Disease management

How Broadening DM's Focus Helped Shrink One Plan's Costs

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

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.

Cost per member per month comparison: Core programs w/o ESRD

ER visits rate comparison: Core programs w/o ESRD

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.

Care support population vs. reference population
Continuously-enrolled between 03/2001 and 02/2003
Fixed length model
Period: Year 1 (03/2001-02/2002) vs. Year 2 (03/2002-02/2003)
  % Changes:
% Changes:
ER Rate
% Changes:
Admission Rate
Program Study Reference Study Reference Study Reference
Asthma 4% 17% -17% -1% -13% 12%
Cardiac -10% 23% -25% 3% -47% 6%
COPD -10% 32% -23% 6% -28% 40%
Diabetes 12% 19% -12% 2% -1% 2%
Impact 10% 21% -20% -3% -6% 7%
Core Programs 2% 20% -18% 1% -25% 7%
Overall Results 6% 20% -19% -1% -16% 7%

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.


  • 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».

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

Measuring DM's Net Effect Is Harder Than You Might Think

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.

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.

Nonfinancial outcome measures as identified by DM companies

  • Clinical (lab values, physiologic measurements)
  • Utilization (ER visits, hospital admissions)
  • Lost work or school time
  • Functional status
  • Enrollee and provider satisfaction
  • Relationship with community providers
  • Patient compliance with treatment regimen
  • Physician or provider adherence to guidelines
  • Prevention (diet, exercise)
  • Smoking and alcohol use
  • Vaccination rates
  • Community services used
  • Psychosocial (emotional function, mood disturbance)
  • Symptoms (breathlessness, activity restriction)
  • Quality of life
  • HEDIS (Health Plan Employer Data and Information Set) scores

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.

Strategies for managing comorbidities
Strategy Explanation
Complex case management Enrollees with very complex or aggressive care for more than one disease may be assigned to nurse case managers rather than disease managers for more coordination of therapies and education.
"Hierarchy of needs" approach The needs of all diseases are prioritized and the enrollee's care plan is developed to address urgent needs first from any disease, comorbidity or complication.
Screen for/manage psychosocial issues Chronic illness can precipitate depression, or be precipitated by social factors such as poverty. This approach includes screening for and managing those issues.
Medication screen/management Chronic medication use can cause the development of secondary health conditions. Management of medication's effects is part of managing the disease.
Nursing comanagement Enrollees with two or more chronic diseases are managed by a nursing team skilled in various specialties.

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.

Alison Johnson, RN, MBA
Legislation & Regulation

States Examine Ways to Improve Disease Management in Medicaid

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

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.

John Carroll

Examining Costs of Chronic Conditions In a Medicaid Population


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.

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

DM and Medicare: A Marriage Made in Heaven?

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?

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."

John Carroll
Contributing Editor

Diabetes Disease Management in a Community-Based Setting


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 A1c 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.

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

DM Vendors Start To Address Costs Created by Comorbidities

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

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."

John Carroll
Contributing Editor

A Conversation With Bob Stone: How Time and Circumstance Changed Disease Management

As DM shifts its focus to outcomes-based care, the EVP of American Healthways suggests that larger health plans consider outsourcing care of chronic patients.

Bob Stone has been in the disease management business for nearly 20 years, which makes him an industry elder at 54. Stone is executive vice president of American Healthways, a Nashville-based company he and three others founded in 1981 as American Healthcorp. In 1984, the company took a strategic turn from hospital management to disease management by launching Diabetes Treatment Centers of America, a diabetes centers-of-excellence program. Now called Diabetes Healthways, these centers at 70 hospitals provide services to more than 100,000 patients. More recently, the company started similar programs for patients with cardiac and respiratory illnesses.

Stone is a charter board member of the three-year-old Disease Management Association of America, and is DMAA's president-elect. Next October, he will assume presidency of the group.

Earlier, Stone was assistant director of the Kings County Hospital Center of the New York City Health and Hospitals Corp. and director of the Kings County Psychiatric and Addictive Disease Hospitals in Brooklyn. Stone earned an MHA from George Washington University in 1971 and a bachelor's degree in communications from Stanford in 1968. He spoke recently with Senior Contributing Editor Patrick Mullen.

MANAGED CARE: What is disease management?

BOB STONE: It's a system of coordinated care interventions and communications designed to help patients and physicians manage conditions that necessitate significant self-management. Recognized standards of care exist for these conditions, and patients who follow those standards will have better health, fewer complications and comorbidities, and lower health care costs.

MC: How has the definition changed in ways that are important?

STONE: We crafted a definition three years ago when we launched DMAA. The Department of Health and Human Services, the National Committee for Quality Assurance, and URAC [the American Accreditation HealthCare Commission] told us that our definition was not sufficiently sharp at the edges for them to determine what was a DM organization and what wasn't. NCQA planned to accredit DM programs and certify component providers, and asked which is which. So we tightened the definition. The six components of DM are population identification processes; evidence-based practice guidelines; collaborative practice models to include physician and support-service providers; self-management education; process and outcomes measurement, evaluation, and management; and a routine feedback loop. An organization has to have all six components to be a full-service DM company. Those with some but not all are considered DM support services.

MC: NCQA, URAC, and the Joint Commission on Accreditation of Healthcare Organizations have all launched initiatives to accredit DM companies. Have any emerged as most likely to succeed?

STONE: Not yet. NCQA hit the development cycle first. They're in beta now and will start their accrediting process in January, as I understand it. URAC is completing its standards development, and I suspect its program will be in the market in the second quarter of 2002. JCAHO seems between three and six months behind URAC.

MC: How is DM evolving?

STONE: Ultimately DM will progress to defining itself by its outcomes. One key requirement for us is to develop a standardized outcome methodology. DMAA President Jonathan Lord, MD, charged the association's Quality Improvement and Research Committee with developing a standardized outcomes methodology for the industry, which is at least a two-year process. If I were chairing that committee — which, fortunately, I'm not — I'd ask all of DMAA's member organizations to submit their current methodologies. Johns Hopkins and American Healthways launched an independent outcomes-validation program in June, so I would want to involve those folks. We're providing the funding, Hopkins is running the initiative with complete independence, and the results will be open to everybody in the industry. Another way that DM is evolving is through the programs we're developing for what we call impact conditions. These are the next group of high-cost, relatively high-prevalence conditions for which evidence-based care standards exist. These include low-back pain, pregnancy, high-risk pregnancy, some arthritis-related conditions, and irritable bowel syndrome.

MC: What evidence exists to show improved health outcomes due to DM programs?

STONE: The Lewin Group produced our first outcomes report in 1998, on first-year diabetes results for 7,000 members in seven health plans nationwide. It included clinical and financial outcomes. Generally speaking, we have clinical and financial measures in our outcomes reports, though the clinical measures are easier to get.

MC: Why?

STONE: Health plan financial databases are designed to pay claims, not to do retrospective cost analyses. Utilization, administration, claims, and eligibility data frequently are in separate databases and are not effectively integrated. We have to clean all those data before we can work with them. There's also the problem of waiting for the claims run-out to occur. If you start a DM program today, it will be 20 months before you can make an intelligent statement about first-year financial results. Clinical data tend to be closer to real time. We get data directly from labs, pharmacy benefit managers, or pharmacies that are readily available, essentially on a right-now basis.

MC: Why the need for a DM industry? Shouldn't those functions be part of the mission of any organized system of care delivery?

STONE: The underlying problem is that the American health care system is designed to deliver acute, not chronic, care. Most Americans, myself included, say, "If I'm sick, fix me. Give me a pill, operate on me if you have to, replace a part, but fix me." That's not an option for people with chronic diseases. The system was never designed to manage a person's health over extended periods. That was clear in the IOM's report, Crossing the Quality Chasm, which identified gaps in care that hurt quality and increase safety concerns. Many of those gaps relate to providing effective communication and support across the delivery spectrum over time. That's what DM does.

MC: When the term DM first came into use, things that were called programs struck me more as pharmaceutical marketing programs. Is that a fair appraisal, and how much has that changed?

STONE: That's a fair statement, because the whole concept was initiated by the pharmaceutical industry. It came to recognize that achieving the theoretical benefits of DM necessitates interacting with patients in a dynamic way.

MC: How big a problem is patient compliance? With chronic conditions, patients have a significant responsibility for their own care.

STONE: We never use the word compliance in our organization. It's like blaming the victim. We use adherence, although my wife, who has type 1 diabetes, tells me it's only a slight improvement.

MC: Has she come up with a better alternative?

STONE: "Cure" is her answer. I tell her that's not our job. Our job is to keep her as healthy as possible until researchers can find a cure. At its root, DM is about creating and sustaining behavior changes in members and their physicians. We use nurses who interact and establish personal, trusting relationships with members and physicians. That significantly enhances our ability to move patients, even in small steps, in the direction that they need to go.

MC: Do you expect that there will be a distinct DM industry over time? Or will such companies end up being folded into care-delivery systems?

STONE: The dichotomy in the industry is among health plans that outsource DM and plans that develop programs in-house. I don't think there's any plan that's not running some kind of DM program for a portion of their population. We believe that once you get past the top six or eight plans, a health plan's ability to come up with the financial and personnel resources to develop and operate DM programs diminishes rapidly.

MC: Your goal is to convince the several hundred other plans to subcontract the DM work out.

STONE: Yes. We also believe it makes more sense for the big fellows. We're the national providers for CIGNA and we have a significant contract with Aetna, which started outsourcing just a few months ago. HealthNet, Sierra, and Humana do some outsourcing. The major holdouts are UnitedHealth Group and Anthem. The issue for the remaining bigger players isn't one of capability, because they have the talent and resources to mount a program. The issue is whether they want to devote resources to the nuts and bolts of DM and care management that an outsider would. Look at other sectors of the economy. If five years ago I had to pick two companies that I would guess would never outsource manufacturing, they would have been Sony and Lucent. They both now outsource all their manufacturing. There are economic and performance issues related to mounting a DM effort. The cost of developing data systems and the infrastructure necessary to do this, while not enough to break the bank for large health plans, are significant. We're talking about 40 to 60 million dollars that they could spend on something closer to their core capability. Disease management is the last, best hope for the health plan industry. Even if you assume that plans satisfactorily implemented their historic strategy, to shift care from large networks of high-cost providers to more restricted networks of lower-cost and better-performing providers — which is open to debate — those horses are dead. There's no room for more aggressive contracting. Employers and consumers have no tolerance for restricting benefits or access. Some people seem to think that defined contribution plans offer a solution, but I think that's a red herring.

MC: Why?

STONE: The first problem is that employers won't be able to get out of the plan-packaging game. If they are concerned about the health and productivity of employees, they'll need to ensure that employees don't use defined contribution money to buy less-than-satisfactory benefit packages. If employees buy poor benefits, employers end up paying for it down the road. A second problem, which I have yet to see anybody satisfactorily address, is what to do with people who have high-cost chronic diseases. Somebody's got to pool risk, whether it's the plan or the employer. Defined contribution is just another way to shift benefit costs to employees. The way the concept is presented, to let employees shop the open market, is not going to happen. That may work financially for the employer, but employers must be concerned about what happens when employees make the wrong choices.

MC: How hard is it to find enough nurses to maintain the person-to-person contact you talked about?

STONE: Not at all. They're coming to an office setting and doing primary nursing interventions, which is why most of them got into nursing in the first place. They're not getting bled on, thrown up on, or exposed to infections and contagious diseases. The average nursing experience of our employees is something over 11 years. These are people who have been in the trenches for some time and who are looking for a job that's a little less demanding but still lets them use their skills in ways that can make a significant difference in the lives of patients.

MC: What about people who are in and out of the job market? If you're not keeping an eye on a chronic condition, you end up with a disaster.

STONE: I don't know that anybody has come up with a solution to that yet. People are in our program because they are eligible participants in a health plan that is our customer. If they lose their coverage, they're no longer in the program. The ultimate payer is Medicaid or Medicare. The Centers for Medicare & Medicaid Services has not figured out how to deliver DM programs. With Medicaid that's serious, because you have people who are eligible for Medicaid this month, lose eligibility next month, and regain it the following month. There is some evidence that continuing Medicaid benefits for the month or two of the year that people with chronic conditions are not eligible would be more cost-effective than letting them deteriorate. But it's not how that program is structured. It continues to be a governmental challenge in search of a governmental solution.

MC: Thank you.


Disease Management

Elderly Achieve Better Health When Reporting Vital Signs on Web

Patients with heart disease bucked expectations in this study by using the Internet to compensate for their lack of mobility.

A long-held axiom in the world of computers has been that the information age belongs to the young. Since the 1980s, when studies first showed that older managers were less likely than their youthful counterparts to install PCs in their offices, conventional wisdom has decreed that elders don't much like computers and don't much like using them.

That has placed people over 65, historically the age group least likely to own computers and have Internet hookups in their homes, on the losing end of disease management programs, which increasingly rely on the Web to transmit everything to case managers, from blood-glucose levels to heart rates.

Surprised by findings

So imagine the surprise of a DM company and medical group in California that found, in a small-scale study of elderly people with congestive heart failure, that an Internet-based disease management program not only improved outcomes and lowered costs, but got patients reconnected with the world — surfing the Web for information, communicating with family via e-mail, and even joining online bridge clubs.

LifeMasters Supported SelfCare and Physicians Medical Group of Santa Cruz County reported earlier this year the results of a 12-month study in which participants in an Internet- and telephone-based program required substantially fewer hospitalizations and physician office visits than a control group that received standard medical care minus the management program.

In addition, participants told researchers that they experienced a heartening improvement in mental status, as the computer helped to offset the debilitating combination of fatigue, isolation, and depression that can plague CHF patients.

"I was surprised that we had such a huge improvement overall, when we saw how much the control group had increased in cost versus the lowered costs of those in the program," says Christine Ruggerio, RN, manager of clinical Web programs for LifeMasters, and the study's primary author. "I was really surprised by the acceptance of computers by the patients, and at the amount of time they were spending on the computer. We didn't expect to see as much uptake as we did."

LifeMasters is a Newport Beach DM vendor; Physicians Medical Group is an independent practice association, based in Santa Cruz, with 200 physicians treating 36,000 patients.

The study focused on 69 patients, with an average age of 79, who had moderate-to-severe congestive heart failure. Researchers divided them into two groups, outfitting one group with a Web-based management program and a second with a telephone-based program. A smaller third group received the medical group's standard treatment for the disease.

The Web and telephone groups had fewer hospitalizations and office visits than the control group, as evidenced by a yearly decrease in cardiac claims of $2,400 per study participant.

$480,000 saved

In that same time period, the control group posted a $1,200 increase in heart-related claims, for a $3,600 total difference per patient. When researchers compared participants' medical costs to the previous year's totals of both participants and nonparticipants, they found the program saved the medical group an estimated $480,000.

The Web group had fewer hospitalizations than the telephone group in the study period, 20 vs. 39, and posted shorter lengths of stay, 149 vs. 258 days.

"Patients feel as though they've got some individual control over the disease," says Wells Shoemaker, MD, medical director for Physicians Medical Group and a coauthor. "You have to remember, with CHF, that as each month goes by, patients lose the ability to do something that gave them pleasure — and that really pierces them. If we were just doing this as community service, we'd still save money."

Congestive heart failure affects an estimated 4- million people nationwide; it is the single most frequent cause of hospitalization in people 65 or older. A DM program for CHF will include regular monitoring of vital signs such as blood pressure, weight, and heart rate, as well as of adherence to diet, exercise, and medication programs.

Last year, according to the Disease Management Association of America, health care organizations spent approximately $360 million on all DM programs, a total that in 2001 is expected to rise to an estimated $510 million.

In the LifeMasters study, patients posted vital signs — pulse rate, blood pressure, weight, and any suspicious symptoms, such as shortness of breath — on a LifeMasters Web site each day. Registered nurse case managers spoke weekly with patients, monitored their conditions for signs of deterioration, and alerted physicians to potential problems.

Like most DM companies, LifeMasters emphasizes that its system depends as much on case management for its success as on the information pipeline that feeds the system.

"In traditional fee-for-service care, it's all too often out of sight, out of mind," says Shoemaker. "If the patient is not in front of you, breathing heavily, then everything is OK. That's just not true."

Customized sites

In designing a Web site that would resonate with elderly people, researchers found that they needed to customize the site's look and its navigation tools.

The physical screen had to be large — 17 inches — because many patients had weakening vision, said Ruggerio, who oversaw patients' computer training. The navigation buttons had to be enlarged, so that patients could identify them correctly.

The expensive mouse that originally came with the computers, with a scroll wheel in the middle, was scrapped in favor of one that was smaller and simpler to operate. Patients with arthritis or an unsteady hand found it difficult to operate the fancy mouse. Patients especially liked keyboards that had toggle switches for scrolling Internet pages.

There was no hypertext on the site, because the patients — 92 percent had never used the Internet prior to the study — didn't know what it was or how to use it. Instead, designers used one large page with no hyperlinks of any kind. Users just scrolled from one end to the other. Large type abounded. Navigation instructions were displayed prominently on each frame.

Pastel colors, such as pinks and light blues, were difficult for patients to read, particularly those who had diabetes-related vision problems in addition to CHF. And yellow backgrounds had to go.

Seeing yellow halos that aren't really there is a side effect of an overly potent dose of the heart medication digoxin, and researchers didn't want patients to get confused. To avoid eyestrain, the study's designers placed goodly amounts of blank space on each page.

The training programs took place in hospital rehabilitation centers, or in patients' homes. While installing the computers, donated by Intel, researchers assuaged patient fears that they might break the machines, that they would never learn how to use them, or that the information they sent to case managers could inadvertently become public.

Intel's donation, of course, begs the question of how broadly applicable the findings are. (One assumes that there's a limit to how many computers Intel can give away.)

LifeMasters officials respond by pointing out that even if the company outfitted patients with computers, at less than $1,000 per patient for the 69 people in the study, there would still be a net savings of more than $400,000 a year.

The more germane point, according to Derek Newell, LifeMasters vice president for marketing, is how well the elderly took to the computers. Patients showed a willingness to use the technology in disease management programs, and compliance was higher for computer users.

After the study got underway, researchers started to see participants become Web surfers — and they eventually stopped needing a substantial portion of the customized design elements that were required at the study's outset.

"Our patients were spending more than 30 minutes a day on the Internet," says Ruggerio. "We had patients tell us, 'I reconnected with a family member I hadn't talked to in three years — I feel like a part of the community again.' I've seen the Internet studies that came out with the isolation of being online for long periods of time. I don't think this took into account this group of people, who already have social isolation built into their lives from this disease state. This study showed a reversal of that."

High levels of satisfaction

Roughly 83 percent of patients in both the Web and telephone programs (the financial data were combined for the two groups) reported high levels of satisfaction with the regimen. Nearly three-quarters said they had seen positive effects from the programs on their care, which was substantiated by high levels of compliance with diet, exercise, and medication regimens. More than 84 percent of the Web group and 76 percent of the telephone group followed treatment recommendations.

It wasn't only the Internet component that made a difference. Patients cited the support from the program's case managers. Olin Carl White, 88, of Scotts Valley, Calif., said that the contact with his case manager made him feel that there was thorough, ongoing attention to his condition.

"I'm much more aware of the things I should and shouldn't do," says White. "I feel I'm much better off than I was without them. My nurse has become familiar with me, my condition, my family, my dog, lots of things. She makes it interesting and more personal — and she always gets the message to me of what she wants me to do."

Stephen Robitaille is a free-lance writer living in Oakland, Calif. A former staff writer with the San Jose Mercury News, he shared in that newspaper's 1990 Pulitzer Prize.

Stephen Robitaille
Washington Watch

Medicare Demonstration Projects Seek To Coordinate Chronic Care

The Centers for Medicare and Medicaid Services (CMS, formerly HCFA) is awaiting the results of landmark demonstration programs to determine if improved Medicare services can be furnished to chronically ill patients without increasing costs. As demonstration projects go, these are particularly significant.

Managed care organizations, legislators, and government officials hope the results will be better health care for elderly patients and a more efficient Medicare program — which could translate into higher payment rates for MCOs or providers retaining more of their capitation dollars. There is no official estimate of what could be saved by the projects, each of which has received four-year funding.

CMS selected 15 sites for a pilot project to test whether providing coordinated-care services to Medicare fee-for-service beneficiaries with complex chronic conditions can yield better clinical outcomes without increasing program costs. Studies have shown that a relatively small number of beneficiaries with certain chronic illnesses — asthma, diabetes, congestive heart failure and related cardiac conditions, hypertension, coronary artery disease, cardiovascular and cerebrovascular conditions, and chronic lung disease — account for a disproportionate share of Medicare fee-for-service expenditures. Patients with these conditions typically receive fragmented care from providers at multiple sites, and require repeated hospitalization.

Some DM-like models

Many of the programs look and feel like disease management, though they are appropriately called case management — DM plus, if you will. Here are some examples of the pilot projects:

Avera McKennan Hospital, in Sioux Falls, S.D., is implementing a rural case management program targeting beneficiaries with congestive heart failure and other related cardiac diseases in a 20-county area spread over parts of Iowa, Minnesota, and South Dakota. Care managers will use patient education, clinical practice guidelines, social service arrangements, and in-home monitoring devices to try to reduce hospital costs.

CenVaNet, in Richmond, Va., is testing an urban case management program targeted to local beneficiaries who have various chronic conditions. The program includes individualized health and self-management education, service arrangements, and medication review.

Erickson Retirement Communities, in Baltimore, is testing an urban case management program aimed at beneficiaries with chronic conditions and who live in two of its retirement communities. The program focuses on patient education and self-care skills. Care managers will coordinate medical, psychosocial, and community-based services. All services are provided in the retirement communities.

Georgetown University Medical Center, in Washington, is implementing a program providing disease management services for area Medicare fee-for-service beneficiaries who have congestive heart failure. The intervention combines use of an in-home monitoring device with patient education, along with transportation and limited pharmaceutical benefits.

Hospice of the Valley, in Phoenix, has an urban case management program for Maricopa County, Ariz., beneficiaries who have various chronic conditions. Interventions include palliative care, disease and symptom management, patient education, and support services.

The Jewish Home and Hospital of New York is implementing an urban case management program targeting beneficiaries in the city with chronic conditions. Multidisciplinary teams provide risk assessment, individual care planning, education, service arrangement and delivery and monitoring.

Medical Care Development, in Augusta, Maine, has a rural disease management program designed for beneficiaries with congestive heart failure or postacute MI. Nurse care managers in participating hospitals will work closely with patients' physicians and provide education and arrange social services.

Quality Oncology, of McLean, Va., has an urban disease management program targeting Broward County, Fla., beneficiaries who have cancer. The vendor matches the plan of care written by the patient's own oncologist with its guidelines based on the type, location, and stage of the patient's cancer. The program's medical director contacts the patient's oncologist to discuss any differences between the care plan and the guidelines, and a care manager provides patient education and counseling, care coordination, and arrangement of services.

QMED, of Laurence Harbor, N.J., is working on an urban disease management program targeting beneficiaries in Northern California with coronary artery disease. The commercial vendor combines data from a cardiac monitoring device with its own database to assist physicians in assessing the patient's condition and formulating treatment recommendations.

Washington University, in St. Louis, and StatusOne Health, of Hopkinton, Mass., have combined to bring case management to St. Louis beneficiaries with various chronic conditions. The urban program gives patients health and self-care education, and helps them learn to set personal health goals.

Testing quality-cost axiom

At the moment, the long-range financial implications of the demonstration projects on any Medicare payment mechanisms aren't clear. "Obviously, we want to bring costs down. That's part of the goal here," one CMS official comments, adding: "If you've been following what's going on in Congress, you know that Medicare funding is still a big issue, and the new administration wants to put in a prescription-drug benefit. So, anywhere you can control costs and hopefully improve care has to be a plus."

Health care industry representatives agree. "It's too soon to tell," says Richard Coorsh, spokesman for the Federation of American Hospitals. The federation hopes the efforts will lead to better funding for hospitals — particularly rural hospitals that have been struggling to meet the health needs of the elderly.

The Health Insurance Association of America hopes the projects bring to light good models for controlling costs and improving quality in Medicare. But HIAA spokesman Joe Luchok, also says it's too soon to tell what might be learned from it all. "We think it's good for CMS to explore options for treating Medicare patients. We may find that some of them work very well, others not so well. That's what demonstration projects are all about."

Mohit Ghose, media relations manager for the American Association of Health Plans, likewise concludes it will take time to learn which of the programs offer any value as models. "I don't think we know enough about it yet. But no one is opposed to improving the system."

What's the thinking on Capitol Hill? One veteran observer notes that Medicare is likely to come to the forefront again among health care issues, once Congress has a chance to move beyond immediate issues arising from the Sept. 11 attacks on the U.S., and then beyond patients' rights. "I think everybody is kind of tired of patients' rights, except for a few people," he says. "It's kind of the Mideast of health care issues — you think you've got a settlement, and then something happens again, and you start over."

Certainly, he agrees, payment issues will come up, and the demonstration projects could point the way to solving some difficulties.

"I think everyone," he says, "is looking for that magic bullet."

Michael Levin-Epstein