.

Effect on physician practice. Many DM programs depend on their ability to influence primary care physicians to provide services or to contact and guide the patient. They may especially rely on physicians to provide additional monitoring, patient and family education, and to change and monitor medication regimens. A recent study by the Pacific Business Group on Health showed little evidence that contacts from DM nurses were influential with physicians. Outcomes that rely on changing physician behavior in this manner may not be realized.

Self-management status. Some DM programs "graduate" members who have demonstrated the ability to self manage their disease. Their cases are closed and they are no longer included in the pool of open cases used to calculate cost savings and other outcomes. Other DM companies maintain enrollment for all members unless they change insurance coverage, contending that chronic disease patients are always in need of services.

The inclusion of stable members in the analysis pool will affect the calculation of outcomes. We can reasonably expect that these stable patients will have better functional status.

Their cost and utilization profile would depend on the number and cost of services required to support them in their self-managed category. An additional consideration is that if enrollees never disenroll, the insurance company or employer will continue to pay fees for DM services.

The verdict, please

So do DM programs work?

The jury is still out. However, health plan and disease management vendor attention to implementation concerns, especially enrollment and monitoring systems, and their rigorous scrutiny of cost analysis and utilization will provide a definitive answer in the near future.

Alison Johnson, RN, MBA, is a health care consultant at Milliman USA, specializing in the evaluation, design and implementation of medical management programs. She is the author of the recent Milliman report Disease Management: The Programs and the Promise. To request a free copy, e-mail her at: alison.johnson@milliman.com.

MANAGED CARE March 2003. ©MediMedia USA

With today's immense pressure on Medicaid budgets, states can't extend DM programs fast enough.

John Carroll

The grim financial crisis that confronts most state governments may be one of the best things that ever happened to the disease management business.

Caught on the horns of a budgetary dilemma — hooked by soaring medical prices and tumbling tax revenue — state legislatures are scrambling to find ways to rein in runaway Medicaid budgets. For quite a few lawmakers, the sudden change in fortunes has meant a quick switch in strategies, from boosting Medicaid enrollment to paring down the rolls and slicing reimbursements. And a number of states have fastened on DM as an important part of the solution — delighted to push a program that not only guarantees millions in cost savings but promises to improve care as well.

In a budget climate dominated by losers, win-win sounds sweet.

"I think states are facing difficult challenges," says Lydia Faulkner, senior policy analyst at the National Governors Association. Focusing on chronic diseases, she adds, "is one of the few proactive things they can do to reduce costs."

Last summer, the NGA brought together representatives from eight states and one territory, American Samoa. "The purpose of the academy was to bring the states and territories together to work with national experts to design customized DM and disease prevention approaches that would best meet the needs of their state," says Faulkner. She adds that next summer, the NGA hopes to bring eight more states together and take another giant step down the road of DM in Medicaid.

Whether the states can rack up quick returns has yet to be seen, but one clear winner in this trend is the DM industry. The companies with proven results stand to benefit enormously as the next wave of states leaps into Medicaid DM.

But it won't be easy.

Unique population

"On the one hand, it is way harder than it looks," says Al Lewis, head of the Disease Management Purchasing Consortium and a frequent adviser on DM contracting. "You'd be amazed at how many impediments you find. Accessing data from medical records is much harder in Medicaid," a population that has a 3 percent to 4 percent monthly churn. And mental health comorbidities can overwhelm physical comorbidities.

But after analyzing four states' Medicaid programs, Lewis concludes: "If everything goes remotely according to plan, you should be able to save in excess of 3 percent on your entire Medicaid budget, guaranteed by vendors."

Lewis is advising vendors to zero in specifically on the Medicaid population that is also dually eligible for Medicare. That includes a large population of elderly patients in nursing homes, a group that can be easily tracked down and monitored while immediately benefiting from the kind of oversight that DM companies offer.

The NGA has also helped identify some winning formulas. The trend toward a single vendor for all ailments — to better control comorbidities — has won favor. But states were also advised to design something unique for their Medicaid population. Each started by identifying the chronic diseases that most afflicted their residents and taxed the Medicaid system.

"I think states are approaching this in two different ways," says Faulkner. "Some may contract with disease management organizations to work with patients and some states may build their own strategies to intervene with physicians."

Mississippi, which holds the unenviable record of having the worst rates of obesity and deaths from heart disease in the nation, chose the private vendor route. The state bid out separate contracts for diabetes, hypertension, and asthma, and McKesson Health Solutions swept the field, taking all three. The state also took a 5 percent guarantee of cost savings and budgeted a $77 million return over three years.

By the beginning of April, McKesson will start enrolling the first patients, says Rica Lewis-Payton, executive director of the state's Medicaid division.

McKesson is under no illusions about the forces driving Mississippi's decision: "They are absolutely looking for dollar savings," says Sandeep Wadhwa, an MD and vice president for DM services at McKesson Health Solutions. "The Medicaid budget is front and center in a lot of governors' minds and a lot of legislators' minds. It's very compelling to present solutions that reduce costs while improving quality and access."

Lewis-Payton agrees that quality improvement plays an important role. "While we are concerned about costs, we are also very concerned about the health statistics plaguing our state."

Great opportunity

Still, from Wadhwa's perspective, the fiscal meltdown is creating a great opportunity. The company can exploit its Medicaid DM experience in three states, matching small networks of nurses on the ground with the national call centers — and proprietary software systems — that it has set up in California, Colorado, Puerto Rico, Illinois, and Mississippi.

As long as state governments are racing to make ends meet, McKesson sees a big opening into at least a few of the 10 to 14 states that Wadhwa sees wrestling with the DM question now. But some of those states may prefer to take a widely divergent path, like the one being broken by North Carolina.

Zones in N.C.

Another National Governors Association alumnus, North Carolina, is intent on building its own Medicaid DM program. Medicaid officials decided to create zones that will each hold about 50,000 Medicaid patients, blending big and little counties into single units. "We cover about 280,000 people right now," says Jim Bernstein, assistant secretary for health in the state's Department of Health and Human Services. "Within 18 months it will be 650,000."

Each of the regions — dubbed community care networks — will form a board of directors drawn from providers and social services as well as individuals from local schools, faith-based organizations, and not-for-profits.

Each region's clinical care directors meet monthly with state representatives, agreeing which chronic illnesses need to be addressed. And each network gets $2.50 per member per month to develop its DM program.

It's a whole new way of looking at Medicaid, says Bernstein.

"Conceptually, we have a belief that states have run an insurance company," he says. "We pay bills and try to regulate it when the costs get out of hand. For our $7 billion plus, we think we should leverage more than a one-on-one care system. We should get per-patient changes in the health status of that population."

Private DM contractors, says Bernstein, can't deliver that kind of system.

"The companies have no entrées to the providers," he says. "They have to deal with them gingerly. Providers are suspicious: Here's another person from Medicaid to bug them. One contract runs out and another company steps in. It's not fundamentally changing the way medicine is practiced in the community."

With states looking for bottom-line results, the class of 2003 will be looking closely to see who's right.

MANAGED CARE August 2002. ©MediMedia USA

Robert I. Garis, RPh, PhD

Assistant Professor, Department of Pharmaceutical and Administrative Sciences, School of Pharmacy and Allied Health Professions, Creighton University, Omaha

Kevin C. Farmer, PhD

Associate Professor, College of Pharmacy, University of Oklahoma Health Sciences Center, Oklahoma City

• Full text available in PDF

ABSTRACT

Purpose: To compare health care costs and their components in patients with chronic illnesses.

Design: Quasi-experimental retrospective database analysis of an integrated state-Medicaid dataset.

Methods: Nine chronic illnesses and 28 two-disease combinations were evaluated in 284,060 patients. Dependent variables were total cost and the component costs (hospital, physician, home health and medical supplies, and pharmacy). Statistical analysis included analysis of variance (ANOVA) and multiple analysis of variance (MANOVA).

Results: The nine chronic illnesses studied were: psychosis, depression, cardiovascular illness, congestive heart failure, diabetes, acid peptic illness, respiratory illness/ asthma, hypertension, and anxiety. Psychosis and depression patients had the highest mean yearly costs at $6,964 and $5,505, respectively. Highest component costs were mental health practitioners for psychosis and hospital costs for depression. All other conditions had significantly lower yearly costs. Component costs consisted primarily of pharmacy and hospital costs. Psychosis was a component in 5 of the 7 most costly chronic-disease concurrences. The highest disease-concurrence mean cost was for psychosis and depression ($18,318).

Conclusions: The unique resource needs of different chronic illnesses should be considered in benchmarking and evaluating chronic-disease management programs.

Key terms: comorbidity, Medicaid program, disease management, cost analysis.

Author correspondence:
Robert I. Garis, RPh, PhD
Creighton University
School of Pharmacy and Allied Health Professions
Omaha, NE 68178
E-mail: rgaris@creighton.edu

Sources of financial support: This manuscript was written while the corresponding author was a graduate student at the University of Oklahoma, School of Pharmacy. The work was supported by the University of Oklahoma, the American Foundation for Pharmaceutical Education, and a grant from the Graduate Student Association of the University of Oklahoma.

This paper has undergone peer review by appropriate members of Managed Care's Editorial Advisory Board.

MANAGED CARE June 2002. ©MediMedia USA

With a budget of about $230 billion for 40 million patients, many with chronic ailments, is it any wonder that these two forces are courting?

John Carroll

Contributing Editor

The disease management industry has powerful friends inside Medicare. And these insiders are making disease management a leading player in the reform of this monolithic federal health agency.

Just ask Reuben J. King-Shaw Jr., deputy director and chief operating officer of the Centers for Medicare and Medicaid Services.

"My time in Medicare has made me see how far behind Medicare is on this issue," says King-Shaw. "The field is so fertile and the potential opportunities so great. The intensity of my commitment has risen a few notches, because we are so far behind."

If King-Shaw has his way, the agency won't play catch up for long. Medicare has embraced a new round of trial disease management demonstration projects. And as the agency harvests the results, says King-Shaw, he expects to see the numbers back up his belief that DM's approach to chronic illness will deliver better outcomes at better prices.

Adds King-Shaw: "I don't want to commit to a time frame, but sometime over the next two to five years you'll see the most successful programs graduating into mainstream initiatives."

Mother lode of patients

King-Shaw took the same message to Congress April 16, to the House Ways and Means Committee's Subcommittee on Health. "The almost complete absence of disease management services in the traditional Medicare plan is another striking indication of how outdated Medicare's benefit package has become," he declared.

It's hard to underestimate how big an opportunity modernizing Medicare offers the fledgling DM industry. CMS as a whole, which includes Medicare, Medicaid, and federal children's health programs, will spend $360 billion on health services this year. And Medicare's population, suffering from large concentrations of chronic illnesses, offers DM companies a mother lode of target groups.

Some 100 million Americans have a chronic illness, says the National Chronic Care Consortium. That number is expected to hit 157 million by 2020 — and most will be cared for under Medicare.

"It's the Holy Grail," sums up Al Lewis, who heads up the Disease Management Purchasing Consortium.

Cancer rates help illustrate the market potential. For private commercial clients, says Edmund Bujalski, CEO of LifeMetrix, you can expect to see the cancer rate average about 0.7 percent to 1 percent. With the aged population of Medicare patients, the rate is likely to be 10 times as high.

"Medicare has the potential to expand the market for cancer services dramatically," says Bujalski. Today, in the commercial market, it may add up to $400 million to $500 million. Add Medicare, says Bujalksi, it shoots up to $4 billion to $5 billion.

This month, Mike Cox, president and CEO of QMed, will begin his own Medicare crusade with a four-year demonstration project in coronary artery disease management in Northern California. About 2,000 participants will be identified and divided into two groups — one left unsupervised (the control group) and another to be managed by QMed.

Cox has no doubt about what's at stake here. Cardiovascular disease eats up about 30 percent of Medicare's budget. "It's a huge number," says Cox. "If you were to make a 10-percent positive change, that's several cruise missiles." But this isn't just about budgets, adds Cox. "Not only does the cost go down, but if the health status changes as well, then the citizens benefit."

Other demonstration programs include:

A high-risk congestive heart failure (CHF) program in Texas and Indiana that will be handled by CorSolutions Medical. The program includes home assessment, patient education, and physician reports.

Health Quality Partners is designing an urban and rural program that will provide education and coordinated services for a variety of chronic ailments.

And Quality Oncology, a subsidiary of LifeMetrix, is identifying cancer patients in Broward County, Fla., for a program coordinating care between a medical director and the patient's physician.

Incentives offered

More DM demonstration plans are being created for Medicare+Choice programs, with plan participants eligible for increased drug benefits. Participating health plans could earn a bonus for meeting quality goals for patients suffering from CHF.

Under a mandate from the Benefits Improvement and Protection Act of 2000, Medicare is also planning to create a new demonstration project that marries DM programs with outpatient prescription drugs for advanced-stage CHF, diabetes, and coronary heart disease. DM companies will earn a premium for coordinating care and be reimbursed for the cost of medications.

But there is a catch. Any DM company participating in the program has to offer the government a defined set of savings, and post a bond to guarantee performance.

Medicare isn't a complete novice in the field of disease management. In 1993, Congress called on health plans to demonstrate their ability to manage chronically ill kidney patients. As a result, Peter Crooks, MD, director of the Southern California Kaiser Permanente Renal Program, took on a population of Medicare patients suffering from end-stage kidney failure.

"The project was to really show that in a managed care setting, patients could have outcomes that were equal to, or better than, those in fee-for-service," says Crooks.

Kaiser Permanente was paid a capitated rate, with each of the 1,056 enrollees fitting into one of 11 payment "buckets," defined by a list of factors including age and the presence of diabetes. Independent evaluators at the University of Michigan were fed the numbers to crunch over the course of the three-year project.

Those numbers are all in now but not reported. That will come after Medicare signs off on the report to Congress by the end of this year, says Crooks, with peer-reviewed articles to follow.

"It wasn't a financial windfall," says Crooks. "But we were able to provide what the patients needed." Mortality rates were reduced, says Crooks, and patient satisfaction was high.

"We've now taken this successful model of care to the marketplace as Optimal Renal Care," he adds.

DM vs. bureaucracy

DM companies looking to get involved with Medicare patients for the first time may be in for some surprises.

"They tend to need a lot more," says Bujalski. In his Medicare program, a patient will be assigned a care manager, typically a trained oncology nurse who is available at any hour of the day or night and who will help coordinate treatments with primary physicians.

"Medicare patients are more apt to pick up the phone and just chat," says Bujalski. "Oftentimes, the decision maker may be a loved one. That adds more interactions."

But if patients may be more demanding, the client could prove even more frustrating.

Cox was cleared for his demonstration project a year ago, but QMed had to stay on hold until payment arrangements were finally OK'd. Says Cox: "It's the typical bureaucratic standard — which is time."

For all the bold talk among Medicare leaders, disease management companies expect to spend a lot of time sorting out the details of federal contracts.

"The top folks in Medicare, like King-Shaw and [CMS Administrator Tom] Scully and [Special Assistant to the Administrator] David Kreiss, are very authoritative on disease management," says Lewis. "But it's the middle level folks who can be a source of great frustration."

As one of several examples, says Lewis: "Some midlevel bureaucrat defines DM as prepaid health plans, because they put their fees at risk. It's ludicrous to say that DM is a health plan. Absolutely ludicrous. I'm sure when it finally makes its way up the chain, the top folks — who are highly informed and supportive of this issue — will immediately countermand it. Demonstration projects take a long time just to fill out the application. Left to their own devices, top Medicare officials would do a better job procuring as many health plans. But right now, there are just too many people involved, too many lifetime civil servants that just love micromanaging health plans and vendors.

"Leadership has to fast-track this stuff, put out bids, forget about these little pieces," adds Lewis, careful to praise senior-level staffers while expressing his dissatisfaction with career bureaucrats.

But any suggestion that the entire Medicare staff in Washington, D.C., isn't 100-percent behind King-Shaw — and the president's plans to reform the agency — or that the entire Medicare organization isn't proceeding with responsible speed can expect to draw some heavy fire from Medicare's big guns.

"There are very serious and intense discussions about these programs," says King-Shaw sternly. "I would encourage people not to question our commitment at any level. These are serious business discussions, so we need to do this judiciously, with skill and hope."

Some industry observers say that even under the best of circumstances, it will take a lot of patience to crack the Medicare market. Vince Kuraitis, a disease management consultant with Better Health Technologies, expects Medicare could take years rather than months before it moves beyond King-Shaw's lead and adopts DM as a regular partner.

King-Shaw has been careful to note that more than just potential savings is involved here. A skeptical U.S. Rep. Pete Stark (D-California) used his time on the subcommittee last April to question whether DM could really cut costs. "In the aggregate, the costs to Medicare will be the same or lower," King-Shaw reportedly told the congressman. But he conceded that sometimes the cost could go up, especially in cases where medical services were being underutilized.

Disease management has already come a long way in just the past few years, says Crooks, and all the trends indicate that DM's time has come for Medicare.

"My personal opinion is that it's the only way that we're going to improve care for the elderly," says Crooks, "especially with the challenges of ever-increasing pharmacy costs and bringing technology to bear."

MANAGED CARE June 2002. ©MediMedia USA

Gregory D. Berg, PhD

Senior Research Scientist, McKesson Corp.

Sandeep Wadhwa, MD, MBA

Vice President, Population Care Management, McKesson Corp., and Clinical Assistant Professor of Medicine, University of Colorado Health Sciences Center

• Full text available in PDF

ABSTRACT

Purpose. The medical cost of diabetes in the United States in 1997 was at least $98 billion. This study illustrates the behavioral change and medical-care utilization impact that occurs in a community-based setting of a diabetes disease-management program that is applied to program participants in a health insurance plan's health maintenance organization and preferred provider organization.

Design. A historical control comparison of diabetes-management participants.

Methodology. One hundred twenty-seven identified diabetes patients are followed from baseline through 1 year. Differences in behavior are compared at program intake and at a 6-month reassessment. Differences in medical-service utilization are compared in the baseline year and the year subsequent to program enrollment. Poisson multivariate-regression models are estimated for counts of inpatient, emergency department, physician evaluation and management, and facility visits, while also controlling for potential confounders.

Principal findings. Behaviors improved between program intake and the 6-month reassessment. From patient reports, the number of participants having a hemoglobin A_1c test increased by 44.9 percent (p<.001), and there was a 53.2-percent decrease in symptoms of hyperglycemia (p=.002). From medical claims after program enrollment, a drop occurred during the program year in every dimension of medical-service utilization. Regression results show that inpatient admissions decreased by 391 (p<.001) per 1,000 for each group, while controlling for age, length of membership, and the number of comorbid claims for congestive heart failure. In the analysis of costs that were pre- and post-enrollment, which included disease-management program costs, a 4.34:1 return on investment was calculated.

Conclusion. The diabetes program provides patients with comprehensive information and counseling relative to practicing self-management of diabetes through a number of integrated program components. This study strongly suggests that the implementation of such a program is associated with positive behavioral change and, thus, with substantial reduction in medical-service utilization. In addition, the intervention resulted in a net decrease in direct medical costs.

MANAGED CARE March 2002. ©MediMedia USA

Some vendors are moving from offering just a few programs to embracing systems that try to deal with all the complicated overlaps.

John Carroll

Contributing Editor

In the early days of disease management, tackling even one of the top chronic ailments was a stiff challenge. Today, inside CorSolutions, the push is on to handle 30.

CorSolutions kicked off the New Year by unveiling "the nation's first integrated patient-care" program, Blues on Call. The program was developed over the past year in partnership with Health Dialog to handle a selection of key medical diagnoses or conditions selected by analytic review of demographic and claims information.

As executives of CorSolutions see it, the future belongs to companies that provide a full suite of services. To compete, companies must become one-stop shops — a vision that could spell trouble or opportunity for the single-disease mom-and-pops that make up the industry's rank-and-file membership.

Almost any DM company that can't compete will be scooped up or pushed out, according to this outlook. The shakeout will be severe.

"Several hundred small companies focusing on one disease is really no longer a viable strategy," says Richard Vance, MD, president and chief executive officer of CorSolutions. He offers three ways to grow: "Buy, build, or partner."

Cautious view

Not everyone is quite so certain as Vance, though, that integrated DM programs will triumph as the inevitable market master.

"I think it's a trend, but it's not a trend that's going to take over health plans," says Al Lewis, who runs the Disease Management Purchasing Consortium. He reasons that with many health plans still leery of buying into one DM program, there's no reason to expect a sudden rush of plans willing to make a "leap of faith and start spending much more when the outcome hasn't been guaranteed. When the outcomes are guaranteed, however, this approach is very attractive."

As you might expect, single-disease companies are even more emphatic about their ability to compete. But the naysayers aren't likely to change Vance's plan to build an unbeatable, cafeteria-style DM company.

It's all very simple, says Vance. It's less expensive: Consolidated companies will be able to pare the administrative costs associated with managing a medley of programs. It's easier: There would be only one contact point for customers. It's better: A coordinated campaign against multiple chronic conditions that often overlap will deliver better outcomes.

"Patients with chronic diseases rarely get just one," agrees Bob Stone, executive vice president of American Healthways. In an example cited repeatedly by his colleagues, Stone points to the common overlap of congestive heart failure and diabetes.

That was a big issue for American Healthways, which got started treating diabetes in 1996. It led to a lot of confusion, says Stone. Which patient ended up with diabetes? Who got CHF? Who got paid for the DM?

From a retail perspective, the company found itself mulling a new strategy: "Wouldn't it be wonderful if we just had one-stop shopping?"

Comprehensive approach

So American Healthways became a two-disease company. Then the company added two more last year and two more this year. It keeps pushing ahead.

Now, not only does it want to offer comprehensive disease management services, the company aims to wrap its arms around all the patients in each health plan it serves.

"We're looking at members not using the system because they're not sick," says Stone. Absent a relationship with their health plan, they're usually ready to jump to another for a few dollars in savings. So American Healthways intends to intervene with the healthy population to help prevent those people from getting sick in the first place and to create a much stronger bond with their providers.

"At that point, we stop using disease management and start talking about total population care management," says Stone.

In this scenario, consolidation becomes the only path to survival and success. "Single-disease companies," Stone continues, "won't be able to compete."

George Bennett, CEO of Health Dialog, predicts that there will be "a shakeout and a consolidation" and that he's ready for it. "We've decided to be an acquirer, not an acquired. We think we've got a pretty powerful thing going here."

Long road ahead

Still, the industry has a long way to go before it reaches the group-or-die phase.

"I think it's premature to ring the death knell for single-disease organizations," says Stone. "Significant consolidation is probably five years away."

Some of the single-disease companies say such bold predictions about their future overlook a few important considerations. Comprehensive services may sound like an appealing approach to disease management, but not everyone advocates it.

Big operations have "more of a call-center mentality," says Susan Riley Earl, president of AirLogix, who is very happy about specializing in respiratory illnesses. "You have to bring in a huge number of calls to justify that kind of business model."

Sure, she adds, CHF and diabetes go hand in hand, and possibly should be coordinated by one company. Still for respiratory illnesses, end-stage renal disease, mental health, or high-risk maternity — and other ailments — single-disease outfits are needed to bring the kind of attention that can make a material difference in patients' health and health plans' bottom lines, she says.

"If I were doing CHF and only doing CHF," says Earl, "I'd be worried. It depends on what the health plans are looking for." If it's just a marketing edge to impress buyers of health care, "it makes perfect sense to go to a light-touch approach."

As for her business, "None of the multiple-disease managers has proven to be much of a threat in respiratory illness yet." Despite plenty of offers to partner up, she's standing alone — at least for the present.

Even some of the champions of consolidation say there will be room for some single-disease programs to thrive. Several chronic diseases simply don't lend themselves to a joint effort.

"We haven't found an approach that can be uniformly implemented for cancer," says Stone, as an example, citing its high cost, lack of uniform standards of care, and a dizzying array of protocols.

Don Fetterolf, MD, MBA, vice president and senior medical officer at Highmark Blue Cross Blue Shield, based in Pittsburgh, and an advocate of consolidation, also doesn't think that single DM companies will necessarily be forced to partner or merge in order to survive. Rare diseases like hemophilia offer plenty of opportunities for a DM specialist. Big employers also often have DM needs that are uniquely suited to single-disease players.

Big companies, says Fetterolf, generally have younger, healthier populations with very specific problems: maternity, asthma, depression, migraine, lower back pain, and so on. For that market segment, with fewer comorbidities, targeting individual conditions may make much more sense.

Skeptics also want to see more hard numbers on return on investment. Yet every time the DM industry takes a fresh step forward, there's a new lag time that has to be provided to determine results.

"I think the key word in all of this is 'evolution,'" says Fetterolf.

Look at the numbers

If 5 percent of a health plan's population is diabetic and the best practice methods of disease management can squeeze out a savings of about 10 percent — "not the 30 to 50 percent often quoted" — you're only going to get a small impact on premiums for the program, says Fetterolf. So you start to expand it, looking for fresh diseases to conquer to generate more savings.

"The problem is that it becomes operationally difficult," says Fetterolf. "You have multiple conditions and multiple vendors. Comorbidities really make it much more difficult, since overlap creates operational issues."

This is particularly true for western Pennsylvania, where Highmark is dominant. The population is older, and comorbidities are common.

At the same time that big health plans like Highmark were pushing for consolidation, some DM companies started pulling them in the same direction. After watching the industry become polarized over whether there were any benefits to be had from DM at all, the vendors began to tighten up methodologies they used to track outcomes. More people were brought in with formal training needed to analyze results. The vendors began to pair up and come at the health plans in coalitions rather than one at a time, offering a more rigorous analysis. "It is," says Fetterolf, "a very different environment."

There are several ways to look at results, says Fetterolf. Highmark has its sights set on three key factors: total per-member, per-month cost; measurable quality of care; and "intangibles" such as marketing benefits and provider relations.

"If we spend a million and save a million, that's a wash," says Fetterolf. "But if you get a marketing edge, you'd still do it. Intangibles count."

Now a year into the program, Fetterolf says he's certain that some conditions Highmark monitors under DM are improving. Costs are harder to measure. It takes months to get a program up and running, months more before claims can be analyzed.

"If you want it counted the way bean counters want it, it takes two to three years."

Even without the numbers, Fetterolf counts himself a DM believer.

"The question isn't whether it saves money. Results have been demonstrated in randomized, placebo-controlled, multicenter academic trials. The question is: 'Are there operational engines effective enough to save money on a large scale?'"

The business principle is sound and the execution orderly, says Fetterolf, and he's betting that the final answer is "yes."

MANAGED CARE September 2001. ©MediMedia USA

Other states were looking to Florida to lead the way in Medicaid disease management, but now they may want to keep their distance.

John Carroll

Contributing Editor

Three years ago, state lawmakers in Florida fought growing Medicaid costs by backing disease management programs that promise savings and slashing their budgets in anticipation of a payback.

This year, they have upped the ante by $214 million, looking to a controversial new supplemental rebate law that forces drug makers to put up either extra cash or a "value-added" program to get their medications on the state's prized formulary. In the contentious environment of the state capitol in Tallahassee, the row over Medicaid is making some unusual — and distinctly uneasy — bedfellows in the debate about the future of disease management in Medicaid.

As lawmakers were debating the Medicaid law, Pfizer lobbied hard to get a provision that allows the drug giant to provide an innovative DM program and escape paying rebates while getting all of its drugs on the state list. Pact or no pact, though, the new law was quickly targeted in a federal lawsuit brought by Pharmaceutical Research and Manufacturers of America.

Meanwhile, some longstanding DM companies are warily eyeing the pharmaceutical giant's jump into Medicaid DM, afraid its success could generate new competition and a failure would tarnish an industry still working hard to gain acceptance.

Adding to the stress, the state's Agency for Health Care Administration (AHCA) has come under attack from legislative auditors accusing it of taking an ineffective and slow-motion approach to DM that has failed to generate promised savings.

Through all the turmoil runs one clear theme: The Florida legislature and Gov. Jeb Bush are absolutely determined to find creative ways to cut the state's multibillion-dollar Medicaid bill, and DM companies and drug makers alike are scrambling for their piece of a very large pie.

Meanwhile, other states are paying rapt attention to see what they can learn from the Sunshine State's problems, preparing to mimic whatever can help lower costs in their areas.

"There is heightened interest, especially in light of the recent Pfizer project," says Maresa Corder of her colleagues in other states. Corder is a consultant with the state AHCA who runs much of the day-to-day business of Florida's DM program.

The stakes are huge. With drug prices rising at a budget-busting, double-digit pace, states are finding their annual Medicaid bill soaring as a weak economy blunts tax revenue.

Control of drug prices is fiercely contested, and the drug industry has been quick to attack a host of new laws springing up from coast to coast that are aimed at forcing down prices and in at least one case — in Maine — threatening to place caps on costs.

Still, that hasn't stopped Pfizer from breaking ranks and coming up with its own creative solution to state control.

In the deal, Pfizer Health Solutions will hire 60 nurses to deliver a one-on-one DM program to about 50,000 Floridians suffering from four chronic illnesses: congestive heart failure, hypertension, diabetes, and asthma.

Pfizer is also providing a health-literacy program and contributing drugs to the program, and backing it all up with a guarantee of $33 million in savings. The program is being added to a pioneering set of DM contracts that the state signed with a variety of providers more than a year ago.

In return for the guarantee, Pfizer gets all 23 of its drugs on the new formulary. The quid pro quo guarantees that when a doctor wants to prescribe one of Pfizer's drugs — including some blockbusters like Lipitor and Zoloft — the Medicaid patients will get it. Drugs not on the formulary can only be prescribed if doctors get permission.

In early August, the Pharmaceutical Research and Manufacturers of America filed a federal lawsuit in Florida asking to trash the whole supplemental rebate statute.

"They violated federal law in the creation of their formulary," declares PhRMA's assistant general counsel, Jan Faiks. The formulary is being drawn up based solely on which manufacturers paid the rebate, says Faiks, not the quality or safety of the drug under consideration. Also, the only way a state can exclude a drug that's already on the federal formulary is by determining that it lacks a "significant, clinically meaningful therapeutic advantage."

Heading to court

As Managed Care was headed to press, Faiks was headed to court to ask a judge to issue a temporary injunction to freeze the state law and put the old formulary back in play.

Ironically, PhRMA's chairman this year is Hank McKinnell, the CEO of Pfizer and a chief architect of the deal with Florida. Nevertheless, Pfizer executives make clear their opposition to supplemental rebates.

"Pfizer is not in favor of supplemental rebates," says PHS Vice President Nancy Steele. With this collaboration, she contends, Pfizer provides access to its drugs while helping the state control Medicaid expenses.

Steele insists that even though Pfizer is being compensated for its DM efforts by having its drugs on the formulary, the company will go ahead with the plan as a test Medicaid project even if PhRMA successfully scuttles the new rebate/in-kind law.

Asked what she thought of the private negotiations, Faiks says the company cannot offer an opinion, as it could violate federal antitrust rules for a trade association to take a position on what an individual company chooses to do.

As for disease management programs, says Faiks, "We think they're smart." But, she adds, "That is a whole different deal."

Cheering her on in the suit to squash the rebate law and Pfizer's DM deal are executives at other DM companies already doing business with Florida.

"It's unconventional in anybody's book," says Christobel Selecky, the CEO of LifeMasters Supported SelfCare, which has a contract for CHF patients in northern Florida. "Pfizer has really never done this particular program before. I'm concerned that Florida has gone with an unproven program with such a large population."

It's a no-win situation for smaller DM outfits, says Warren Todd, executive director of the Disease Management Association of America. If Pfizer succeeds, mainstream DM companies face a deep-pockets rival. If it fails, all DM programs are likely to see their reputations tarnished by the results.

"They're all worried," says Todd.

Pfizer, for one, dismisses the fears. "I think we should all focus on delivering the best possible results and not worry about a brother or sister program," responds Steele.

Sharpe says no one will be able to judge just how effective Pfizer can be at cutting costs for about 15 months. Nevertheless, it's clear he wants to offer some hard results as soon as possible. Florida's aggressive DM Medicaid program already got one black eye from the state's Office of Program Policy Analysis and Government Accountability, which audits programs for the state legislature.

Thumbs down

In May, that office delivered a failing grade on every important factor that inspired the DM initiative back in 1997. By dividing the Medicaid population into a variety of programs targeting individual acute ailments, the auditors said, the program was made inefficient and inconsistent, unable to deal with comorbidities.

The initiative failed to improve public health, and did little to prove it could cut costs. AHCA was also held up as slow to develop the program, putting in place only five of the nine programs called for by the legislature in 1997 and 1998.

Just in anticipation of DM's ability to cut costs, the legislature went ahead several years ago and sliced Medicaid's budget by $66 million. That, says Sharpe, was a mistake.

"We in no way have achieved that level of savings," he says. "Some disease management organizations, we believe, are saving us funds, though not in the range of the budget reductions."

While the legislature was counting savings before the programs were even put in place, says Sharpe, it failed to recognize that there were administrative costs that had to be paid to the DM companies to get the programs up and running. If he had to do it over again, says Sharpe, he would prefer an invest-now, save-later approach.

Blame on both sides

Some of the DM companies would have liked to have seen AHCA move more quickly, too.

"AHCA took a long time" contracting, says Selecky. Because they were doing due diligence and trying to contract at the same time, negotiations stretched on for far longer than anyone thought. "It took LifeMasters almost a year from the time we were selected to getting a contract signed," she adds.

Earlier this year, another DM company, Coordinated Care Solutions, was handed a bill from AHCA for $7.5 million after state officials concluded that the contractor failed to deliver $15 million in guaranteed savings and was required to return its administrative fee.

The company fired back that by its analysis, it had exceeded its goal for diabetes patients and that the state was measuring its performance against an artificially low baseline. Both sides recently agreed to turn the dispute over to an independent mediator.

Chalk it up to growing pains for a fledgling program.