Constructing Disease Management Programs

Formal disease management is one of the more vibrant areas of health care, with drug manufacturers, health plans and independent companies all greatly interested. Here’s a plan for putting such a program together.

Mary C. Gurnee, Pharm.D.

Robert V. Da Silva, M.S., R.Ph.

As the health care delivery market struggles to reform itself, size and efficiency become important issues for providers of care. Engaged in consolidation, the marketplace closely examines new models of delivery that offer increased efficiency and competitive advantage while maintaining or improving quality of care. In this milieu, the concept of disease state management (DSM) has attracted significant interest from drug manufacturers, pharmacy benefit managers (PBMs) and managed care organizations as a potential model to accomplish these goals.

Defining disease state management

Although a universally accepted definition is lacking, for this discussion, disease state management can be described as an integrated system of interventions, measurements and refinements of health care delivery designed to optimize clinical and economic outcomes within a specific population. It has been pointed out, however, that the term “disease state management” is not entirely correct since the patient, not the disease, is being managed. Although “population-based care” or “continuous health care improvement” are preferred by some, disease state management, or sometimes just disease management, prevails.

Properly designed, such a program relies on aggressive prevention of complications as well as treatment of chronic conditions. The program is created with a clear understanding of the natural course of a disease in a population and the effect of interventions at critical points to delay or prevent morbidity and mortality. DSM calls for a fundamental shift in the way health care is delivered, with both care and reimbursement based on a systems approach rather than the component approach that has been standard in the past.

When, as in traditional medicine, components of a disease are managed singly, providers and payers tend to address only what they are responsible for treating or reimbursing. The focus on treatment of acute medical problems rather than preventive care leads to a reimbursement system that favors expensive treatments in high-cost institutional settings over less expensive treatments in lower-cost community settings. Without an incentive to treat all aspects of the disease, health care is uncoordinated, wasteful and lacking in continuity.

Will our system of health care delivery be replaced with a more efficient, more effective health management system? Managed care organizations are introducing DSM because they manage large patient populations with a variety of health care needs, often under a capitated reimbursement program. Although they cannot provide direct treatment and do not directly “manage diseases,” pharmaceutical companies, pharmacy benefit managers and disease state management companies are exploring partnerships to design and implement DSM programs. Two premises of such partnerships are that:

  • Combined and coordinated resources create synergy in managing disease; and
  • Aligned incentives are most effective in ensuring that the partners maintain a strong commitment to the program.

What, then, makes disease state management different from traditional utilization review? It’s in the boundaries. Defining the risk as treating an entire disease, or even an entire class of drugs, shifts management focus away from components and toward systems, where there is greater potential for real savings and quality improvement. Accepting this change is one of the greatest challenges facing DSM program participants.

Can a managed care organization in such an arrangement really stabilize or reduce expenditures over entire therapeutic areas in which costs have been increasing? Results of pilot programs are just beginning to be disseminated, and early reports are promising. However, extensive reports of the success or failure of DSM programs will not be available for some time.

Drivers of DSM development

The major force behind the development of DSM probably has been employers’ concern about health care expenditures. Cost-cutting has forced a closer look at health care service reimbursement and cost-effectiveness. Medical plan sponsors are calling for providers to account for the enormous costs. At the same time, it is becoming necessary for pharmaceutical manufacturers to demonstrate the value of their drugs in producing a therapeutic outcome, and pharmacists are beginning to demand reimbursement for cognitive services. Because past approaches to health care have been less than ideal, many believe the shift to a systems approach is necessary.

The team approach

While pharmaceuticals are an important component of disease state management, a disease cannot be managed through pharmaceutical care alone. Well-designed programs require the input and commitment of program administrators, health care providers, information managers, finance experts and patients. This is what each can contribute:

Program administrators

The people who run a health plan are the best source of information on organizational structure, goals and expectations, pay and incentive programs, and fiscal commitments to the disease management program. The success of such a program is strongly linked to the support it receives from the administration during its development and implementation.


Traditional medical education provides a rigorous academic background followed by intensive experiential training to assure competency. The practicing physician’s clinical experience and continuing medical education build on this, but at the same time, the system has produced significant variation in treating each disease.

In the DSM system, medicine will be required to undergo a basic shift in approach, as shown below.

Changing practice models will require development of dynamic practice guidelines rooted in outcomes measurements, along with physician behavior modification.

Medical specialists must collaborate in developing treatment guidelines, even where national guidelines or recommendations from panels of experts are available. Once guidelines are developed, physician education can be accomplished through training programs and, if necessary, one-on-one academic detailing.

Pharmacy benefit management programs have repeatedly proved that physicians will change behavior when shown objective measurements of their performance against established criteria in population-based prescribing, hospital admissions, use of ancillary services and other efficiency parameters.

Physicians as a group are not exempt from acting in their own financial interest, however. They may be moved toward optimal management, including use of practice guidelines, by appropriate economic incentives that involve risk-sharing. Combining these methods in a well-coordinated program should assist physicians to adapt.


Academic and professional training in pharmacotherapeutics and pharmaceutical care empowers pharmacists to play a critical role in disease state management. Pharmacists in highly integrated managed care settings participate in formulary decisions, drug treatment protocols and critical pathway design. Other activities pharmacists can perform in a DSM program are listed above and to the right. Most of these activities involve education and monitoring, for which pharmacists are particularly well trained.

In developing a DSM program, one must often deal with an increase in budgeted pharmacy department costs, since expensive drug treatments sometimes replace hospital stays or surgeries that are more expensive. Drug use in disease state management programs therefore must be viewed in perspective, as an integral part of medical care instead of a separate cost in a component-managed system.

Information managers

Data analysis plays a critical role in designing and operating a DSM program. Baseline measurements are necessary for later comparisons to ascertain whether care has been improved and costs have been controlled.

Most information systems in health care plans cannot track care in the detail required for outcomes research, nor can they provide administrators with information for continuous DSM program improvement. Computerizing clinical data is critical in these programs, which usually have only claims data from billing systems.

Information managers help the planning team decide on data formats and definitions. They determine the usefulness of current information systems and also promote exchange of appropriate data elements among the partners.

Finance managers

The DSM team’s finance experts must thoroughly analyze current costs of care, including the costs of failing to achieve intended outcomes and the predicted financial consequences of the DSM program.

In addition, this team is responsible for negotiating contracts among the disease state management partners, and for clarifying arrangements among them with regard to risk-sharing and capitation.


The potential for success is highest when the patient is on the management team, because an informed patient is better equipped to help manage his disease than an uninformed one. This involvement is especially important when patients consume significant acute care resources because of poor disease control. Patient education and intervention result in better understanding of the disease and greater rapport with medical caregivers; both are essential for patient participation in the management plan.

In the interest of conserving resources, education and intervention should be coordinated with health risk assessment (see “Goals for Patient Education,” below). Education programs for mild or episodic asthma patients, for example, should be much less intensive than strategies for those with moderate or severe asthma. Severely ill patients with a history of extraordinary medical resource consumption should receive the most intensive education and intervention.

Measuring patients’ expectations and satisfaction with care in a DSM program is important for continuously improving the program. Patients have a profound effect on their clinical outcomes, and should understand the responsibility they hold in managing their health. Now that we have better methods for measuring outcomes, patient satisfaction and quality-of-life improvement can be used in analyzing a DSM program.

Patients are beginning to gain more authority in judging the quality of their health care and demanding to know more about their medical conditions and treatment options. Ultimately, the patient is the consumer, and will demand satisfactory management of his disease.

Choosing diseases to manage

General criteria for selecting a disease to be intensely managed include:

  • High-prevalence chronic disease states;
  • High-dollar-volume or high-velocity drug use;
  • Potential for wide variation in treatment approach;
  • Potential for lifestyle modification to improve outcomes;
  • Therapies with many treatment options, and
  • Diseases with high risk of negative outcomes.

These criteria lead to a group of diseases that are often considered for management (see “Conditions Most Commonly Selected for Disease Management “).

Selecting partners

Managed care organizations usually lack resources in several areas necessary for developing and conducting disease state management programs. There is no shortage of professional organizations, educational institutions and for-profit companies willing to provide these resources; pharmaceutical manufacturers, PBMs and disease management companies frequently approach health care organizations with proposals.

The managed care organization itself, however, must have certain capabilities to be successful in a DSM partnership. The managed care organization should possess:

  • Cooperative medical providers. The plan should enjoy a good working relationship with its care providers, preferably with incentives that encourage them to provide cost-effective care and improve quality.
  • A computer system with accurate, detailed and summarized medical and pharmacy claims data for a period of at least 12 months. The plan should be willing to share demographic and specific enrollment data (such as details on the patient, the managed care plan, the PBM, the amount of copayment and the formulary) with its partners.
  • Willingness and ability to commit market share to a pharmaceutical partner, if applicable. A relatively closed formulary or portion of a formulary is useful. The partners should share in the benefits of expense reduction.
  • Willingness to conduct aggressive co-promotional programs with the partner.

Managed care organizations, PBMs, pharmaceutical companies and their subsidiaries are exploring different combinations to find the ones that will be most productive.

Capabilities that the pharmaceutical companies or their DSM subsidiaries can bring to the relationship because of their size, resources and experience include:

  • Determining the total cost of an untreated illness;
  • Determining the natural history of a disease and the cost of treatment;
  • Conducting outcomes research in the target population;
  • Designing patient education and compliance programs for a specific DSM program that might not even include drug use;
  • Providing expertise and manpower for developing and promoting professional education of DSM providers, and
  • Supplying providers and patients with education and communications materials.

The pharmaceutical benefit manager, a comparatively new player in health care delivery, can:

  • Collect and analyze data critical to DSM success, and
  • Select noncompliance and other drug use patterns for education programs.

Developing treatment guidelines

After choosing partners and doing a baseline analysis of current care, it is time to draft treatment guidelines (also known as clinical practice guidelines or practice parameters). Success here is possible only with the exhaustive collaboration of medical providers. Possibilities will vary with the disease, but some or all of the following are usually involved:

  • National expert panel recommendations, such as reports from the Joint National Committee on Detection, Evaluation and Treatment of High Blood Pressure and the National Cholesterol Education Program Expert Panel on Detection, Evaluation and Treatment of High Blood Cholesterol in Adults;
  • Independent clinical consultants on faculty at a school of medicine or pharmacy;
  • Consensus panels of national, local or plan-contracted therapeutics experts;
  • Pharmacists in the plan, and
  • Physicians in the plan.

Success in promoting these guidelines lies in combining the partners’ personnel and other resources to communicate, educate and encourage physicians to participate. The ability to identify physicians who fail to comply with treatment guidelines is critical. Without it, the program will not be able to change physician behavior.

Aligning the incentives

When managed care organizations and potential partners design business agreements, three terms often appear: outcomes management, capitation and disease state management. The success of any of these activities can be traced to the concept of shared risk.

Many utilization management programs have failed in the past because the managed care organization objective of lower pharmaceutical cost often meant decreased sales for the partner that provided the drugs. Even where traditional utilization management programs were marginally successful in managing a single component of the costs, overall reduction of expenditures frequently remained elusive when costs ballooned in other areas.

Plans have traditionally relied on negotiation of component prices to reduce the whole expenditure. This strategy, even when employed skillfully, failed to recognize the other side of the expenditure equation, which could include over- utilization of resources. Thus,

Total Expenditure = Component Price * Utilization

In short, narrowed vendor margins were offset by increased sales and/or utilization.

The road to real expenditure reduction and quality improvement may be paved with partnerships to improve clinical and economic outcomes where success rewards all partners equitably.

In disease state management, the agreement must include at least these cost drivers:

  • All of the drugs or therapeutic classes of drugs that are specifically employed in the treatment of the specified disease;
  • All therapeutic devices and adjuncts to therapy;
  • All hospital days with ICD-9 discharge codes for the disease, and surrogate markers for the disease and its complications;
  • All emergency room visits coded for a particular diagnosis or complication, and
  • All laboratory and other diagnostic costs associated with the disease.

The agreement will cover other cost drivers that can be measured within the defined population — and are relevant. An office visit coded for asthma, even though measurable, costly to the physician and clinically significant, might not be financially relevant to the disease state management program in a system in which physicians are paid on a capitation basis.

These cost drivers are quantified by merging pharmacy and medical claims data. Managed care plans that are seriously attempting to manage care are already capturing medical encounter data in such a way that specific identification and quantification of these cost drivers is possible.

If components of disease state management are applied effectively, the expectation of clinical quality improvement and decreased overall cost through increased efficiency should be realized. It is reasonable to draw up a shared-risk agreement where the costs of data technology, physician services and patient education are put at risk against the realization of an expenditure goal.

If a target is met or exceeded, the providers of the education, intervention and data technology share in the benefit of expenditure reduction with the managed care organization.

Setting the target for expense reduction is a balancing act between the current cost of delivering care to the specific population and the estimated cost of developing and implementing ideal practice standards as they are embodied in guidelines.

The target can be determined by using a model incorporating known variables, such as:

  • Expected change in drug cost resulting from appropriate use as delineated by protocols;
  • Expected reduction of hospitalization resulting from program application;
  • Cost of an average hospital day associated with coding for the disease;
  • Expected decline in emergency room visits, and
  • Cost of the average emergency room visit associated with coding for the disease.

As greater experience is gained in the marketplace with such programs, targets will be readjusted. The partners may find themselves in a position to employ some benchmarking as well.

Measuring success

The primary measure of success for a disease management program is found in outcomes research. Well-designed studies are critical in documenting improvement in care, and include such indicators as clinical and economic outcomes and quality-of-life and patient satisfaction surveys. Performance can be compared to normative databases, allowing plans to take a look at their results in light of those achieved by other plans.

Successful disease state management will use continuous improvement programs to determine the ongoing changes necessary to provide the most cost-effective health care management.

Mary C. Gurnee, Pharm. D., writes frequently on pharmacy issues. Robert V. Da Silva is vice president, disease management, at MedImpact Pharmaceutical Management Inc., San Diego.

Fundamental shift in medical practice

Away from Toward
Reactive, experience-based, sickness-oriented approach Population-based, health risk management approach using evidence-based principles
Reliance on interventions that offer the possibility of benefit Reliance on interventions that offer evidence of benefit
Component cost control System cost control

Pharmacist activities in a DSM program

  • Patient education concerning drug use, especially in high-risk/high-use cases
  • Compliance education and monitoring for selected populations
  • Disease state monitoring (blood glucose, blood pressure, serum cholesterol, etc.)
  • General wellness education
  • Intervention with physicians to encourage drug protocol adherence

Goals for patient education

  • Promote understanding of the disease and coping strategies
  • Ensure that the primary care physician is kept informed
  • Teach techniques of monitoring progress of the disease and avoiding exacerbation
  • Involve patient in support groups or organizations that provide continuing education, counseling and fellowship
  • Encourage patient to make appropriate decisions regarding therapy

Conditions most commonly chosen for disease management

  • Asthma
  • Cardiovascular diseases
    • Coronary artery disease
    • Congestive heart failure
    • Angina
    • Lipid irregularity
  • Depressive disorders
  • Diabetes
  • Ambulatory infectious disease such as otitis media, urinary tract infection and community-acquired pneumonia
  • Pain
  • Upper gastrointestinal disease, including peptic ulcer disease and reflux esophagitis
  • Women’s and children’s health

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