Richard E. Ward, MD, MBA Vice President, Clinical Programs and Medical Informatics

1. Decision Analytic Modeling for Wellness and Care ManagementDisease Management ColloquiumMay 20, 2008 Richard E. Ward, MD, MBA Vice President, Clinical Programs and Medical Informatics Blue Cross Blue Shield of Michigan

2. Care Relationship Support Effective Providers Michigan • Basics • -Medical Policy • Pre-certification • Utilization Review Wellness & Care Management BCBSM Members BCBSM Clinical Programs

3. Continuum of member needs Wellness Concerns & Symptoms Preference Sensitive Conditions ChronicConditions Acute Conditions Complex Catastrophic Conditions BlueHealthConnection components Complex Case Management (Internal) Diabetes DM Health Risk Appraisal 24-hour Nurse Line Hysterectomy for Benign Uterine Conditions Case Management (Internal) Living Health Magazine Asthma DM Quit-the-Nic Personal Health Record + Dashboard Hip Replacement COPD DM Medicare Case Management (CareGuide) Complex Case Management (CareGuide) Walking Works CHD DM Prevention Reminders Audio Library Knee Replacement Fitness Assessment Medicare Complex Case Management (CareGuide) CAD DM Healthwise Self-Help Book Lumbar Back Surgery Affinity Programs Medicare DM (Health Dialog) Wellness Incentive Tracking Medical Encyclopedia Acute/Chronic Back Pain Online Health Managers (Asthma, Arthritis, Pregnancy) Premium Incentive Tracking Screening for Depression Prostatectomy for Benign Prostate Enlargement Health Fairs (Not a complete list) Chronic Disease Gaps-in-Care Alert Drug Guide Biometric Measurement Depression Retrospective Claim Review Medication Treatment Mgmt Drug Interaction Checker Worksite Educ Classes Subimo Provider Profiles Consultation about worksite initiatives

4. Outline • Consultative Tailoring • Optimization using Decision Analytic Modeling • Steady State Models • Dynamic “Ramp Up” Models • Stochastic Models: Monte Carlo Simulation • Medical Home-based Coaching • IT Architecture to support mass customization and multi-party process integration

5. Rare Conditions Mgmt End-of-Life Care Coord COPD Disease Mgmt IHD Disease Mgmt Diabetes Disease Mgmt CHF Disease Mgmt Health Risk Appraisal Smoking Cessation Asthma Disease Mgmt Depression Disease Mgmt Smoking Cessation Hip Surgery Decision Making Incentive Tracking BUC Decision Making Long Term Care Coord Medicare Case Mgmt Worksite Wellness Consult Card Revasc Decision Making Knee Surg Decision Making Back Surg Decision Making Consultative Tailoring Develop a collection of mix and match wellness & care management components CHF Disease Mgmt Configuration Parameters CHF Disease Mgmt Performance Characteristics for this configuration Yr 2 -------- PMPM Cost: $0.07 Identify% 0.4% Target % 87% Engage % 36% Admits Avoided 206 PMPM Savings: $0.58 PMPM Net Savings: $0.51 ROI: 7.96 Intervention Intensity Engagement Incentive Level Target Penetration High 40 pts 90% 80% 30 pts Med 20 pts 70% Low (Parameters vary by component) Etc.

6. Basic Robust Basic Robust Solution Solution Solution Solution High Z% of Intensity Population Core Core Core Core Components Components Components Components Low X% of Intensity Population ER HRA HRA Targeted Focus Targeted Focus Health Onsite Management Coaching Programs Solution Solution Chassis Chassis Z% Z% Maternity Cancer X% X% Core Core Back ESRD Components Components Moderate Y% of Pain Y% Intensity X% Population Chassis Consultative Tailoring Simplify sales and consulting process by creating “solution templates” for each typical set of customer needs Productivity Max Solution Template Low Program Cost Solution Template Max Net Savings Solution Template

7. Consultative Tailoring Propose Listen Tailor Consultant and sales team interact with customer to tailor solution to customer Consultant identifies solution template closest to customer’s need and uses it as basis for making a proposal to customer Dedicated wellness & care mgmt consulting team interacts with customer and sales team to understand customer needs Deliver Revise Measure Enhanced medical informatics capabilities enable measurement of activity and outcomes to be reported to customer Consultant and sales periodically interact with customer to provide reports & to recommend course corrections Flexible information technology platform uses business process mgmt / workflow technology to facilitate efficient delivery of the solution

8. Plausibility of Value as Justification Effect Size -> Power Calcs -> Sample Size Evidence-based Parameter Assumptions Wellness & Care Mgmt Analytics DECISIONANALYSIS Projecting Outcomes For Alternative Intervention Designs EVALUATIONRESEARCH Measuring Outcomes Compared to Control Group Which Comes First?

9. Decision Analytic Models Results Calculations Assumptions Epidemiology ---- ---- Effectiveness ---- ---- Economic ---- ---- Preferences ----- ----- Optimistic Best Pessimistic -------------- ------ ----------------

10. Threshold Y N Role of Predictive Models Which Threshold Value Is Optimal? -- Depends on Intervention -- Depends on Objectives Diabetes Highest Risk = Best Candidate Lowest Risk = Worst Candidate

11. Finding Target Penetration that Yields Max Net Savings Gross Savings Dollars Cost Net Savings Fixed Cost 41% Target Penetration Rate (as % of Diabetes population)

12. Highest ROI Does Not Yield Maximum Net Savings Increasing the target penetration rate from 18% to 41% leads to a lower ROI, but the net savings increases by 24%. Dollars ROI ROI* Gross Savings Cost Net Savings Fixed Cost 18% 41% Target Penetration Rate (as % of Diabetes population)

13. Max Net Savings Signatures 41% of Diabetes 87% of Congestive Heart Failure 47% of Ischemic Heart Disease 34% of COPD 20% of Asthma

14. Max Net Savings Signatures 43% of Knee Replacement Surgery 7% of Back Surgery 5% of Surgery for Benign Uterine Conditions 9% of Cardiac Revasc Surgery 6% of Hip Replacement Surgery 0% of Surg for Benign Prostatic Hypertrophy

15. Dynamic Models Cohort Sub-model: Calendar Sub-model:

16. Dynamic Models Disease Management $40.7M gross savings $35.5M gross savings RAMP-UP PHASE $26.7M net savings $21.8M net savings STEADY STATE SATURATION/ DECLINE? $9.9M gross savings $13.7M cost $14.0M cost $4.6M cost $5.3M net savings 2009 Projected 2007 Calculated 2008 Projected

17. Dynamic Models Case Management Net Savings Case Management 2007 2008 2009 Higher Intensity ($5.4 million program cost per year) $16.9M projected $8.7M projected $8.7M projected $7.1M projected Lower Intensity ($2.9 million program cost per year) $4.1M calculated

18. Analyzing Uncertainty • When buying a bond, we intuitively understand that we need to know: • Price (cost, investment) • Yield (benefit, return) • Bond rating (uncertainty). • Cost-Effectiveness & ROI consider only price and yield. • Evidence-Based Medicine (EBM) considers only uncertainty. • We need to consider all three.

19. Analyzing Uncertainty • One-way Sensitivity Analysis • But there is uncertainty about many assumptions… • Best & Worst Case Scenario Analysis • But the joint probability of “worst case” for every assumption is exceedingly rare & irrelevant… • Multi-way Sensitivity Analysis: Monte Carlo Simulation • Stochastic assumptions (shapes, not values)

20. Monte Carlo Simulation Assumptions Calculations 90% Interval of Uncertainty

21. Medical Home-based Coaching • Traditional DM Industry Concept of Integration with Provider • Encourage providers to refer patients to health plan’s coaches • Send “gaps in care” reminders • BCBSM’s deeper level of provider integration • 4 year goal: 25% of Blue Health Connection coaching done by staff of primary care practices • Coordination and data exchange necessary to support customer reporting of activity and outcomes

22. American Academy of Family Physicians American Academy of Pediatrics American College of Physicians American Osteopathic Association Care planning based on partnership of patient, patient’s family and personal physician Enhanced access Whole person orientation Focus of safety, quality, evidence-based medicine Integration and coordination of care, facilitated by information technology Physician practice accepts responsibility, held accountable based on performance measures Payment structure redesign, including gain-sharing and performance-based components. Patient Centered Medical Home

23. Physician Group Incentive Program Initiatives to develop capabilities for collaborative improvement • Establishing staff dedicated to managing or coaching process improvement teams • Establishing analytics and reporting staff • *Performance reporting Condition-specific initiatives • Diabetes management through Lean Thinking-Clinic Re-engineering CQI • CHF management through Lean Thinking-Clinic Re-engineering CQI Service-specific initiatives • Increase the use of generic drugs • Radiology procedures utilization • Improve Oncology Practice Performance • Anticoagulation management Core clinical process initiatives • *Evidence based care tracking/patient registry • *Patient-Provider agreement. • *Extended access • *Individual care management • *Test tracking and follow-up Clinical information technology initiatives: • *Electronic prescribing 1 2 3 4 • *Components of the Patient Centered Medical Home (PC-MH) 5

24. PGIP Phys Org B PC-MH Nominee PGIP Phys Org A PC-MH Nominee PC-MH Nominee PC-MH Nominee PGIP Phys Org C “Control Group” PC-MH Nominee PC-MH Nominee Patient Centered Medical Home PCP PCP PCP PCP PCP PCP PCP PCP PCP PCP PCP PCP PCP PCP PCP PCP PCP PCP PCP PCP PCP PCP PCP PCP PCP PCP PCP PCP PCP PCP PCP PCP PCP PCP PCP PCP PCP PCP PCP PCP

25. Patient Centered Medical Home PGIP Phys Org B PCP PC-MH PGIP Phys Org A PCP PCP PCP PCP PCP PCP PCP PCP PC-MH Nominee PCP PCP PC-MH PCP PCP PCP PCP PCP PCP PCP PCP PCP PCP PGIP Phys Org C PCP PC-MH “Control Group” PCP PC-MH Nominee PCP PCP PCP PCP PC-MH Nominee PCP PCP PCP PCP PCP PCP PCP PCP PCP PCP PCP PCP PCP

26. Wellness & Care Management Technology Architecture Providers Vendor Partners BCBSM Staff Members Customers Wellness & Care Mgmt “Modules” (migrate to Portals) • Business Process Management (BPM) platform • process modeling & simulation • workflow automation • BCBSM • Integration • Framework • internal • externalI • Questionnaire Component • web • paper Clinical Programs Operational Data Store BCBSM Business Intelligence Platform Other BCBSM Systems (Membership, Claims, Provider Info, Customer Service, etc.)