“The Disease Management Value Equation: Reducing Costs, Improving Quality ” December 2002 Vince...

“The Disease Management Value Equation: Reducing Costs, Improving

Quality ”

December 2002

Vince Kuraitis JD, MBA Harry Leider MD, MBA

Better Health Technologies, LLCwww.bhtinfo.com (208) 395-1197

http://www.bhtinfo.com/

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Agenda Overview

I. Background -- Health care purchasing decisions are changing.

II. DM to date -- cost reduction (not quality improvement) has been the major driver

III. DM Tomorrow -- • Cost reduction will continue as a major driver• New value propositions focused on quality

improvement and value creation are transforming DM business and clinical models

IV. Take Away Points

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Agenda


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The Big Picture

20th Century Health Care

Acute/Episodic Care

21st Century Health Care

Acute/Episodic Care

CHRONIC

CARE

+

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we’re two percent of where we’ll be ten years from now...

Jeff Bezos, CEO, Amazon.com

..... this could have been said to describe thethe state of disease management today

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Health Care in 2002 Relative Cost & Quality

OptimalQuality

RelativeCost &Quality

OptimalCost

?

Source: Northeast Consulting Resouces

xYouAre Here

This framework describes the natural transitions across all industries (not just health care) over a 5-10 year time period. Health care is moving from a position of optimal cost focus to one of relative cost and quality focus.

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Shifting DM Metrics:Creating Value for Patients and Shareholders

OptimalQuality

RelativeCost &Quality

OptimalCost

?

Source: Northeast Consulting Resouces;Better Health Technologies, LLC

xYouAre Here

ROI

Outcomes

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90s: Managing Cost00s: Managing Variation

Source: Rand Health, Taking the Pulse of Health Care in America, 1999http://www.rand.org/publications/RB/RB4524/

Here’s how a Fortune 500 CEO might view this graphic. “Excuse me please?? At MegaCompany our 6 Sigma quality process has reduced defect rates to 3 per 1 million. You mean that average error rates in health care are 300,000 out of 1 million for acute care and about 400,000 in 1 million for chronic care??

How Purchasers View the Health Care System

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Agenda



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How did we envision DM in the first place?

“For those that succeed, however, the reward will be a share of the financial value created and a sustainable competitive advantage built of superior outcomes. Disease management will widen the gap between industry leaders and laggards....”

Boston Consulting Group, The Promise of Disease Management, 1995


DM Reality: 1995-to-Date

Reducing cost (by reducing ER visits and hospitalizations) has been the primary driver for adopting DM programs. While DM in the early 1990s was originally

envisioned as a quality improvement and value creation model, the reality is that DM emerged as a cost reduction approach. To date, most DM has been driven by health plans, not providers.

How is DM doing?4 Recent Analyses of DM Trends


The Debate About DM Rages On

Whatever your opinions are about DM, proponents and detractors alike will find support in these 4 recent studies. The studies very widely in their methodologies, and their conclusions are not easy to synthesize.


Prevalence of DM Programs Among Health Plans

Any disease 99%

Diabetes 86

Asthma 78

CHF 75

CAD 45

High-Risk Pregnancy 27

Source: American Journal of Managed Care, April 2002


Summaries of the 4 Recent DM Trend Studies

Medical directors perceived their DM programs to be highly effective in reducing mortality and morbidity and in improving the functional status of patients, and perceived them to be effective in lowering cost. The greatest challenge in implementing DM programs involves information technology. Source: Am J Manag Care 2002; 8:353-361


Although the goals of DM programs were similar, organizations took a variety of approaches to achieving thse ends. There were typically 3 steps in implementing a DM program: analysis of patient data, external analysis, and organizational analysis. Decision makers believed that DM programs had only achieved partical success in reaching the 2 mains goals of impoved quality of care and cost savings. Source: Am J Manag Care 2002; 8:633-641


The backlash against managed care has pressured health plans to reexamine their approaches to controlling utilization and managing their members' health care needs, but how much has really changed? Interviews with health plans and others in twelve nationally representative markets suggest that the changes are significant. New and refined disease management programs are improving the care experience of participants with certain prevalent chronic illnesses, while utilization management changes are reducing the administrative burden for providers. Still, disease management programs will need to greatly expand in scope and scale if plans are to succeed in addressing the complex health care needs of aging populations and those with chronic diseases. Source: Health Affairs; Vol 21. No. 5: 210-217


• Medical management approaches are evolving rapidly• Case management and disease management are

increasingly employed to provide high touch, guideline-based interventions to improve outcomes and reduce costs. Many health and managed care companies also view improved medical management techniques as a strategy to rebuild relationships with providers....

• The delivery and financing of health care is moving towards a model of patient empowerment. Patients are being asked to make more decisions about their benefits and their providers, and to share in the financial risk. Source: URAC, Trends and Practices in Medical Management, 2002


Common Themes

• DM penetration is increasing• Cost (not quality improvement) has been the major

driver• Data on ROI: imperfect• Physician reactions: “skepticism to limited support” --

the Achilles heel of current DM• IT challenges are signifcant• Patient satisfaction is high• Focus on 4-6 diseases/conditions• DM is a qualified success• DM is becoming mainstream


Which DM Do You Mean?

People who use the term “DM” use it it different contexts. The next slide shows several different conceptualizations of DM market size. On the one hand, the small box in red represents the $500 million revenues for Disease Management Service Companies (DMSCs) in 2001. At the other extreme, the green box represents the $700 billion (that’s with a “B”) of health care expenditures spent on people with chronic conditions. The point here is that DMSCs are just beginning to scratch the surface of the larger chronic care challenges faced in the US.

3 Definitions of Chronic Disease Market Size

(Drawn to scale)

$500 MDMSCs

$700 B Chronic Care Patients$20 –$100 BOpportunity*

* Projections by BCG and First Union


DMSCs (Business Model)

• Prevent unnecessary hospitalizations and ER visits

• Save $$ short term for payor

• Quality w/o ROI only “sells” for a few diseases

• 4 to 6 top diseases

• Done “to” the patient

• Care coordinator = 3rd party

• Local/regional focus

• Outsource vs. build

DM-to-date: Cost

focused

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Agenda



III. DM Tomorrow -- • Cost reduction will continue as a major driver

• New value propositions focused on quality improvement and value creation are transforming DM business and clinical models


DMSCs (Business Model)

• Prevent unnecessary hospitalizations and ER visits

• Save $$ short term for payor

• Quality w/o ROI only “sells” for a few diseases

• 4 to 6 top diseases

• Done “to” the patient

• Care coordinator = 3rd party

• Local/regional focus

• Outsource vs. build

DM (Care Delivery Model)• Optimize patient health status & clinical

outcomes

• Save $$ long term for payor or patient

• Health care consumerism/ patient empowerment

• 100+ conditions/diseases

• Done “by” the patient

• Care coordinator = patient or doctor

• Not geographically bound

• Assembly from components viable

DM Tomorrow:

Quality/Valuefocused

DM-to-date: Cost

focused


DM-to-date has revolved primarily around managed care organizations (MCOs) sponsoring DM programs. The primary value proposition has been cost reduction.

What’s next?

1) DM is expanding beyond MCOs2) The DM value proposition is expanding

beyond cost reduction!

Remember the red/green color scheme as you view the next few slides.


4 Different Chronic Disease Customer Segments Emerging

MCOs (health plans)

Employers

Patients/Caregivers

Providers


Varying Value Propositions for Chronic Care

Who cares most about ________?MCOs Employers Patients/

CaregiversProviders

Short-term

Medical Costs

Health/Quality of Life Clinical Quality Peace of Mind/Monitoring Productivity Convenience/Time Savings

New Revenue Source




CaregiversProviders

Short-term

Medical Costs


New Revenue Source


Would some examples help?


Medtronic -- a medical device company transforming itself to becoming a chronic

disease solutions company.

Here’s an example of a forward thinking company. This statement is from Medtronic’s “Vision 2010”. This vision is quite a bit different than simply being a medical device company!

Benchmarking Study Finds Productivity Loss Dwarfs Direct Benefits Costs

Source: Integrated Benefits Institute, June 2000

Employers are becoming one of the biggest advocates of DM.

While employers have been focused on direct health care costs, early evidence suggests that there are far greater potential savings by focusing on productivity improvements as well.


Take a look at the next slide. You’ll see that the traditional 4-6 diseases that we’ve focused on in the past don’t make as much sense from an employer’s perspective.

The productivity improvement potential lies in baby boomer diseases/conditions like allergies, back pain, depression, arthritis, and migraines.

Top Productivity Related Conditions/Diseases

Source: Employers Health Coalition, Tampa, Fla; www.ehcaccess.org


The Institute of Medicine Crossing the Quality Chasm report recommends establishing 15-25 Priority Conditions

• AHRQ should identify 15-25 priority conditions (mostly chronic conditions) Cancer

Diabetes Emphysema High cholesterol HIV/AIDS Hypertension Ischemic heart disease Stroke

• Purchasers, health care organizations, and professional groups should develop strategies and implement action plans to substantially improve quality for priority conditions over the next 5 years

Arthritis Asthma Gall bladder disease Stomach ulcers Back problems Alzheimer's disease and other dementiasDepression and anxiety disorders

DiseasesRx.com – Domain Names For 142 Diseases/Conditions

AcidRefluxRx.com AIDSHIVRx.com AlcoholismRx.com AllergiesRx.com AlopeciaRx.com AnemiaRx.com AnginaRx.com AnorexiaRx.com AnxietyDisorderRx.com ApneaRx.com ArrythmiaRx.com AttentionDeficitDisorderRx.com AttentionDeficitRx.com AutismRx.com BipolarRx.com BladderCancerRx.com BloodPressureRx.com BoneCancerRx.com BrainTumorRx.com BreastCancerRx.com BronchitisRx.com BulimiaRx.com BursitisRx.com CancerDiagnosisRx.com CancerTreatmentRx.com CarpalTunnelRx.com CarpalTunnelSyndromeRx.com CervicalCancerRx.com ChronicFatigueRx.com ChronicFatigueSyndromeRx.com ColitisRx.com ColonCancerRx.com CongestiveHeartFailureRx.com ConstipationRx.com CosmeticSurgeryRx.com CrohnsDiseaseRx.com CysticFibrosisRx.com DementiaRx.com DiagnosisRx.com DiverticulosisRx.com DownsSyndromeRx.com DyspepsiaRx.com EatingDisordersRx.com EczemaRx.com EmphysemaRx.com EndometriosisRx.com EpilepsyRx.com ErectileDysfunctionRx.com EsophagealCancerRx.com FibroidsRx.com GenitalWartRx.com GlaucomaRx.com GoutRx.com GravesDiseaseRx.com GynecologyRx.com HairLossRx.com HairRemovalRx.com HeartFailureRx.com HemorrhoidsRx.com HepatitisRx.com HerniaRx.com HighBloodPressureRx.com HyperThyroidismRx.com HypoThyroidismRx.com HysterectomyRx.com IrritableBowelRx.com KidneyCancerRx.com KidneyDiseaseRx.com KidneyRx.com KidneyStonesRx.com LearningDisabilitiesRx.com LeukemiaRx.com LiposuctionRx.com LiverCancerRx.com LowerBackPainRx.com LungCancerRx.com LupusRx.com LymeDiseaseRx.com LymphomaRx.com MacularDegenerationRx.com ManicDepressionRx.com MassageTherapyRx.com MedicalDiagnosisRx.com MelanomaRx.com MemoryLossRx.com MentalHealthRx.com MononucleosisRx.com MouthCancerRx.com MultipleSclerosisRx.com NarcolepsyRx.com ObsessiveCompulsiveDisorderRx.com OCDRx.com OralCancerRx.com OsteoArthritisRx.com OsteoporosisRx.com OvarianCancerRx.com OvarianCystRx.com PainManagementRx.com PainReliefRx.com PancreaticCancerRx.com PanicAttackRx.com PanicDisorderRx.com PanicRx.com ParkinsonsDiseaseRx.com ParkinsonsRx.com PhobiaRx.com PneumoniaRx.com PregnantRx.com ProstateCancerRx.com PsoriasisRx.com QuitSmokingRx.com RenalCancerRx.com Renal RheumatoidArthritisRx.com RheumatoidRx.com RosaceaRx.com SADRx.com SchizophreniaRx.com SciaticaRx.com SeizureRx.com SickleCellRx.com SkinCancerRx.com SleepApneaRx.com SleepDisorderSRx.com SnoringRx.com StomachCancerRx.com TendonitisRx.com TesticularCancerRx.com ThroatCancerRx.com ThyroidCancerRx.com TMJRx.com TongueCancerRx.com TourettesSyndromeRx.com TuberculosisRx.com TurnersSyndromeRx.com UrinaryInfectionRx.com UrinaryRx.com UrinaryTractInfectionRx.com VaricoseVeinsRx.com VasectomyRx.com YeastInfectionRx.com

Source: http://corporate-partnering.com/names/DiseaseNameRx.htm#names

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Agenda



III. DM Tomorrow -- • Cost reduction will continue as a major driver• New value propositions focused on quality

improvement and value creation are transforming DM business and clinical models

IV. Take Away Points


Take Away Points

• In the past, health care purchasers were primarily driven by cost.

• Health care purchasers are becoming increasingly focused on value and quality.

• As originally conceived, DM was NOT a cost containment tool

• However, the dominant DM business models of the mid-1990s developed cost reduction as the primary DM value proposition

• The evidence about DM cost and quality improvement: positive, but imperfect. The debate rages on.


Take Away Points

• Tomorrow’s DM– Customers expanding beyond MCOs to employers,

patients/caregivers, and providers– Value proposition expanding beyond cost to include

many variations of value and quality improvement

• Exciting times ahead for DM clinical and business models!


APPENDIX


Better Health Technologies, LLC

• Creating value for patients and shareholders

• Strategy, business models, partnerships• Disease/care management and e-health • Consulting/Business Development

• E-Care Management News– Complimentary e-newsletter– 3,000+ subscribers in 27 countries worldwide– Subscribe at www.bhtinfo.com/pastissues.htm

http://www.nap.edu/books/0309072808/html/

BHT Clients• Pre-IPO Companies

• Cardiobeat (medical device/DM)• Life Navigator (remote monitoring connectivity)• Medical Peace (physician driven care management)• Stress Less (stress condition management)• DiabetesManager.com (Internet diabetes DM)• CogniMed (highest cost/risk patient management software)• Caresoft (consumer focused DM)• Benchmark Oncology (oncology DM)• SOS Wireless (cellular phone technology)• Click4Care (Internet DM)• eCare Technologies (Internet DM)

• Established organizations• Medtronic -- Neurological DM (medical devices/chronic disease solutions)

-- Cardiac Rhythm Patient Management• National Rural Electric Cooperative Association (employer coop)• Disease Management Association of America (trade association)• Blue Cross Blue Shield of Massachusetts (MCO)• PCS Health Systems (PBM)• Varian Medical Systems (oncology equipment & systems)• VRI (behavioral health care management services)• Washoe Health System (integrated delivery system)• S2 Systems (medical transaction processing software)• CorpHealth (MBHO)• Physician IPA• Centocor (biopharma)


END

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