9 th Population Health & Disease Management Colloquium

1. Chronic Condition Management & Wellness: Measuring Financial Outcomes 9th Population Health & Disease Management Colloquium David Mirkin, MD Kathryn Fitch, RN, MEd Principals, Milliman New York

2. Presentation Outline • Introduction – Who is Milliman and who are we • The problems with measuring financial outcomes for • Chronic condition management • Wellness • Milliman research • Q&A

3. Milliman Inc • Actuarial and consulting firm • Health discipline • Consult to almost all US based health insurers • Health Cost Guidelines™ (used by most US payers for cost & utilization benchmarking) • Care Guidelines™ (used by most US payers to determine best clinical practice and medical necessity) • Hospital Inpatient Profiler – shows potentially avoidable admissions and LOS

4. Milliman New York – Kate & David • Milliman’s largest consulting office • Kate & David’s work portfolio • All major national US health insurance companies & associations • Many Northeast regional health insurers • NYC & New England hospitals and hospital systems • Advocacy organizations – ACS, CF Foundation, Hospice • A majority of large pharma • UK NHS and the major private medical insurers • Kate has authored over 20 publications • David is the only “healthcare expert” shorter than David Nash

5. The Problem • General skepticism due to past history of producing inaccurate forecasts and results for financial outcomes • Producing credible forecasts and measuring actual financial outcomes is not easy and methods are not straightforward • Marketplace continues to expect cost savings from chronic disease management and wellness

6. DMAA: The Care Continuum AllianceOutcomes Guidelines Report III - 2008 • Guidelines for measuring outcomes for the five most common chronic condition management programs; Diabetes, asthma, COPD, CAD and CHF • Major Recommendations for measuring financial outcomes • Matched control - Pre-post study design with an internal or external comparison group that is “equivalent” to and assessed over the same time period. • Annual qualification using 24 months of claims • Use of non-chronic population for trend calculation • Adjust trend for current year chronic condition by the average difference between historical chronic and non-chronic trends • Financial outcomes should be reported both as per member per month (PMPM) and per participant per month (PPPM)

7. Practical Issues • The most readily available methods are the non-participating and trended historical control models • Non-participating control suffers from significant potential selection bias and poor credibility of causality statements • As a result, trended historical control method is often selected and accurate estimation of trend becomes critical

8. Trend for Chronic Conditions • Milliman has published and unpublished research showing that trends for populations with chronic condition are less than for non-chronic populations and that the relationship between non-chronic and chronic trends may vary significantly from year to year • “Cost trends for chronic condition cohorts with Medicare benefits” – May 2008, Milliman Research Report – Kathryn Fitch, et al.

9. Medicare Chronic & Non-chronic Condition Cost Trends – Milliman Research

10. Difference Between Non-chronic and Chronic Medicare Cost Trends – Milliman Research

11. Illustrative Savings Calculation

12. Plausibility of DM Savings Targets • Contract • 5% savings guarantee • Must recover DM program fees -may need an additional 3% to 5% savings • Total required savings = 8% to 10% • Is this plausible??

13. Plausibility of DM Savings Guarantees • If program impacts 10% of those enrolled (highest risk), the amount of required savings per person increases 10 fold • Using our previous example - $56 PMPM ($714 – $658) reduction is required to meet target or $560 PMPM for the 10% highest risk = $6720 annually • A significant amount of savings is typically due to avoiding ambulatory care sensitive admissions (exacerbations of asthma, COPD, CHF, complications of poorly controlled diabetes, etc.) • ACSAs on average $7,000 per admission • Need to reduce 1 admission for each high risk individual to meet target • Also need to consider additional costs from increased compliance, prevention uptake etc.

14. Ambulatory Care Sensitive Admissions: A Plausible Outcome Metric for DM? Costs are based on Medicare 5% paid claims and trended to 2009 by 3% annual trend rate Management Margin = (ACSA per 1,000 LM – ACSA per 1,000 WM)/ACSA per 1,000 LM, which suggests the percentage of potential savings for LM Categories of diseases follow the definition by AHRQ of Prevention Quality Indicators, version 3.2, Data Sources: Milliman analysis of Medicare 5% sample data, 2006; Milliman Health Cost Guidelines and DRG models; and AHRQ Prevention Quality Indicators, version 3.2. March 3 2009

15. ACSA Illustration with Prevalence Adjustment for Global Measurement for a Commercial Population - Alternatively measure for DM population only Taken from presentation by Iver Juster, MD - Active Health Management

16. Measuring Financial Outcomes for Wellness • DMAA recommends: • Process measures: • Contact frequency, duration and type, participation rates, type and number of contacts • Behavior change for modifiable risk factors/unhealthy lifestyle choices • Productivity/quality of life (absenteeism) • Utilization and medical costs • Medical claims, short and long term disability, absentee days, workers’ comp

17. How are Financial Outcomes for Wellness Programs Measured • Monetize Behavior change: • Weight loss • Smoking cessation • Hypertension control • Hyperlipidemia control • Flu shots • Cancer screening • Cost of doing business: • Employee morale • Attracting and retaining employees

18. Challenges for Wellness Financial Outcome Measurement • Wellness focuses on low-cost people • There are a lot of them (38% of working age adults have under $1,000/year in claims) • Most low-cost people will stay low cost for years whether or not their behaviors change • Program / employee turnover means “treated” people lost to follow-up • Usually impossible to create treatment arm / control arm – participants in wellness programs may self select • Many other changes in healthcare costs (medical practice, disease management, and public education) can easily overwhelm impact of wellness

19. How Much Can Wellness Programs Cost? Source: Milliman Proprietary, Health Cost Guidelines, 2006, national average. Costs will vary.

20. Which Wellness Programs make Sense:Evaluate Value ((Prevalence x Cost) - Offsets) & Evidence Base

21. IF Wellness Works, What Will Happen to Costs Long Term? • Medical Cost Trend Analysis? Does it make sense to expect a reduction? Some cost up, some down.

23. Status Report • Current methods for measuring financial outcomes for DM and Wellness program are less than ideal and often produce inaccurate results • Marketplace is unlikely to stop expecting to obtain net financial savings from DM and Wellness programs • We have no magic solution other than; • Purchasers – be skeptical of reported savings, these are unlikely to ever show up as real medical claims cost reductions for healthplans or plan sponsors • Vendors – try and avoid overly optimistic savings calculation methods and caveat reported financial “savings”.

24. Cutting Edge Research • Is there a better way to monitor outcomes for people with chronic conditions? • A subset of the advisory board for the Value Based Insurance Design Institute in Ann Arbor decided to tackle this question during 2007 and came up with this conclusion; • Current methods for measuring outcomes for populations (including those with chronic conditions) do not produce information helpful to physicians because the process is designed from an actuarial and financial perspective, not a clinical one. People requiring very different clinical management strategies are grouped together in the same “bucket” so it is difficult to decide what to do clinically if costs or utilization are higher than expected.

25. Value Based Management Groups • In late 2007 the group, composed of Michael Chernew (Harvard), Mark Fendrick (Univ. of Mich), Lonnie Reisman (Aetna), Patricia Sabler (Center for Practical Health Reform) and David Mirkin (Milliman) – completed the initial stage of setting design parameters for a new grouping system called “Value Based Management Groups” or VBMGs. The core principle is people should fall into unique groups based on the condition that has the greatest impact on clinical decisions. • During 2008 Milliman working with Fendrick and Chernew developed the grouper and used it to analyze MedStat data for 1999, 2002, 2004 and 2006

26. Value Based Management Groups • 33 discrete categories including 24 for specific chronic conditions, 1 for “all other” (chronic conditions) and 8 for “healthy” individuals. • Grouping hierarchy based on the impact of a condition on clinical decision making. For example, a patient with both a major psychosis and CAD would be grouped as Major Psychosis since this conditions would drive clinical decision making. The CAD can not be managed effectively without out first managing the Major Psychosis. • The 24 specific chronic conditions account for approximately 76% of total cost for a commercial group insurance population

27. Major psychosis Severe dementia Active cancer Renal failure Liver disease HIV Connective tissue disease HF Chronic blood disorders CAD & diabetes CAD without diabetes Diabetes without CAD HTN alone COPD Asthma Neurologic disorders Developmental disorder Musculoskeletal Mental health (other) GI TB Thyroid disease Dermatologic disorders Unhealthy newborns Other chronic conditions VBMG Chronic Condition Category Hierarchy

28. Trend Drivers Per VBMG System Categories with largest share or cost growth 1999 to 2006 – Preliminary Figures for a Commercially Insured Population All numbers are subject to revision as results are still under development

29. Recommended Reading • Outcomes Guidelines Report – dmaa/The Care Continuum Alliance • http://www.milliman.com/expertise/healthcare/publications/rr/cost-trends-for-chronic-condition-RR5-1-08.php