Disease management

Opinions on DM Outcomes Can Be Swayed

An exercise in "point-counterpoint" at a recent disease management meeting showed dramatic swings in views

*Four members of the National Managed Health Care Congress (NMHCC) Disease Management Outcomes Workgroup debated the pros and cons of six different issues before a group of knowledgeable listeners, and discovered that even in a short period, opinions could change significantly. Six issue statements were presented to the participants who were asked to respond to the statements with "agree, somewhat agree, neutral, somewhat disagree, and disagree" using wireless keypads. (The issue statements are below the graph.)

Three minutes

After the tally for one issue was displayed, one panelist spoke three minutes in favor of the statement. A second panelist spoke for three minutes against the statement. Then the poll was repeated. Dramatic shifts were evident in the responses to half of the statements. This indicates that discussion and debate is a valuable tool for the DM industry.

Jeff Gruen, MD, MBA, had assembled the DM Outcomes Workgroup for an earlier NMHCC conference to help attendees improve their comprehension of the complex financial and methodological elements of impact assessment in DM programs.

The workgroup has now presented successfully seven times at National Managed Health Care Congress/Disease Management trade shows, has produced a publication based on these results (Joint Commission Journal on Quality and Safety. November 2004, Volume 30, Number 11, Page 616. "Assessing Return on Investment of Defined-Population Disease Management Interventions." Authors: Thomas W. Wilson; Jeff Gruen; William Thar; Donald Fetterolf; Minalkumar Patel; Richard G. Popiel; Al Lewis; David B. Nash), and continues its work.

At the September 2005 Disease Management Congress in Orlando, Fla., the workgroup conducted a session titled "Who Wants to Avoid the Millionth Error? DM Reality Show Explores Issues Driving the Outcomes Measurement Debate."

Before each debate began, the question was read to audience members who were given the choice of five answers. The audience had about 30 seconds to respond, and the sums were displayed immediately.

One panelist defended the statement for three minutes (the pro position), followed by a three-minute speech from one panelist who argued against the issue (the con position). The poll was repeated for each issue, with the post-debate sums and pre-debate sums displayed.


Responses of "agree" and "somewhat agree" were combined into one category and "somewhat disagree" and "disagree" into another. Statistical significance tests were performed after the debate.

On 5 of the 6 issues debated, the percent that strongly agreed or agreed dropped as a result of the debate. Half of the time, the percent who strongly agreed or agreed showed a statistically significant difference after the discussion.

The three issues that show the most changes in participants' opinions were, in descending order of change: 1) uniform ROI measurement standard needed (number 1 in chart below); 2) controls regression-to-the-mean (number 4); and 3) DM dies in 3–5 years if federal projects fail to find value (number 6).

General conclusions from those polled, to the degree that they represented their respective institutions and the industry, would include the following:

  1. Following this nonscientific market poll, the disease management industry should certainly consider the creation of a single universal ROI methodology, as 58 percent agreed or somewhat agreed with that statement after the debate. However, the industry may want to carefully think over how best to proceed on this issue, as prior to the debate a full 81 percent agreed or somewhat agreed with this statement. This was the biggest shift in opinion that was seen in the six questions. This shift in the audience's outlook after six minutes of discussion suggests that this effort should proceed carefully.
  2. Disease management program studies that have been published are overwhelmingly believed to not include sufficient methodological adjustments to establish equivalence between the reference group and the DM intervention group. The debate did not appreciably change the opinion on this issue. This is a potentially challenging problem as most studies conducted in DM are not randomized control trials. The randomized control trial study design is most likely to lead to equivalent reference groups, but there is no guarantee that randomized control trials will achieve equivalence.
  3. Participants in the meeting strongly felt that disease management outcomes are not primarily a result of reduction in health care provider practice variation, but rather, the change in patient behavior. This position was improved by the debate, with 9 percent of the audience shifting position toward patient change as the primary driver.
  4. The problem of adequately controlling for regression to the mean (RTTM) was identified as the most serious negative of all the issues. After the debate, 86 percent of the participants — up from 62 percent prior to the debate — did not believe that DM had adequately controlled for this phenomenon. Simply put, RTTM refers to the observed decline in costs and utilizations in many DM populations when using a pre-intervention/post-intervention study design. But the decline seems to occur even when DM is not present, suggesting that the programs are not responsible for the change, but that it is a natural phenomenon.
  5. For DM initiatives, the belief that a ROI of only 1:1 (i.e., where DM costs = DM benefits) was consistent (41 percent to 38 percent, not statistically significant). Most importantly, over 50 percent believed that this statement was not supported, presumably because evidence supports the contention that DM ROIs are greater than 1:1. In other words, the audience believed that DM did, in fact, have a positive ROI in both published and nonpublished studies.
  6. The conference participants were initially skeptical regarding the future of the DM industry, given a hypothetical unfavorable Medicare Chronic Care Improvement Project (CCIP) evaluation (now called the Medicare Health Support project). However, the audience changed its position after the debate, most likely because of the recognition by the con position that disease management offers a variety of multidimensional contributions, including clinical improvement, patient satisfaction, productivity improvement, and other softer outcomes that result in overall better health. The results from DM are not and should not be single-dimensional.

Authors' commentary

We believe that the audience informed us that the industry must move toward more standardized methodologies that can more adequately adjust for regression to the mean and nonequivalence between the DM intervention population and the reference (e.g. trend, pre-period, concurrent period, nonparticipants, classic control group, etc.). We agree with this sentiment.

The fact that there were significant changes in opinions in one half of the issues leads us to believe that there is a great need for civil, structured discussion and honest and respectful public debate of the important issues facing DM. These discussions should take place at conferences, at other meetings, and in the pages of magazines.

Given the issues in the peer-reviewed literature, we encourage more space be devoted in peer-reviewed journals for letters to the editor. This would constitute an on-going public peer review of peer-reviewed literature.

A similar debate will be conducted at the Health Management Congress in the fall.

The authors
*These members, a subset of the NMHCC Workgroup on Outcomes Assessment in Disease Management, participated in the presentation and wrote this article:

Jeffrey Gruen, MD, MBA, president for care, Revolution Health Group; workgroup chairman
Donald Fetterolf, MD, MBA, corporate VP for health intelligence, Matria Healthcare
William Thar, MD, MPH, independent health care consultant
Thomas W. Wilson, PhD, DrPH, president, Population Health Impact Institute

The authors wish to acknowledge support for the NMHCC Workgroup provided by the National Managed Health Care Congress and IIR Inc. We are specifically grateful to Megan Antonelli for the administrative support provided to the group and to the vendor that supplied the wireless touch pads, and to the audience that participated in this survey.

Prepared by the NMHCC Workgroup on Outcomes Assessment in Disease Management
Cover Story

Health Plans Are Ill-Prepared for Looming Diabetes Epidemic

The problem is outpacing insurers' resources and perhaps even their commitment. Can the chronic care model help?

Diabetes is creating an escalating economic crisis for our health care system. Health plans use a handful of approaches, but "many insurers remain unaware of the scale of the problem," says Thomas Bodenheimer, MD, MPH, an adjunct professor in the department of family and community medicine at the University of California, San Francisco and a leading authority on the management of chronic disease. "Health plans need to step up to the plate. Their active involvement is absolutely critical."

Some plans are making efforts. Aetna has implemented what the company calls its "Integrated Comprehensive Diabetes Program," designed to coordinate care between the large insurers' various departments to encourage patient self-management and physician recognition of the disease's dangerous comorbidities, including depression and heart disease. Cigna has a similar program.

Kaiser Permanente's Care Management Institute emphasizes care coordination, a key to managing diabetes, in its staff-model practices. The plans shared America's Health Insurance Plans' 2006 Innovation and Excellence Award for Chronic Care in the large/affiliated category.

Intensive management required

"The key to success is placing the patient at the center of care," says Paul Wallace, MD, former executive director of Kaiser Permanente's Care Management Institute and currently Kaiser's medical director for health and productivity management programs. "Complex comorbidities require intensive management."

The AHIP Innovative Award winner for smaller/independent plans was Rocky Mountain Health Plans (RMHP) for improving diabetes outcomes in Mesa County, Colo. RMHP's truly innovative program combines pay for performance with a physician practice redesign at the primary care physician level for patients with diabetes.

Their plan is based on the chronic care model, which pays doctors directly for improved outcomes. The model is similar to pay for performance except that it rewards physicians for managing the overall care of their patients' chronic illness, including making community referrals and planned nurse visits to patients' homes. Unlike disease management, it rewards physicians, not a third-party vendor.

"Traditionally, physicians are not trained in management techniques to deal with ongoing chronic conditions," says David Herr, MD, chief medical officer. "We wanted to address that problem."

These are meaningful efforts, and they are plan-based. But the national plans fail to address the needs of the large majority of their populations. Aetna's program only enrolls 6 percent, for example. Medicare has waited until just this year to implement pilot studies on chronic disease management. That's despite the fact that the program has by far the highest incidence of diabetes of all health plans.

Study after study shows that people with diabetes are not getting the help they need. A survey by researchers at the University of Michigan, the results of which were published in the April issue of the Journal of General Internal Medicine in an article titled "Indications for and utilization of ACE inhibitors in older individuals with diabetes," found that less than half of all people with diabetes 55 or older were receiving ACE inhibitors. Endocrinologists have long advocated that almost all people with diabetes in this age group take the medication.

Insurers and Medicare simply do not pay enough for what is needed to treat patients with diabetes, says Irl B. Hirsch, MD, a professor of medicine at the University of Washington Medical Center in Seattle, in an editorial in the journal Diabetes Care. "Our system rewards physicians doing procedures, and diabetes care is classically a matter of evaluation and management," he said. "The current system is nonfunctional, if not dysfunctional."

It is a problem of enormous urgency, says K.M. Venkat Narayan, MD, chief of the Centers for Disease Prevention and Control's Diabetes Epidemiology & Statistics Branch in the Division of Diabetes Translation. According to the CDC, about 18.2 million Americans (6.3 percent of the population) have diabetes, a four-fold increase in the last 50 years. Of those, more than 5 million are unaware they have the disease.

And more than a million new cases are diagnosed every year, which predicts that the number of diagnosed cases of diabetes will increase by 165 percent by the year 2050. Without preventive care, 1 in 3 children born in 2000 will develop the disease.

"There has been some improvement in treatment and management, so we know we can make things better, but the disease is reaching epidemic proportions. There is still a great deal to be done," says Narayan. "There are good treatments available, but it's no time for complacency."

"This trend is extremely disturbing," says Robert Rizza, MD, a professor of medicine at the Mayo Clinic and president for medicine and science of the American Diabetes Association, adding that our health care system "isn't set up to address the complexity of chronic disease, especially diabetes."

Five chronic diseases — heart disease, cancer, stroke, chronic obstructive pulmonary diseases, and diabetes — account for more than two-thirds of all deaths and consume 75 percent of the nation's health care cost. Diabetes is the fifth most common cause of death, according to the ADA, but among its most significant comorbidities are heart disease and stroke. And heart disease is the most common killer.

Chronic diseases among diabetics, nondiabetics, and all adult U.S. population, 2003

Prevent complications

Says Rizza: "We need to create incentives for patients and within the system to do a better job in preventing the disease and, once you have the disease, preventing its complications."

Tools and information about management techniques are certainly available. The ADA has an extensive database of community resources available to health plans that develop referral systems. Aetna, for example, works with local diabetes coalitions to promote compliance with recommended ADA guidelines. The company recently implemented a pilot project with a collaborative named the Network to Improve Community Health (NICH) in the Mid-Atlantic region by providing regional physician offices and blood lab draw stations with the NICH's Patient Guidelines for Diabetes Care brochure to educate patients.

Chronic care model

The Institute for Healthcare Improvement offers a detailed program to health plans and medical groups that outlines and implements the Chronic Care Model designed by Ed Wagner, MD, director of the MacColl Institute for Healthcare Innovation at the Group Health Cooperative of Puget Sound, Seattle. The model "recognizes that a substantial portion of chronic care takes place outside of formal health delivery settings," says Wagner. "Its purpose is to capitalize on a full array of possible treatment options." It has traditionally been used in staff model HMOs, large group practices, and community health clinics, with positive results, says Wagner. "Yet few provider settings are prepared to execute the model," he adds.

So why aren't more plans more aggressive in managing diabetes? "The main barrier to that involvement is that managing diabetes has yet to establish a return on investment to the satisfaction of many plan leaders," says Bodenheimer.

Health plans may continue to be in the dark about the need for widespread diabetes management, but apparently many payers are seeing the light. Recognizing that employees with diabetes take eight times as many sick says at their coworkers who don't have the disease, it is employers — not health plans — that are taking the most aggressive steps toward managing diabetes.

The University of Michigan, for example, is starting a two-year pilot program to provide no-cost or discounted medications to employees and dependents with diabetes. The program, named "MHealthy: Focus on Diabetes," begins July 1. More than 2,000 university employees and dependents enrolled in the university health plan will receive no-cost generic medications for diabetes and related complications such as hypertension, heart and kidney problems, and depression. And the university will reduce copayments for brand-name medications for diabetes and related complications by 25 percent to 50 percent, and will distribute educational materials about how diabetes patients can manage their health. The purpose is to measure whether reduced copayments for medications for chronic conditions improve access to care and reduce complications.

Huge irony

But in spite of payer initiatives, health plans too often fail to recognize the need for physician and community involvement in efforts to manage chronic disease, say Bodenheimer, Wallace, and many others.

"Taking care of chronic conditions over time is different from the way we, as plans, deliver health care," says Wallace. "It is a huge irony. Health care is really about how we deal with sickness. Disease management is how we pursue health."

Some plans are initiating pay-for-performance programs if their network physicians make the necessary test referrals. Many plans and employers hire disease management vendors to manage the disease. But very few insurers pay their physicians directly for actually getting results, says Bodenheimer.

"The key to effective management of diabetes is the active involvement of the primary care physician, who treats 80 percent of all diabetes cases," says Bodenheimer. "The chronic care model involves the entire community, and is centered on the primary care physician."

Bodenheimer believes the chronic care model offers the most effective management technique and is an improvement over disease management because it compensates physicians directly and emphasizes utilization of community resources.

External DM programs remain the most popular form of diabetes management, however. Sixty-two percent of employers have contracts with diabetes disease management programs, according to Mercer Human Resource Consulting. Every national plan and most regional plans offer an internal or an external DM program, although not always for diabetes management.

Poor cholesterol control

And that has made some difference. DM programs and health plans have reported through HEDIS measures that in the last decade, cholesterol control in diabetics has improved.

However, according to the CDC, blood pressure control and blood sugar control measures have not improved. The agency reports that 2 out of 5 people with diabetes have poor cholesterol control, 1 in 3 has poor blood-pressure control, and 1 in 5 has poor control of blood-sugar levels, according to the CDC.

Some plans are starting pay-for-performance programs for diabetes treatment, which some physicians say can be effective. Blue Cross Blue Shield of Minnesota, for example, recently implemented a P4P program that ties clinical tests and values for diabetes to added compensation. According to Douglas Hiza, MD, BCBSMN's medical director, about 55 clinics signed up for the voluntary program, which includes about 80 percent of BCBSMN members.

Statistically significant comparisons

The P4P program is almost entirely based on outcomes and derives data from chart reviews, not claims data. It is part of the Minnesota Community Measurement Project, which is made up of all of the major health plans in Minnesota and produces statistically significant comparisons of clinics across Minnesota by combining plan data. "We believe we'll find that incentives do make a difference, because when you combine financial rewards with recognition of quality rankings, you get powerful results," says Hiza.

Popularity and hope notwithstanding, P4P and disease management have yet to truly demonstrate their cost effectiveness, say some experts, and that may be in part because they fail to enroll complete populations. Return on investment in DM programs is an especially controversial issue, says Ron Goetzel, PhD, vice president for consulting and applied research at Thomson Medstat, a health care information company. He also serves as director of Cornell University's Institute for Health and Productivity Studies.

"It is a relatively new idea that DM is cost effective, although it has shown good outcomes," says Goetzel. "We have found, however, that little evidence currently exists that clearly demonstrates DM's financial impact. Much of what has been done doesn't really meet standards of being scientifically rigorous."

But as far as KP's Wallace is concerned, it is the chronic care model's emphasis on placing the patient at the center of care coupled with primary care physician and community involvement that has the most potential for addressing the diabetes epidemic.

"Why keep reinventing the wheel?" he asks. "It is simple, complete, and effective. We just need to put our brains into the game."

Chronic care model demonstrates effectiveness

An effective approach for managing chronic disease, including diabetes, is the chronic care model developed by Ed Wagner, MD, MPH, director of the MacColl Institute for Healthcare Innovation at Group Health Cooperative of Puget Sound in Seattle.

"The model recognizes that a substantial portion of chronic care takes place outside of formal health delivery settings," says Robert Mechanic, MBA, director of the Health Industry Forum at the Schneider Institute for Health Policy at Brandeis University.

Patient self-management, delivery system design (including information systems and decision support), and community resources are all critical components, says Mechanic. The chronic care model has been used successfully in staff model HMOs, large group practices, and community health clinics. "However, most provider settings are fully prepared to execute the chronic care model," says Mechanic. "In fact, a majority of large care management programs originate outside of provider systems and are managed by health plans and disease management firms."

Health plans should be aggressively encouraging providers to implement the model because it is highly effective, says Thomas Bodenheimer, MD, adjunct professor in the department of family and community medicine at the University of California, San Francisco. He has written extensively about its implementation. "The model is the single most effective way to manage diabetes, more effective than any other," says Bodenheimer. "It should be adopted by health plans."

The Institute for Healthcare Improvement in Boston offers seminars and practice-centered training in the model, which has six components. According to IHI, they are:

Self-management support — Patients are placed at the center of care and are encouraged to manage their own care.

Decision support — Treatment decisions need to be based on explicit, proven guidelines supported by at least one defining study. Health care organizations creatively integrate explicit, proven guidelines into the day-to-day practice of the primary care providers in an accessible and easy-to-use manner.

Delivery system design — The delivery of patient care requires clarifying roles and tasks, making sure that all the clinicians who take care of a patient have centralized and current information about the patient's status. Follow-up is made part of standard procedure.

Clinical information system — A registry, which is an information system that can track individual patients as well as populations of patients, is a necessity when managing chronic illness or preventive care.

Organization of health care — Health care systems can create an environment in which organized efforts to improve the care of people with chronic illness take hold and flourish.

Community — To improve the health of the population, health care organizations make an effort to form powerful alliances and partnerships with state programs, local agencies, schools, faith organizations, businesses, and clubs.

Source: E.H. Wagner, C. Davis, J. Schaefer, M. Von Korff, B. Austin, "A survey of leading chronic disease management programs: are they consistent with the literature," Managed Care Quarterly 7 (1999): (3) 56–66.

Diabetes cost is crushing the system

The cost of diabetes in this country is greater than the gross national product of all but 25 of the world's 192 countries. It is $132 billion a year, including $92 billion in direct medical costs and $40 billion in indirect costs, such as lost work days, restricted activity, mortality, and permanent disability, according to the American Diabetes Association. That was in 2002, when the most recent comprehensive study of diabetes was completed. In the same study, the annual cost of diabetes (in 2002 dollars) was projected to rise to $156 billion by 2010 and to $192 billion by 2020, including $138 billion in direct medical costs. The CDC also reports that people with diabetes miss 8.3 days per year from work, compared to 1.7 days for people without diabetes.


What is the direct cost to health plans? According research conducted by Pharmerit North America, a company in Bethesda, Md., that specializes in determining the economic effects of health care interventions, the average per-member annual cost for patients with diabetes is between $4,614 and $6,532 in a managed care plan with an external or internal management program. The cost rises to $9,046 for a plan with no disease or case management program. Diabetes itself is neither the most nor least expensive chronic disease. Asthma costs less ($4,604 for patients enrolled in a disease management program), and cardiovascular disease costs more ($8,257). But add a diagnosis of diabetes to CVD and the cost jumps to $13,132.

In fact, it is the complications of diabetes that make the disease so economically devastating. For newly diagnosed patients without complications, overall costs are more than 50 percent lower than for the average patient with diabetes, according to the Pharmerit researchers, who published their findings in the March 2006 issue of the Journal of Managed Care Pharmacy in an article titled "Economic Impact of Antidiabetic Medications and Glycemic Control on Managed Care Organizations: A Review of the Literature."

Inpatient, outpatient

"Within managed care, the top expenditure category for the broad diabetes population is typically inpatient care. For patients newly diagnosed with no complications, top expenditure categories are pharmacy and outpatient services," state the authors. For a patient with no complications and diet-controlled diabetes, the cost is $1,987 for male patients and $2,608 for female patients.

The authors conclude: "The literature to date suggests that improving glycemic control and antidiabetic medication persistence reduce overall medical costs for patients with diabetes in managed care plans." And the ADA reports that a sustained reduction in A1C levels (a decrease of more than or equal to 1 percent) among adult diabetic patients is also associated with significant health care savings, amounting to $685 to $950 per person per year, within one to two years of improvement.

Martin Sipkoff
Contributing Editor
Cover Story

'Take My Word for It': The Enduring Dispute Over Measuring DM's Economic Value

While DM is now mainstream, it can still be difficult to judge a program's worth. Health plans faced with renewing DM contracts have a lot to think about.

When Bill Popik was chief medical officer at Aetna last year, it was his job to renew or terminate Lifemasters' three-year disease management contract. Lifemasters was running Aetna's diabetes, heart failure, and other programs. Before making a second commitment, Popik, who was spending tens of millions of dollars on DM, needed assurance that the programs were earning their way, especially since Aetna was reselling DM to large self-insured companies. "We had a lot of skeptical employers to convince that this was worth investing in," Popik says.

Aetna's internal audit showed an overall return of about $3 for each $1 spent on DM, a good return on investment (ROI). Most savings came from the sickest patients, such as those with heart disease, while asthma programs were close to breaking even. Popik, president-elect of the Disease Management Association of America DMAA, the industry trade organization, gladly extended the contract.

Health plan leaders, CMS officials, and others are betting the farm on DM programs. An estimated $1.5 billion will be spent on DM this year, up from $78 million a decade ago, according to Al Lewis, JD, president of the Disease Management Purchasing Consortium. DM's health improvements are incontrovertible — better quality of life, less absenteeism and disability, more productivity. The big unknown is: Do the programs really save money? Executives at Aetna and many other managed care organizations seem to think they do. But there is great uncertainty in and out of DM circles about the formulae that establish positive ROI, such as Aetna's 3:1, causing some to wonder whether bullishness derives from faith alone.

Lifemasters, Healthways (formerly American Healthways), Matria, Health Dialog, and others can claim in contracts that for every dollar spent on call centers, patient literature, and other means to improve patient health, managed care organizations can expect $1.50 to $8 in reduced use of acute care services.

However, any postulation is suspect since there are many ways to calculate financial savings or losses, industry sources agree. Results can be wildly inconsistent. One telltale study demonstrated that using the same data and different methodologies produces three different results: a negative ROI, break even, and a positive ROI. Titled "The Impact of the N," it won an award at DMAA's 2004 annual convention. "The method you choose influences the results you get," says the study's author, Thomas Wilson, PhD, of the Population Health Impact Institute, a not-for-profit provider of evaluation guidelines and other services.

Wishful thinking

In the early days of DM a decade ago, vendors boasted returns of 30:1, a declaration that experience has shown to be outrageous. Still today, "It's impossible to know whether the results managed care executives are hearing are valid," Wilson says. "Most of the time, calculation methods are not even disclosed."

The Congressional Budget Office examined dozens of peer-reviewed DM studies. "There is insufficient evidence that the programs can generally reduce overall spending," wrote CBO director Douglas Holtz-Eakin to the Senate Budget Committee in 2004. Moreover, the CBO worried that the programs could even raise costs by increasing the amount of medical care patients use.

"Improving health outcomes and mitigating . . . costs do not necessarily go hand in hand," CBO researchers wrote.

The Cornell University Institute for Health and Productivity Studies in collaboration with Thomson Medstat also analyzed ROI for dozens of DM studies. Led by Ron Goetzel, PhD, vice president for consulting and applied research at Thomson Medstat, the group discovered a positive ROI of 2.78:1 for congestive heart failure; only "some evidence" that diabetes programs save more than they cost; mixed results for asthma programs, and a 30-cent loss for every $1 spent for depression.

Depression programs were found to cost more than they save, but may save money when productivity outcomes are considered.

The greatest returns were for managing multiple conditions, from $6.65 to $10.87 per dollar invested. Results were published last summer in Health Care Financing Review.

David Cutler, PhD, the Harvard economics professor who studies health spending, examined two diabetes programs run by insurers in the last decade. He concluded that DM is not a moneymaker because patients change plans before long-term savings can be realized. Thirty-seven percent of the workforce turns over annually, according to a current analysis by the Bureau of Labor Statistics.

"The longer a member is enrolled in a program, the more dramatic results obtained," says Donald Fetterolf, MD, corporate vice president for strategic initiatives at Matria and formerly vice president and senior medical officer at Highmark Blue Cross and Blue Shield in Pittsburgh.

"It could take 18 months to get people signed up and another 12 months to get initial outcome data," adds John Stark, a regional vice president and actuary at WellPoint. In addition, the effects of behavior change are often slow to develop. Imagine a cardiac condition that has developed over a lifetime. While simple dietary changes, weight reduction, exercise and smoking cessation will have significant effect on health, the effect on claims may not be seen for years. Clearly, if all companies had similar DM programs and measurement standards, when patients moved on, DM would be seamless.

For some, like Gordon Norman, MD, formerly PacifiCare Health System's vice president for disease management, the thorny issue of ROI is moot. "We're beyond determining whether DM programs save money," he says. "There are enough cohort and quasi experiments that have caused senior health plan executives and self-insured employers to invest year after year. Their confidence is not predicated on anecdote, supposition, or faith."

Norman is now chief medical officer at the DM vendor Alere Medical, which entered into a long-term DM management agreement with PacifiCare last year. Every year since 2000 that DM had been in place at PacifiCare, the company realized "in excess of $100 million annually in net savings aside from what the program was costing," he says.

Chris Coloian, Cigna's vice president for DM and wellness, agrees: "People have moved past speculating whether these programs work." In 2004, the company released results of a DM study that it had conducted of 43,000 diabetics in 12 states. Overall medical costs declined by an average of 8.1 percent for full parti-cipants, mainly through a decrease in hospitalizations. The program is provided in collaboration with Healthways.

Cigna has the largest DM program as measured by total dollars, according to "Leading Disease Management Organizations," a summer 2005 report by the Disease Management Purchasing Consortium.


DM sometimes gets shortchanged because it is impossible to measure factors that would surely boost ROI. "Where does productivity loss occur?" asks Popik, formerly of Aetna. "Parents who leave work or don't come to work because they have to take their asthmatic children to doctors — we don't measure that but it's very significant. Presenteeism — no one is measuring that and factoring it into ROI." An analysis of the lost work time avoided would demonstrate significant savings, according to Popik.

Few health plans are without at least one DM program. Enthusiasm and high expectation reigns. "The check that the chief financial officer writes for DM is one of the largest, aside from claims and labor," says Ian Duncan of Solucia Consulting, a company that helps negotiate DM contracts.

Gold standard

Even Senate Majority Leader Bill Frist, MD (R-Tenn), boosted DM in February when he said in a speech to the Detroit Economic Club referring to diabetes DM: "We know that through evidence-based interventions and monitoring — things as simple as phone calls from trained nurses — disease management can reduce health costs by as much as 30 percent, and can cut hospital costs by as much as 50 percent."

But as the industry matures, changes are occurring. Only two to three years ago, managed care organizations "were just accepting what was handed to them by their DM vendors and relying on those explanations," says Rebecca Owen, an actuary with Solucia Consulting. Today they are looking under the hood to learn how numbers are derived.

"The president of the company wants to know if it's a red number or a black number," says Matria's Fetterolf. Executives have to consider whether they will come out ahead with alternate uses for their dollars.

To be sure, some health plan executives renewing vendor contracts are calling for independent audits of methodologies with striking results. "We have audited calculations that differ substantially from the written methodology that studies were supposed to represent," Duncan says.

Especially for health insurers, outside auditors have become de rigueur since the federal Sarbanes-Oxley Act of 2002. "We want to validate vendor results to make sure that savings are there, for our peace of mind," says WellPoint's Stark. "We have a lot of people looking at our business." The act was passed after the Enron, Tyco and WorldCom fiascoes to encourage public companies to enhance financial disclosure.

Numerous attempts had been made in the past to create a uniform standard, in the way that the accounting industry has "generally accepted accounting principles" to which all accountants adhere. "It's been one big spitting contest and no one has won," says the DM consultant Vincent Kuraitis of Better Health Technologies.

Wrote Tracey Moorhead, DMAA's executive director, earlier this year: "Our experience shows DM works, but lack of agreement on how to measure that success has hampered our ability to convince skeptics."

Representatives of multiple disciplines have weighed in — academicians, politicians, statisticians, actuaries, economists, epidemiologists, and assorted researchers. Many have created, or are in the process of creating, methodologies that they consider scientific. Moreover, each vendor thinks it has created the gold standard. For example, SHPS, a company in Arizona that describes itself as "an integrated health management provider," used Ernst & Young to validate client savings. SHPS wrote in 2002: "Through the Ernst & Young study, SHPS has established a financial model that will become an industry standard for measuring our programs as well as those of the competition."

A year later, Healthways (then called American Healthways) and John Hopkins University researchers announced that they had developed a Standard Outcomes Matrix that was to be the "benchmark for all program evaluations." Neither is uniformly accepted today, Fetterolf says.

It was big news in January when the DMAA announced that by December, it would establish a definitive methodology for measuring financial and clinical outcomes.

"The ROI issue has become so annoying," says Fetterolf, appointed chairman of the DMAA committee directing the effort. "It's a resource-consuming, fracturing issue. We want to come up with a standard so everyone can get on with life. It's slowing contracting. Expensive people spend lots of hours in windowless rooms arguing over nuances and methodology."

To get the ball rolling, the DMAA sent 300 questionnaires to CEOs, chief medical officers, quality and informatics people, vendors, health plans, support organizations, consultants, and pharmaceutical concerns in an attempt to gain a consensus. "Engaging all key stakeholders early and soliciting their input is crucial, and we're doing both," Moorhead says. Committee members include Jim Pope, MD, chief medical officer of Healthways, Jaan Sidorov, MD, director of care coordination at Geisinger Health Plan, employees of actuarial and accounting concerns, and others. Still, there is so much contentiousness about how to conduct a financial review that it is doubtful that warring factions will accept the DMAA standard. "We fully anticipate consensus on a large number of key elements in the presentation of DM outcomes, but recognize there may not be agreement on some elements," Fetterolf says.

"I'll go on record to say that if the DMAA includes plausibility analysis, I will be a big supporter. Leaving it out wouldn't pass the sniff test," says Lewis, who has his own algorithm. Plausibility indicators adjust for the impossibility of predicting all the members of a health plan who are going to have health events.

There are even suspicions that since the DMAA represents an industry eager to demonstrate that its programs have financial worth, its algorithm may be faulty. "As a trade organization, the DMAA is going to come up with a method that shows DM provides a ROI," says Medstat's Goetzel. "Perhaps only a government agency can come up with a methodology that is unbiased." Fetterolf strongly rebuts that assertion. "The industry can worry that the fox is in the henhouse, but we've gone to great lengths to make sure that is not the case by including lots of stakeholders,"

Wilson, of the Population Health Impact Institute, argues that it is not even possible to come up with a single credible standard, as there are too many variables for a method to work in all circumstances. He has created a framework of five principles instead of a uniform methodology: data quality, equivalence, statistical quality, causality, and generalizability. "There is not only one way to build a house, but all construction companies follow certain rules, such as that walls have to be plumb and floors level."

It should be simple

Virtually all agree that the Holy Grail for evaluating ROI is through expensive, double-blind randomized controlled trials, with patients assigned to one of two groups. One is the control group receiving no program intervention; the other receives DM interventions. Some doctors and others perceive this as unethical because the vendor withholds services from people who could benefit from them, Solucia's Duncan says.

Wilson, however, argues that "double-blind" trials are not even possible in DM, as the patient will be aware of the DM program. "What's left," he says, "are less rigorous methods, more potential for bias, and the need for even greater scrutiny. To enable credible evaluations, metrics and methodologies will have to be fully disclosed."

One of these methods is "the pre-post method," or pre-DM intervention as the baseline period for comparison, versus post DM intervention. This method is fraught with potential for miscalculations and flaws, such as selection bias and regression to the mean.

Self-selection will no doubt include more highly motivated and perhaps healthier patients. In regression to the mean, members selected for DM during a time of acute illness, such as a hospitalization in the initial year, tend over time to become better and more like the average patient with the disease. Comparison of costs for groups of members in a base year, selected for hospitalizations, have the false result of magnifying the effect of an intervention.

Countless variables easily skew the data. For instance, the introduction of new technologies, new therapies, and new medications can make a vendor seem positively heroic. ROI can rise dramatically if a popular drug goes off patent. "A pill that costs $10 may now cost 10 cents," Solucia's Duncan says. By the same token, a new, coveted, but expensive medication on the market could lower ROI.

Comorbid patients can wreak havoc on DM calculations. Most primary care patients have more than one chronic condition; approximately half of the patients have five or more, according to a study in the May/June2005 issue of Annals of Family Medicine. Financial savings from a single patient who is registered in more than one DM program should count in one program only. One CHF program may monitor patients with a remote device; another can use a nurse reminding CHF patients to take their medication. "Every one of these could have a profound effect on the results," says Wilson of Population Health.

Insurers themselves unintentionally alter ROI. Formulary changes that substitute drugs could affect efficacy. Hiking copayments for doctor visits and prescriptions makes it less likely patients will get the treatments that could keep their diseases in check, irrespective of other aspects of the DM program.

When insurers alter their networks, changing doctors or hospitals, patients may find they have to travel distances to receive care and so may not follow up. "If WellPoint were to shrink its network and get rid of tertiary care facilities, that would affect prior promised savings by the vendor," Stark says.

DM programs work only if patients take the advice proffered. Sometimes, they just can't. About 15 percent of working age adults ages 18–64 with private health insurance and at least one chronic condition did not purchase all of their prescriptions because of cost concerns, according to a 2005 study released by the Center for Studying Health System Change.

In spite of it all, physician leaders remain ebullient about DM because there is a vague notion that even if results are 1:1, that is sufficient. "If the ROI is a wash, would you still do the programs?" asks Fetterolf.

"Programs have other value. Employees like their employers who provide these services; physicians support these efforts to help them practice." Adds William Gold, chief medical officer of Blue Cross & Blue Shield of Minnesota: "We don't want to lose money, and I would have a problem if ROI was less than 1:1, but DM is at least better than the way the health system operates now, such as ordering an MRI that is not indicated or not following up with noncompliant patients."

In 2004, Gold had no hesitation re-enlisting one of its company's outside DM vendors when that contract renewal landed on his desk for the second time. "We'd had very favorable outcomes and we were confident of their methodologies," Gold says, declining to the name the niche vendor. This time around, though, Gold asked to drop performance guarantees, a move that reduced the rate charged to the insurer. In each of the previous years, the vendor had exceeded the guarantee. "We have no doubt the relationship will continue as it always has," he says.

At contract renewal time, Aetna's Popik also made changes. "It became clearer to us we needed to focus on the sickest members. We had to stratify members by risk and to focus activity on levels 1 and 2. "Someone with the mildest from of chronic heart failure might receive some written information, while those with the most severe form would receive much more intensive intervention, including home visits," said Popik at a DM conference at Duke University.

Employers contracting with Aetna also made changes born of experience. "They decided they did not want to pay for people who were not enrolled, so we developed a per-participant pricing schedule," Popik says. "Our customers were saying, 'I want you to have an incentive to sign members up and I'll pay you more for those who sign.'"

The first time around, Cigna was concerned with financial indicators in DM contracts, but at renegotiation time, clinical improvements were equally or more important, Coloian says. "Not just 'Did the patient have the lab test?' but 'What was the value of improvement?'"

While Norman was at PacifiCare, he renewed contracts with Alere. "We were getting value," he says. However, one publicized contract that ended 10 months early in January was a PacifiCare pilot with Uncle Sam for congestive heart failure patients. "There were challenges in recruiting beneficiaries," Norman says. He adds that massive companywide changes were occurring. PacifiCare was acquired by UnitedHealth and all of PacifiCare's DM business was outsourced to Alere.

Time will tell

A young DM industry in the 1990s boasted huge savings that now appear incredible. "There was no intent to mislead. If results were glowing, it was incorrect methodology created by people who did not have experience in clinical trials. They were unsophisticated in the complexities of study design," Fetterolf says. "We are in a different place today. Vendors realize that mocking up a colorful histogram demonstrating large positive outcomes is history," Gold says.

A lot of bright ideas have come and gone in the health field. Physician practice management companies such as MedPartners and Phycor rode a brief wave of popularity in the 1990s, for instance. Time will tell whether DM will succeed or meet the same fate. Popik, though, is upbeat. "You have 78 million baby boomers about to develop chronic diseases. It's a great opportunity for DM and for health plans."

Before You Renew? 10 Cautionary Items To Look For in Vendor Contracts

Ian Duncan

Every vendor contract should include four major categories: financial outcomes, clinical outcomes, functional outcomes (patients functioning better or worse), and satisfaction outcomes (asking physicians and patients if they are satisfied)

In addition:

1. Ensure that vendors don't double-count savings on comorbid patients registered in two or more different DM programs. Savings should be assigned to one DM program.

2. Requalify chronic patients annually, because some of those registered might have originally been false positives, meeting criteria for inclusion in one year but not another. Their continued inclusion in the chronic populations increases the number of members contributing to "savings" and reduces average PMPM cost. (Other industry experts believe that requalifying is unnecessary and accept that "once chronic, always chronic.")

"If someone really does have the disease and doesn't have claims in a year they still count," says Al Lewis of the Disease Management Purchasing Consortium.

3. Assure that both the baseline period for comparison and the DM intervention year are measured identically. For example, allow at least six months after end of a year to allow all claims to be submitted. This rule should be applied equally for both the baseline and intervention year.

4. Expect an adjustment for inflation, since it is becoming an industry standard for vendors to make an adjustment of 3–10 percent, sometimes known as a trend adjustment. That amount corrects for increases in hospital, emergency department, prescription, and other costs. Be careful how it is calculated. It should be reasonable in relation to the health plan's experience and in relation to the expected experience of the chronic population.

5. If a comorbid patient is registered in both DM and case management, establish an objective method to attribute patient savings to one program or the other. Definitely not both.

6. Use guarantees as performance-improvement tools, increasing next year's target when the current year target is met. Because health plans and employers don't trust vendors' methodology and calculations, they like guarantees. For example, the vendor must return $2 for every $1 spent in fees. Payers think this somehow assures validity. But if vendors use flawed methodology, they are more likely to meet numerical targets, and experience has shown that they rarely miss.

7. Consider applying a flat rate charge to the entire patient population. Typically, there are two ways vendors charge for DM. One is per enrolled member. In this way, fees escalate over time as more members are enrolled in DM, and fees can escalate sharply if members are not requalified annually. The other method is a fee for all members of a plan, for example, a $1 PMPM flat rate that applies to the eligible population whether members are enrolled or not. This method is more widely used because it's simpler to calculate ROI and often results in lower fees.

8. Be wary of guarantee provisions. At the end of a contract, the vendor may owe money to the health plan, especially if there are contractual guarantees. A vendor sometimes places an item in the contract that says the money it owes is applied to fees owed by the health plan for the next contract period. That locks the plan into renewing, even if it is unhappy with the vendor. Owed amounts should be paid out within 30 days of the reconciliation.

9. If you want to be wholly comfortable with vendor methodologies and savings calculations, hire an independent auditor. Audited calculations can differ substantially from the written methodology vendors were supposed to employ. Actuarial and benefit consultants perform this function. They include Medstat, Mercer Consulting, Milliman USA, Reden & Anders, and Solucia.

10. Be straight with the vendors. They should have the right to adjust promised ROI down when information given by the health plan is not valid. For example, sometimes the members' phone numbers that plans provide are wrong or missing. A plan can be late providing membership or claims data, or the data can be poor. Vendors should not be at risk for health plan data failures.

Ian Duncan is president of Solucia Consulting of Hartford, Conn. Solucia assists in contract negotiations and renegotiations between managed care organizations and DM vendors.

When you need a vendor to evaluate your DM program, be sure that . . .

Thomas Wilson

1. The evaluator provides DM program metrics, outcome metrics, and a method to demonstrate that the DM program caused the outcome.

2. The evaluator discloses his method in sufficient detail that an independent evaluator could reproduce the study and get the same results.

3. The method used is verified independently for credibility.

4. The evaluator has made a statement regarding potential conflicts of interests.

Thomas Wilson, PhD, is an epidemiologist and founder of the Population Health Impact Institute, which is concerned with evaluating programs that are intended to improve the health of populations. «www.phiinstitute.org.»

For further reading

"Return on Investment in Disease Management: A Review," by Ron Z. Goetzel, PhD et al, Health Care Financing Review, Summer 2005, Volume 26, No. 4.

"Leading Disease Management Organizations," Summer 2005, Health & Disease Management Service, Health Industries Research Companies.

"Assessing Return on Investment of Defined Population Disease Management Interventions," by Thomas W. Wilson, PhD, et al, Joint Commission Journal on Quality and Safety, November 2004, pp. 614–21.

"Estimating the Return on Investment in Disease Management Programs Using a Pre-Post Analysis," by Donald Fetterolf, MD, MBA, et al., Disease Management, Vol. 7, No. 1, 2004

Maureen Glabman
Contributing Editor

A Conversation with Al Lewis: 'There's Now a Correct Method For Defining ROI in Disease Management'

The godfather of disease management talks about how the industry went wrong, and is now going right, in describing its own value

To the degree that one person can be credited or blamed for the very existence of a $1.1-billion segment of American health care, Al Lewis is that person when it comes to disease management. If you doubt that, just ask him. Blunt, funny, and supremely confident of his knowledge of the field, Lewis founded and is a past president of the Disease Management Association of America, and now heads the Disease Management Purchasing Consortium International. DMPC is a consultant and broker with 89 members that include health plans, private and public employers covering 80 million lives, the Congressional Budget Office, and leading accreditation groups.

With a potentially huge boost from the Medicare Modernization Act, disease management could be on the verge of a boom, Lewis argues, but only if it overcomes a major obstacle: Nobody believes its numbers. Many employers won't contract with DM companies because they doubt vendors' claims about how much money their programs save. Lewis says these doubts are legitimate, and traces the problem of inflated savings to a flawed methodology — and to the likelihood (he contends) that some DM vendors are "so stupid they don't know how stupid they are."

He also says that he and two colleagues have solved the problem in a recently published white paper. On DMPC's Web site, Lewis indicates that he'll accommodate those who think he should give that document away — as long as they themselves work for free or are card-carrying members of the Communist Party. Others can pay.

Lewis holds undergraduate and law degrees from Harvard University, and is a visiting scholar at Brandeis University's Heller School for Social Policy. He spoke recently with Senior Contributing Editor Patrick Mullen.

MANAGED CARE: What's wrong with how disease management companies calculate return on investment?

AL LEWIS: I used to pooh-pooh skepticism about ROI in disease management as being a result of people not knowing what they were talking about. It turns out they were right, though they didn't know why. The old industry standard that everybody used — myself included — has a fatal flaw. I would claim to have invented the old methodology, but since we figured out that it was wrong, I went from pride of authorship to admission of authorship.

MC: To be followed by denial of authorship?

LEWIS: Right, though I'm not quite at that point. Here's the problem: A huge percentage of employers who don't do disease management don't do it because they don't believe the numbers. Most of the numbers they don't believe are indeed wrong, especially if the vendor is not on the DMPC-recommended list. Employers are right to be dubious of vendors that claim an ROI of four to one.

MC: Can you give an example of a DM vendor's dubious claim?

LEWIS: Yesterday, somebody sent me ROI numbers that her company's DM vendor — apparently a friend of her company's president — had given her. She knew the numbers were wrong, but she's not a financial person, so she doubted management would take her word for it. She asked me for some ammunition to bolster her argument. Within five minutes, it was clear to me that this vendor had no clue whatsoever what it was doing. One obvious reason was that it said it was saving more money on asthma than its client was spending on asthma. It was disguised and I had to do a couple of calculations to determine that, but there it was. Asthma is the canary in the coal mine with disease management. I can tell in a nutshell whether a DM company is doing the whole thing wrong by whether asthma savings exceed asthma spending. It's an easy mistake to make, because the tendency is to measure a patient's entire claims rather than just asthma claims. If an asthma patient's total claims drop by 20 percent, some DM vendor will say they've produced a 20-percent saving on asthma. The problem is that average asthmatics spend only about 15 percent of their claims on asthma. For this company's numbers to work, asthma patients would have to have been spending about 80 percent of total claims on asthma, which simply doesn't happen.

MC: They took credit for lower claims that had nothing to do with asthma.

LEWIS: Exactly. The vendor had no idea why its numbers were wrong. They were too stupid to realize how stupid they were. That's probably true of 50 small vendors.

MC: Are you describing a two-tier market, with some vendors trying to provide accurate numbers and others more interested in making a quick buck?

LEWIS: It's a three-tier industry. A group of established players does disease management right. A second group of established players does it right under duress when somebody makes them. A very large third group of small companies has absolutely no clue what they're doing. They think they're right, but they're not, and nobody calls them on it because benefits consultants who dabble in this stuff don't have a clue either.

For all I know, these small companies do save their clients a little money, but their reporting is so bad that there's no way to know for sure, which calls their entire performance into question.

MC: What distinguishes one first-tier DM vendor from another? Are there wide strategic differences or is success defined by how well they execute similar strategies?

LEWIS: There are differences in the models, but it's hard to say one model saves more money than any other. It's reasonably easy to say that certain vendors measure their savings more accurately than other vendors.

MC: And the third-tier companies give the entire DM segment a bad name.

LEWIS: Right. A lot of employers are on the sidelines for this reason. I was among the first to figure out what's been wrong with the methodology, but I don't have a monopoly on IQ. A few actuaries at the big actuarial firms know what they're doing, not many, but enough that they can spread the word.

MC: What's the fatal flaw in how disease management companies have calculated ROI?

LEWIS: The fatal flaw is caused by the fact that not all patients with a disease will file a claim during the initial measurement period. This creates a situation where the entire diseased population is not counted in the baseline measurement. As a result, estimated savings for some chronic diseases — asthma and coronary artery disease in particular — will always be overstated. As improvement is measured from an artificially underrepresented baseline, plans will overstate program improvement and report an inflated ROI.

MC: How does your solution fix this measurement flaw?

LEWIS: Ariel Linden, a biostatistician, Ian Duncan, who's an actuary, and I put out a white paper that basically creates the new industry standard for measuring savings from disease management. We now have a proof that fixes this fallacy, which means we have valid measurements of costs pre- and post-disease management. There's now a correct answer for defining ROI in disease management. It can be refined a bit, but the magnitude of what we don't know is likely to be small enough that I'm quite comfortable saying that there is indeed a correct answer.

MC: What's at the heart of the new methodology?

LEWIS: The key to the measurement is that anybody that you find with a disease in any period has to be considered to have the disease in all periods. Let me give you an example. Say you had two asthmatics in your plan. One had a $1,000 claim in 2003 and nothing in 2004. The other one had no claim in 2003 and a $1,000 claim in 2004. Using the industry standard methodology, if you look at claims for 2003, you conclude that your average asthmatic costs $1,000 in that year. You had a prevalence of one and it costs $1,000. In 2004, the vendor finds that prevalence went from one to two, and would claim that the cost-per-asthmatic fell to $500, even after spending $1,000 on one patient in 2004.

MC: Why is the new methodology important?

LEWIS: It puts the whole issue of validity to bed through standards. I'll tell your readers with certainty that if this is the first you're reading about it, then you are not using it. It will be commonplace within one or two years because essentially as soon as people read this article, they'll realize that they're doing it wrong and will change it. So far, only about 15 health plans and employers use this correct answer. Georgia and Wyoming's Medicaid programs use it, and their results are publicly available. Health Industry Research Companies (HIRC), a market research concern in Santa Cruz, Calif., nominates and identifies the best health plans, employers, and states in disease management every year, about 30 in total. I was pleased to see that every health plan and employer that is measuring correctly is on that list. We'll see a big trend away from invalid methodologies.

MC: The concept of disease management is about ten years old. Over that decade, has disease management evolved away from, or more fully realized, its original mission?

LEWIS: It's more fully realized its mission. The definition DMAA put out ten years ago is still pretty good. It could be tweaked, but the mission, charter, and strategy are the same. The tactics and the scope of the industry have increased quite a bit. The industry used to focus on only three or four diseases. While it remains true that the vast majority of savings comes from three or four diseases, there are many other diseases where disease management can improve people's health and keep them at work longer. Employers are willing to pay for that.

MC: How fast is disease management growing?

LEWIS: Industry growth was well ahead of expectations in 2004. HIRC is projecting a fifty-percent growth rate over the next three years. I have a feeling that will turn out to be conservative.

MC: The Medicare Modernization Act includes several disease-management demonstration projects. If they go well, what is the potential effect on the DM business?

LEWIS: If it works, disease management could become a $10 billion industry and be as much a part of the landscape as primary care. The beauty of it is that the measurement that CMS is using is as good as you can expect a real-world measurement methodology to be — and they're not a client of mine, as much as I wish they were. So if they say they've saved money at the end of those demonstrations, they've saved money. It cannot be argued. Likewise, if it turns out they haven't saved money, there's very little ground for challenging the methodology.

MC: Do you expect the demonstration projects to succeed?

LEWIS: My concern is that a lot of vendors that contract with Medicare won't meet CMS's goal of five percent net savings, because the vendors will still be using an incorrect methodology. That's the bad news that might put some vendors behind the eightball. But I predict that the good news will turn out to be that even if the five-percent threshold isn't reached, there will be savings in excess of cost, so it will make sense to expand the program. Another trend we're starting to see with the Medicare population is a move toward better medical management of the frail elderly in nursing homes. These folks are in constant potential crash mode. They end up in the emergency room or other acute care setting, which is debilitating to the patient and expensive. Having a doctor walk through and take a quick look at a napping nursing-home resident won't cut it. Doctors and nurse practitioners need to get into these facilities far more often.

MC: How did CMS arrive at the five-percent figure?

LEWIS: A lot of the CMS methodology, for better for worse, is traceable to stuff I had been doing for years. I invented guaranteed savings by accident while working for a consulting firm that was working for Humana, where disease management originated. The consulting firm's fees for Humana had a strong component of guaranteed savings. For the consulting firm to get its money, when we invented disease management, we passed the same model on to DM vendors. That way, we could include their savings in our savings. Guaranteed savings became part of the landscape because it made it much easier for health plan CFOs who were skeptical of disease management to accept it.

MC: What do you see happening with DM as part of Medicaid?

LEWIS: I do a ton of Medicaid consulting work, and the huge mistake that gets made in Medicaid health plans is the failure to distinguish between TANF population — Temporary Assistance for Needy Families — and the disabled population. They're two very different populations that should get very different approaches to disease management. Yet in many cases, plans just think one size fits all. Sight unseen, I can tell any health plan executive that however much he spends on disease management for TANF, he's overspending, and however much he spends for disabled, he's underspending. The reason is that the TANF population has a low disease burden, very high turnover, and is not easily trackable. The disabled population has a high disease burden, is easily trackable, is underserved, and has low turnover. It takes me half an hour to explain this to people, but when I look at programs put in place by non-DMPC members, it's quite common not to distinguish between those two populations.

MC: In this magazine six years ago, you cited consolidation as a coming trend in DM. Any thoughts on what's stalled that trend?

LEWIS: I always think the industry's about to consolidate and it never does. So I'm not only going to deny that I ever made that statement, I'm going to deny that you and I ever had this conversation.

MC: Fair enough. Talk a little bit about DMPC's certification program.

LEWIS: It the only objective assessment of whether a DM company correctly measures what it does. More than forty companies have applied for certification; thirteen or fourteen have received certification to date. Our certification differs from what the accreditation agencies do because they don't look at the integrity of the financial reconciliation. I've received about 100 inquiries from employers looking for health plans that have been certified.

MC: What separates a certified DM program from others?

LEWIS: When a program is certified, their ROI is pretty darn close to what they say it is. There might be five programs in the country that could be certified right now for their ROI, but for whatever reason, haven't asked. There are probably a hundred or two hundred that could not get certified if they asked.

MC: Odds are they won't ask.

LEWIS: I get calls from people who know they're not up to standard but want to apply to figure out how to get there. We don't decline applicants. You just keep getting deferred until you get it right. I don't keep a list of who's flunked or anything like that.

MC: Do you expect that 10 years from now, disease management will still be around as a distinct market segment, or will its functions be absorbed into health plans or whoever is providing health services?

LEWIS: I don't know what's going to happen in ten years. For the next three years, DM programs are not going to get done by health plans. The trend now is toward outsourcing for the simple reason that benefits consultants and employers want name-brand programs. Smaller employers want their health plans to provide DM services. Health plans have a chance to keep small employers from looking elsewhere for those services. Plans can either get disintermediated or be the intermediary. They want to be in the mix, and here's their chance. If they blow it, they basically just become claims payers.

MC: Thank you.

The interviewer, Patrick Mullen, is a former managing editor and editor of Managed Care.

Employer Update

Don’t Forget Productivity Gains When Rating Health Programs

Disease management conference focuses on outcomes measures that address issues such as presenteeism that concern most health care purchasers

The timing couldn’t have been better when David R. Groves, PhD, vice president for corporate health management at Comerica, the large banking concern, received the findings of a study on the company’s employee health coaching program early last month. He had been preparing a talk for a disease management conference on outcomes, so he tacked the numbers onto the end of the presentation and knew they’d have an impact (see table below).

Comerica banks on savings
By considering indirect costs such as presenteeism, Comerica showed significant results from a disease management program in 2004. The company saves more than $2 for every $1 it spends on the disease management program that includes personal health coaching.
Disease Savings per participant Total savings
Asthma $1,009 $82,699
Coronary artery disease $9,718 $437,332
Chronic obstructive pulmonary disease $2,294 $105,542
Diabetes $1,143 $175,979
Heart failure $6,853 $54,822
Peptic ulcer disease $1,173 $22,599
Source: Comerica Inc. Figures annual, 2004 compared with 2003

In 2004, Comerica reduced medical costs and improved productivity through a telephone counseling program designed to help chronically ill employees manage their conditions. The company reduced its annual asthma costs, for example, by 40 percent — saving $1,009 per employee in the asthma program, for a total of $82,699.

The asthma savings includes a 50 percent reduction in hospitalizations, a 16 percent decrease in physician and clinic visits, and a 64 percent decrease in emergency room visits. It also includes a 43 percent reduction in indirect costs such as presenteeism (having an employee not working to full capacity because of illness) and paying temporary workers to cover for sick employees.

Return of 200 percent

Measuring indirect costs helps Comerica demonstrate that it saves at least $2 for every $1 it spends on its health-coaching program, Groves says. And that was particularly relevant to the conference that Groves had been preparing for. "The goal of the conference was to drill down, look at successful programs, and ask, ‘How can we design disease management programs that we know are going to benefit employers with good functional outcomes?’"

Initiated by the Institute for Health and Productivity Management, the March conference was designed by and for employers, says Sean Sullivan, president and CEO of the institute, a Scottsdale, Ariz.-based not-for-profit organization that works with employers on workplace performance issues. "Employers pay the bills; they should drive the system. Employers are finally beginning to take charge in disease management, and they are telling health plans and other vendors what they really want."

What they want is broader proof of the value of disease management programs, he says. Health plans tend to present savings only in terms of medical costs, Sullivan points out. "You will not hear the providers of disease management programs talking about workplace impact and productivity, but that is what employers really need to base their decisions on."

Not now, but soon

Return-on-investment analyses of medical savings are debatable, Sullivan adds. Late last year, the Congressional Budget Office issued a report stating that the evidence on disease management has not yet demonstrated clear health care savings. The Institute for Health and Productivity Management agreed that the business case for disease management has not yet been made. "But we are convinced that the business case will be there once you start calculating the impact of disease management on productivity in the workplace," Sullivan says.

Lockheed Martin Aeronautics has been striving to educate employees about managing their chronic illnesses since 1991 and has made strides with diabetics in particular, says Pamella Thomas, MD, director of wellness and health promotion. "Quite a few of our employees have been able to manage their condition through diet and activity — and have been able to stop taking medication. Their attendance at work has improved, so overall, it’s making a big difference in terms of their health and productivity."

Until recently, companies relied on anecdotal evidence or "a good feeling" to know that disease management programs were improving productivity, says Thomas. Today, a number of tools have been developed to calculate indirect savings, she says. "Now we can actually measure things like presenteeism and other indices that show us the difference we’re making."

Thomas and others who gave presentations and attended the conference — 320 in all — presented an impressive range of thoughts and ideas, says Jack Mahoney, MD, corporate medical director of Pitney Bowes and co-chair of the event.

One of the key statements made during the conference, he says, came from Catherine Baase, MD, global director of health services at Dow Chemical. "She said that this is a learning process and that we are all learning together to develop these programs. Employers are searching for the right way to implement disease management services in a continuum from wellness to chronic disease management."

Cost shifting in reverse

A major theme that emerged was the need to break through the silo mentality of addressing disease management, benefit design, and medical and pharmacy costs separately, Mahoney adds. That resonated with him. Last year, Pitney Bowes released results of a study in which the company was able to reduce the overall costs of treating diabetics by 6 percent and asthmatics by 15 percent by reducing the copayments.

"We increased our pharmacy costs, but reduced the total cost of care. We looked at the whole thing together," he says.

"Most employers are at the stage where the days of managing cost through cost sharing are over," Mahoney says. "We need to manage total cost. We are getting to the point where instead of managing health care, we want to manage health."

To keep the needs of employers in the forefront after the conference, the Institute for Health and Productivity Management has launched the Disease Management Strategic Advisory Council. Its role will be to serve as an ongoing vehicle for work in this area, setting an agenda and perhaps generating pilot projects that will help make the business case for disease management, Sullivan says.

"This was not just a conference; it was the beginning of an effort to really redefine, focus, and deliver greater value from the whole disease management enterprise."

Employers involved in the council, which has close to 60 members, will meet this month, and a larger meeting with members from the disease management industry will be held in the spring, Sullivan says. "We’d like the council to keep people focused on the employer as the customer, on these larger workplace outcomes as the objective, and on valid, comparable methodologies as the way of proving the case."

MargaretAnn Cross, a Managed Care contributing editor, covers purchaser and other issues from her home in Michigan.

MargaretAnn Cross
Legislation & Regulation

Pfizer Touts Medicaid Data In Arguing That DM Works

The pharmaceutical giant says that its disease management program saved Florida $42 million, but a state watchdog group remains unconvinced.

Florida lawmakers may already have turned thumbs down on Pfizer's two-year-old Medicaid drug program, but the drug giant isn't about to just walk away quietly from the epic struggle.

Pfizer recently touted its own fresh analysis showing that its disease management programs saved the state more than $41 million over 27 months — well over the $33 million Pfizer promised when it put the programs in place in exchange for having all of its drugs listed without discount on Florida's Medicaid drug formulary. In addition, the drug giant said that the company had made drug donations and investments worth almost $20 million. And Pfizer said that it reached 150,000 people, triple its original goal.

That's everything that Pfizer promised to do and more, says Hank McKinnell, Pfizer's chairman and chief executive officer. And the company says the numbers should make the Florida legislature think again about killing the program. "The lessons we have learned in the past three years have important implications as both federal and state governments look for new ways to deliver better health care to patients with chronic diseases."

Alan Levine, the secretary of Florida's Agency for Health Care Administration, backed Pfizer up. "Partnerships like this one with Pfizer are good benchmarks for states to use as they, like Florida, struggle with the difficult balance between cost and outcomes."

But some of the program's critics immediately cautioned against betting on a comeback, or relying on any lessons from Pfizer.

"I'm sure that it will be brought up again," says Bernie Horn from the Center for Policy Alternatives, a "progressive" Washington think tank that tracks state health initiatives. "But I think it's unlikely that the [legislators] will reverse their decision."

Pfizer found itself fighting a rear-guard action against the legislature long before its contract had run its course.

It's chief nemesis: Florida's Office of Program Policy Analysis and Government Accountability, a state watchdog group that reported that once Florida made its deal to leave Pfizer's drugs on the list without discount, other pharmaceutical companies that might have cut their prices in order to compete for the business didn't see any need to discount. And the real savings to be had, OPPAGA added, was in rebates — not through Pfizer's DM program.

Those numbers from Pfizer, adds Horn, are just a rehash of earlier figures that the state had already rejected.

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

John Carroll

DM's Cost-Effectiveness Doubted in CBO Report

Congress's financial review agency says that not enough evidence exists to prove that disease management saves money. Many beg to differ.

Uncle Sam isn't too sure that disease management saves money in the managed care world, and has some real doubts that it could ever be applied to Medicare. At least, those are the findings of a Congressional Budget Office study that has proponents, critics, and observers of DM talking.

The report resulted from a congressional request that the CBO look into DM as a way to reduce the entitlement program's costs in light of the launching of disease management demonstration projects as part of Medicare reform. These projects are to be implemented in 10 to 12 sites around the country and cover about 20,000 patients.

"Proponents often claim that disease management programs not only improve quality but also pay for themselves by decreasing the use of acute care services enough to offset the costs of the additional screening, monitoring, and educational services," states the CBO report An Analysis of the Literature on Disease Management Programs. It adds that "there is insufficient evidence to conclude that disease management programs can generally reduce the overall cost of health care services."

Heated response

Reactions range — or rage. The Disease Management Association of America held a news conference Oct. 21 at which it denounced the findings.

Al Lewis, president of the Disease Management Purchasing Consortium, responds to the CBO report as if it were a personal attack.

"Since I advise over 90 percent of all procurements for plans and states, this is a criticism of my ability to contract since roughly 80 percent of them show savings using my methodologies," says Lewis. "If they were going to pass judgment on my methodologies, they could have called to get a copy of them."

Meanwhile, Lewis takes issue with the CBO's methodology.

"I would say that the entire study overlooks the fact that there are 80 payers in the DMPC and most of them have saved money using our rigorous counting specs," says Lewis. "And the ones that haven't, have gotten their money back. It would have been nice if the CBO had actually called someone who knew what actually happens in the 99 percent of contracts that aren't written up in the peer-reviewed literature, rather than focus on the 1 percent that are. And, by the way, there are far bigger data holes in that literature than in any study design that I would ever recommend."

To Victor Villagra, MD, president of Health & Technology Vector, a consulting company specializing in disease management, language counts. Saying that there's a lack of evidence of cost savings is not the same thing as saying there's evidence of a lack of savings.

Close read

"The CBO statement suggests, but does not really say, the former," says Villagra. "Furthermore, read their statement closely: '...[T]here is insufficient evidence to conclude that disease management programs can generally reduce overall health spending.' There are several well-chosen words here: 'can generally' and 'overall health spending.'"

DM advocates do not necessarily claim to reduce overall health spending in absolute terms, Villagra says. "The DM community states that having DM saves payers money, and implicit in that statement is a short- to medium-term horizon," says Villagra. "Postponement of health care expenditures through DM in the commercial segment until after age 65 may transfer to Medicare some financial burden while it relieves the stress from commercial payers. The CBO is also thinking about the long-term impact of DM — 30 to 50 years ahead — particularly if it enhances the survival of chronically ill Medicare beneficiaries."

The DMAA charges that there were some "rigorous new studies that were not included in the CBO report" and Villagra concurs.

Villagra regrets that the CBO did not review a recent study in Health Affairs about the impact of a diabetes DM program on quality and costs. "Had they reviewed it, it might not have changed their conclusion, but in the continuum of accumulating sufficient evidence, every study should weigh in," he says.

NCQA's stance

The NCQA has long looked with favor upon health plans that implement DM, and that's certainly going to continue, says NCQA spokesman Brian Schilling.

"I don't think this changes our outlook on DM at all," says Schilling. "I think it's actually wrong to conclude that the report says that DM doesn't save money — my read is that the report concludes that we don't know yet, but that it does seem to improve care quality.

"To us, that's the real issue, particularly when viewed in context of our State of Health Care Quality 2004 report which just came out showing that 42,000 to 79,000 people die every year because of poor quality care. Even if DM turns out to be budget neutral, if it improves quality of care, it is money well spent. Bottom line: We're strong supporters of DM as a means of improving care quality and increasing value for our health care dollar."

Michael J. Reardon, MD, head of member advantage programs at Aetna, says that his company's DM efforts have cut costs and improved outcomes.

"Aetna's disease management programs have delivered definite and significant value — in terms of both cost savings and quality of care improvements when delivered to our commercial population of members," says Reardon.

Reardon agrees with the CBO report that a dearth of data prevents any conclusion about whether DM would cut costs in fee-for-service Medicare. However, he adds that one of the goals of the soon-to-be launched demonstration projects is to find out whether it would.

"Aetna is very interested in participating in the pilot project, viewing this as a forum that will produce legitimate and defensible research findings," says Reardon. "We believe it will deliver sufficient data due to its size, scope, and consistent application of disease management interventions."

An Analysis of the Literature on Disease Management Programs is based on peer-reviewed studies of DM programs for congestive heart failure, coronary artery disease, and diabetes.

"All in all, the evidence on cost savings is limited," the report states. "Most studies do not directly address costs. Instead, they report improvements in processes of care or in intermediate measures of health, from which an overall impact on spending cannot reasonably be inferred. The few studies reporting cost savings generally do not account for all health care costs, including the cost of intervention itself."

The CBO report further states that there's no way of telling whether it would be an effective tool for the older and sicker Medicare population.

This doesn't impress Lewis who, as noted earlier, finds that the CBO report has some flaws of its own. And since the report "started" this debate, Lewis will get the last word.

"It's a trial in absentia without evidence," he says. "If they are going to do that, maybe they should just have me walk over hot coals."

How to get the report

The CBO report: An Analysis of the Literature on Disease Management Programs

DM and Medicare may be incompatible

The Congressional Budget Office's review of disease management found "insufficient evidence to conclude that disease management programs can generally reduce overall health spending." The report also looks at whether DM would even be applicable to the Medicare population.

The elderly's higher susceptibility to multiple chronic conditions may seem to suggest that DM could help Medicare save money. "But translating the results of successful studies into savings for Medicare is not straightforward," says the report. DM studies conducted in a managed care setting might not be applicable to fee-for-service Medicare, which covers 90 percent of enrollees.

Then, there's the matter of how often people in the employer-sponsored system switch health plans, which happens every two or three years. Beneficiaries stick with Medicare until until the end.

Question of timing

"If a disease management program merely changed the timing of significant expenditures — for example, postponing rather than preventing the need for a heart or kidney transplant — then the impact on spending associated with that specific disease could be modest; in turn, that outcome would increase the likelihood that new spending on other conditions would cancel out savings for the managed disease," says the report.

"Moreover, Medicare beneficiaries accrue a substantial portion of their lifetime program costs in the year that they die, costs that probably would be incurred one way or another. Indeed, if beneficiaries ended up dying from diseases that are more expensive to treat (such as cancer), the total cost for the program could actually increase."

Further, the CBO study says, some of the basic care provided by Medicare could be considered disease management.

"For example, if disease management programs for Medicare intended to achieve savings by improving physicians' compliance with evidence-based treatment guidelines, then much of those savings might already have been captured — since physicians who treat Medicare patients also treat younger patients, including ones in private-sector disease management programs, and tend to use the same treatment protocols for both groups. At the same time, the home health and skilled nursing benefits available under Medicare could already be providing some of the active monitoring and educational services envisioned by proponents of disease management."

Takes some doing to crunch these numbers

Here's what the CBO report says about just how DM and Medicare's payment systems would mix — or not.

Unless disease management companies did have to bear insurance risk for all of the covered benefits that their enrollees received, policymakers would need to consider how Medicare's current payment systems for medical services would affect the extent and nature of the cost savings that disease management programs could achieve. In some cases, the effect on Medicare spending would be complex:

  • If disease management cut providers' costs of delivering Medicare services, that would not automatically yield savings for the program because of Medicare's payment structure. For example, if the length of hospitalizations or costs for treating a given condition during a hospital stay decreased, all of those savings would accrue to the hospital sector because Medicare pays a fixed fee for each admission. In those cases, further legislation to reduce provider payment rates would be needed for Medicare to capture some of the resulting savings.
  • Conversely, if disease management programs led to an increase in the use of physician services and associated lab and diagnostic tests, Medicare's payment system for physicians could prevent an increase in overall costs. Under Medicare's "sustainable growth rate" (SGR) payment system, the initial costs related to increased services would be offset by reductions in the rates for payments to physicians, and there would be no long-term affect on Medicare spending. In effect, physicians as a group would bear the increased costs instead of the Medicare program.

Percentage of employer-sponsored health plans offering DM programs grows

Whether DM actually reduces costs will be a matter of debate for the foreseeable future, thanks to the recently released study by the Congressional Budget Office. The National Committee for Quality Assurance asserts that the programs boost quality — regardless of whether they're cost-effective. And they are being relied on more often. Mercer Human Resources Consulting says that the percentage of employer-sponsored health plans that offer DM grew from 41 percent in 2002 to 58 percent in 2003.


Frank Diamond
Managing Editor
Legislation & Regulation

DM Industry Jumps for Joy Over Medicare's Leap of Faith

CMS has implemented 10 pilot programs that may very well be viewed as a make-or-break test for disease management.

Depending on whom you talk to, Medicare's looming pilot program for disease management is either a "watershed event," a "defining test" of DM's effectiveness, or the industry's "event of a decade." In fact, there aren't many people in disease management who don't think it's a big deal.

"I've spent much of the past six months of my life working on it," says Vince Kuraitis, a DM consultant who's been advising companies on how they can snag a contract. By his reckoning, all of the big disease management groups — like American Healthways, LifeMasters, and Health Management Corp. — are lining up for a piece of the action. And they've helped generate just a few of the perhaps hundreds of proposals that have probably been floated through agency doors to meet an August deadline, he adds.

For the disease management business, the next three years of Medicare results are viewed as a critical final exam — one that will either see DM triumph as the most effective tool in managing chronic illness or crippled in a messy failure that could tarnish the DM approach to chronic case management for years. If successful, these contracts may also ultimately spur industry consolidation, help vanquish expensive performance guarantees, and make a compelling case to those health plans that have so far resisted adopting DM.

But whichever way DM insiders are betting, one thing is absolutely certain: Program results will be intensely scrutinized by everyone with even a small interest in disease management.

The Centers for Medicare and Medicaid Services put up 10 three-year chronic disease management pilot programs for COPD, CHF, and complex diabetes. Working under a mandate to develop consortiums of providers, health plans, local agencies, and DM specialists, each of the contracts will enlist roughly 20,000 Medicare members for a DM program while another 10,000 are identified as the control group — though some smaller pilots could total 15,000 or 20,000 members. Under the Medicare Modernization Act of 2003, CMS has until early December to award the first contract, with the rest expected to go out in the first half of 2005.

Going all out

Add it all up, and more than 250,000 Medicare recipients are likely to be in a pilot DM program by the first half of 2005.

This is a big leap of faith for Medicare. Up to this point, the federal agency has only dipped a regulatory toe in the DM water, content to launch about 20 small experimental programs, most of which are still under way. Now, it's going all out to see if DM will make significant quality and cost differences in treating the chronically ill.

Some 12 million to 14 million Medicare patients suffer from the ailments targeted by the pilots, roughly 30 percent to 40 percent of the entire Medicare population, says Christobel Selecky, who runs the DM company LifeMasters Supported SelfCare. And those numbers are only going to keep getting bigger as the boomers start hanging up their careers by the end of the decade.

"Analysts think this could be a $5 billion to $10 billion market for disease management," says Selecky, who helped hammer out the pilot program rules while running the government affairs committee for the Disease Management Association of America.

Selecky, whose company has submitted a few proposals, focused on two basic approaches to DM, both built around creating consortiums of DM players. In one, the consortiums will include health plans — largely ones already experienced in serving Medicare populations — as prime contractors doing case management and working with physician relations and so on. Medicare has made it clear that it wants local docs involved, says Selecky, which should help to calm potential political backlash from providers. The second approach is likely to be more of a standalone method that looks like a Florida Medicaid project, where the DM companies would be directly contracting with local social service agencies and others to keep local involvement high.

Health Management Corp. decided to team up with a health plan for its proposal. And it's designed to ring Medicare's bells on key points like physician involvement and rural coverage.

Nurse-based model

"Our model that we've proven to be effective in this age group is a telephonic nurse-based model," says HMC's Jeff Odell, vice president of sales and marketing and a lead player in structuring the company's contract proposal. "We have designed several new program components that will address outreach and physician engagement challenges. I'm not at liberty to reveal a whole lot about our proposal, but I will say we've got some innovative approaches to physician engagement."

CMS left it up to the bidders to define the markets, says Selecky. But there are other rules to play by as well. First, she says, Medicare made it clear that it wants to engage the sickest people with the highest costs. And it won't go into a region where a substantial experimental program is already under way — a rule that excludes California altogether.

But there are plenty of states left over, she says, especially in the Southeast and Rust Belt, where low income and unhealthy lifestyles have conspired to create the agency's biggest concentrations of comorbidities.

Add them all up, says Vince Kuraitis, and they create a "ticking time bomb" for Medicare — which estimates that beneficiaries with five or more chronic conditions account for 20 percent of the Medicare population but 66 percent of program spending.

Hundreds of millions of dollars in contracts are up for grabs — but there's a catch. As with most first-time DM contractors, Medicare is making it clear that anyone who wins one of these contracts is going to have to guarantee a 5-percent cut in costs. Results will be tracked year to year, and failure will be very painful.

"Theoretically, if you have no savings, and you get paid $40 million or $50 million over three years, that's a lot of money to pay back," says Selecky.

For LifeMasters and the others in DM, though, that's a familiar provision. Many built their business plans around guaranteed savings of similar size.

"I think that everyone in disease management is hoping that it will go well," says Kuraitis. "The industry has had a lot of input and Medicare has been quite cooperative in structuring a project that everyone wants to be successful."

And that leaves no room for failure.

Adds Kuraitis: "In the event that none are successful, then it could be death to disease management."

Kuraitis says that the Medicare contracts will play an influential role in shaping the industry. In one extreme, he says, Medicare may decide that only big companies could be effective and provide contracts worth up to a billion dollars — a move likely to spur consolidation. At the other extreme, he adds, Medicare may opt for a locally integrated DM approach driven by doctors groups or home health agencies or hospitals.

5-percent savings rule

Selecky says that Medicare's acceptance of DM is also likely to help lead to an eventual end to the 5-percent savings rule. For DM companies, that standard guarantee has added to their costs, which in turn are passed along to the customers. The sooner Medicare gives its blessings to DM, the sooner the industry may be able to phase the guarantees out altogether.

For its part, Medicare has made it clear that if it sees any of the DM pilots as clear winners, it won't wait until the end of the three years to roll that pilot out for the entire population.

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

John Carroll
Legislation & Regulation

Pfizer: DM Did Not Fizzle In Florida Medicaid Ruckus

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

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

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

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

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

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

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

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

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

No concessions

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

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

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

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

Scathing report

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

Asthma 19%
Diabetes 29%
CHF 17%
Hypertension 22%

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

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

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

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

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

Good experience

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

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

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

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

John Carroll

DM Standards Off and Crawling

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

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

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

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

Sense of urgency

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

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

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

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

Not on radar screens

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

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

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

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

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

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

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

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

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

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

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

Converting the skeptical

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

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

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

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

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

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

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

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

Health plans take notice

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

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

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

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

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

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

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

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

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

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

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

Too good to be true?

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

And that's why Stone got started.

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

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

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

"The enemy of innovation"

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

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

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

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

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

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

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

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

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

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

Accepted principles

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

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

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

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

Customer always right

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

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

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

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

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

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

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

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

Further study needed?

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

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

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

The DMAA's Own Approach

Eager to clear up the confusion associated with measuring disease management programs experienced by planners and managers, the Disease Management Association of America has issued new guidance in a paper titled Evaluation Methods in Disease Management: Determining Program Effectiveness. The paper's overall theme is caution, however, as no matter which design planners choose, careful attention needs to be paid to the identification and control of potential biases that may invalidate the results.

Key biases to watch out for include selection bias, regression to the mean, and measurement error.

The paper suggests three methods of evaluation that can measure clinical and financial effects of a DM program while keeping away from statistical biases. The methods are: total population approach, survival analysis, and time series analysis.

Total population approach. This is the most widely used model used in evaluations and consists of a pre-test/post-test that addresses the clinical and financial performance of a DM program administered during a given time period, usually one year. Clinical and financial performance are measured during a comparable baseline period during which no DM program intervention occurred. Although most widely used, this method is a weak research and evaluation technique. The most basic limitation is that there is no control group to compare outcomes with.

Survival time analysis. A better approach than the total population design, this method takes into account the effect of enrollment and withdrawal patterns during the program's implementation.

Time series analysis. This approach controls for the effect of many biases, provides a timeline for changes in outcome patterns, and is more suitable for evaluating changes at the population level, which is what DM programs are intended to do.

The paper also addresses the concern that using cost as the outcome measure for the evaluation is inappropriate. Using cost as an outcome variable can expose the results of the evaluation to measurement bias.

One way to avoid this bias is to determine if a pre-established target is met. Each percentage reduction in utilization is worth a given payment. For example, each percentage point decrease in hospitalizations may be worth X dollars in bonus to the DM vendor above a set fee limit. Conversely, an increase in hospitalizations may lead to reimbursement of fees to the health plan or some other payment penalty.

John Carroll
Contributing Editor