Disease Management Programs A Winning Strategy in Today’s Competitive Markets

1. Disease Management Programs A Winning Strategy in Today’s Competitive Markets Joe MarloweSenior Vice PresidentAon ConsultingRadnor, PAjoe_marlowe@aon.com

2. Agenda for Today’s Session • Setting the Stage • Basic Principles • Health and Productivity’s Importance • Health Behaviors and Chronic Diseases • Health Management • Absence and Presenteeism • Success Indicators

3. “Full Service” Disease Management Components • Population identification process • Evidence-based practice guidelines • Collaborative practice models including physician • Patient self-management education (primary prevention, behavior modification, compliance/surveillance) • Process and outcomes measurement, evaluation and management • Routine reporting feedback loop Source: Disease Management Association of America

4. Why Disease Management? • Coordinate patient care; health system navigation • Reduce expenditure for targeted persons • Increase worker productivity • Improve clinical outcomes • Improve functional status • Enhance patient satisfaction Overall objective with disease management program is to bring more value into the equation: Health Care Value = Outcomes + Patient Satisfaction Cost

5. Why Disease Management? • 10% individuals spend 70% dollars • 1% individuals account for 30% • 33% expenses for preventable conditions • 50% to 60% hospital admissions due to chronic conditions

6. Disease Management Debate “Disease management is the only remaining strategy to deal with chronic diseases... Perhaps the greatest contribution of Disease Management lies in the fact that it has the potential to drive change in the way we approach healthcare. As a new concept in healthcare delivery, Disease Management is pushing the envelope in how we manage chronic disease.” —Warren Todd Executive Director, Past President, and founding Board Member of the Disease Management Association of America (DMAA) “There is insufficient evidence to conclude that Disease Management programs can generally reduce overall health spending…The proposition that decreased use of acute care services might offset the costs of the screening, monitoring and educational services in Disease Management programs is clearly appealing, but, unfortunately, much of the literature on those programs does not directly address health care costs.” —Douglas Holtz-Eakin, Director of the Congressional Budget Office

7. Disease Management Market Overview—Summary Industry Trend Implications 1 2 3 4 5 6

8. 7 Potential Value of Disease Management 1 3 4 5 2 Market View of Importance Utilization Service/Operational Financial Clinical Other

9. Health Management Continuum Case/Disease Management Health Promotion Care Management Staying Healthy (70% population) Getting Better (14% population) Living w/Illness (16% population) 15% costs 25% costs 60% costs Complex Cases • Transplants • Cancer • Trauma cases Chronic Care • Diabetes, asthma • CAD, CHF, COPD • Depression Risk Factors • Alcohol/tobacco usage • Physical inactivity • Poor nutrition • Health history • Unmanaged stress • Inadequate self-care Acute Care • Broken leg • Kidney stones • Pneumonia

10. Disease Management Purchasing • Most government programs are still large scale RFPs • The contracts are highly risk-based; contingent on performance • Government purchases no-frills contracts • Health promotion/wellness and utilization management often absent • Business frequently split across multiple vendors • Programs are no longer single disease focused • Increasing awareness of co-morbidity management • Government is exploring new intervention methods • Government is working to customize programs to the needs of specific geographies and individuals Source: Chapter House, 2005

11. Managing Chronic Disease • Identify problem diseases to target for management • Plan your strategy • Identify and evaluate vendors • Develop innovative performance guarantees • Negotiate contracts • Communicate • Implement the program • Conduct ongoing performance measurement • Clinical • Financial • Satisfaction

12. Identifying Problem Disease States w/Dx Analysis • Prevalence of chronic disease states in population • Prevalence of multiple co-morbid chronic disease • Unique members with a chronic disease • Cost implications for those with chronic disease • Drug costs for the chronic diseases identified • Clinical conditions driving large dollar claims • Identify “gaps” in care delivery / availability of programs

13. Case Selection • Affects large number of population • Expensive to treat • Potential for serious complications • Avoidable complications • Measurable impact • Reasonable return on investment

14. Identify and Evaluate Vendors – Key Parameters • Program design • Scope of services/diseases managed • Clinical resources • Risk sharing/performance guarantees • IT/Technology • Remote patient monitoring to gather clinical data coupled with “smart system” intervention (e.g., scales, blood pressure, glucose monitors) • Enrollment processes • Communication • Reporting

15. Essential Components for Successful Program • Data driven identification and risk-stratification • Predictive technology gives no insight into supportive environment for targeted individuals • Proven enrollment approach • Readiness to change: engage person directly • Proactive patient outreach • Participation incentives • Use of evidence-based treatment guidelines • Customized care plans to meet each patient’s unique needs • Management of co-morbid conditions • Clinical, financial, and satisfaction outcome reporting • Performance guarantees

16. Important Evaluation Steps • Develop comprehensive RFP • Incorporate your specific requirements • Secure the necessary information from the vendors to address your particular needs and expectations • Prepare summary evaluations of selected vendors • Develop selection criteria • Complete site visits with finalists • Provide data for analysis by finalists • Select a partner(s)

17. Purchaser Cautions • Most vendors sound the same • Have clear idea of program objectives • Get beneath vendor’s skin • Negotiate performance guarantees

18. Performance Guarantees and Contract Negotiations • Guide the development and selection of meaningful performance guarantees (clinical, financial, satisfaction) • Craft risk and reward program that provides incentives to advance your financial interest • Secure the best possible terms and contract conditions • Financial risk sharing less popular due to: • Higher fee structure to cover reinsurance premiums • Proven results make risk sharing less important

19. Member Communication – Critical Ingredient • Identify audiences and challenges for reaching them • Determine appropriate strategy and media • Match messages to audience • Not “Big Brother” • Determine appropriate incentives for targeted groups • Financial • Non-financial • Coordinate flow of information from the vendor and your organization • Monitor and refine communication plan, as needed • Reinforce message periodically

20. Some Considerations • Population-based approach to health management • Wellness services to assist those at risk of chronic condition • Coordination with case management resources • Single person, single disease state management losing appeal • Partner with local medical providers and community resources • Behavioral health assessment and treatment • Depression or chemical dependency as primary or secondary diagnosis • Technology becoming increasingly important • Online program educational materials (symptom advisor) • Provider reports • Patient profiles

21. Realities of the High Risk Population • Sicker than most DM vendors anticipate • More intensive management needed (higher intervention costs) • Need to tap into social services • More costly during early patient attraction phase • Psychosocial (not pure medical) challenges • Demands more social workers to be effective • More costly engagement strategies (lack of phone numbers) • With effective overtures, expect solid voluntary program enrollment • May require that >70% of targeted group enroll to give ROI • High satisfaction demonstrates pent up demand for DM services • Premium on speed of intervention • Same day early alert for hospitalizations and discharges • Role for face-to-face assessments • Substitute for less expensive, traditional call center approach • Role for local pharmacists

22. What • We • Know • About • Health • Behaviors Importance of Healthy Behaviors

24. Mortality Risk Factors In The U.S. Source: Centers for Disease Control and Prevention

25. Difference in Medical Costs - High vs. Low Risk Source: Goetzel,JOEM, Vol. 40, No. 10 Oct. 1998

26. 5+ Risks 3-4 Risks 0-2 Risks Economic Case for Health Management Programs Source: StayWell data analyzed by U of Michigan (N = 43,687) – HERO Study

27. Obesity – A National Challenge • Considered of epidemic proportion • 31% of adults and 16% of adolescents • Metabolic syndrome contributes to risk of serious disease • Increased blood pressure • Elevated insulin levels • Excess body fat around the waist • Abnormal cholesterol levels • Physical inactivity and unhealthy eating primary contributors Source: National Center for Policy Analysis, May 2003; JAMA, 1999

28. Annual MedicalCosts $8,075 $7,758 $5,844 $7,118 $5,176 $5,753 $4,214 $4,151 $4,611 $6,667 $5,079 $4,014 $3,579 $4,500 $3,921 $4,760 $3,239 $3,995 – > 35 $3,201 – 30-34.9 $2,667 – 25-29.9 – < 25 Risk Level Musich, Lu, McDonald, Champagne, Edington, AJHP.18(3): 125 132, 2004. University of Michigan Health Management Research Center Medical Costs and Risks by Body Mass Index

29. 5% - 10% ~5% ~5% Weight Loss Weight Loss Weight Loss Weight Loss 1 1 HbA1c HbA1c 2 2 Blood Pressure Blood Pressure 3 3 Total Cholesterol Total Cholesterol 3 3 HDL Cholesterol HDL Cholesterol 4 Triglycerides Triglycerides Impact of Weight Loss on Risk Factors 1. Wing RR et al. Arch Intern Med. 1987;147:1749-1753. 2. Mertens IL, Van Gaal LF. Obes Res. 2000;8:270-278. 3. Blackburn G. Obes Res. 1995;3 (Suppl 2):211S-216S. 4. Ditschunheit HH et al. Eur J Clin Nutr. 2002;56:264-270.

30. Chronic Disease Linked to Obesity • Cardiovascular diseases • Diabetes • Hyperlipidemia • Gout • Osteoarthritis • Gallstones • Cancers Obesity accounts for 5-8% of direct medical costs and leads to premature disability and mortality Source: Cas Lek Cesk. 1997 Jun 12;136(12):367-72.

31. Depression: “The Silent Cost Driver” • Depression can be triggered by a chronic disease • Depression can be a marker for other conditions • Research links depression to the later development of: • Asthma • Diabetes • Heart disease • Hypertension • Obesity • Stroke Source: Centers for Disease Control and Prevention

32. Market Trends • Many vendors have entered this market, but only a few can offer the entire range of services: • Lots of Health Plans, TPAs, HMOs, DM vendors, HRA and other specialty vendors operate in this space • Fair amount of purchasing, partnering, and outsourcing • Some vendors have superficial offerings that lack design and execution capability • Participation rates • Intensity of interventions • Results • Resist the temptation to generalize across vendors • Learn to differentiate among vendors • ROI less important than program design and execution: • Vendors control ROI methodologies and calculations • False expectations of high ROI savings

33. Vendor Differentiators • Risk identification process (HRA tool, assigning risk factors) • Healthcare coaching model (outreach, interventions, consistency) • Track record on connecting and engaging targeted individuals • Technology (portal, personalized programs, flexibility) • Web content • Integration with employer plans and vendors • Participation incentives (ability to administer) • Metrics • Communications • Future initiatives/enhancements

34. Disease Management Outcomes Measurement (ROI) • New focus on utilization rather than pre-post cost analysis • Unproductive debate about statistical biases for cost-based studies • Chronic disease-related hospital admissions and ER visits • ALOS and readmission rates • Literature does not point to reductions in outpatient visits, pharmacy, etc. • Question: “If there a sufficient number of avoidable admissions to justify DM program fees?” • Standard costs per avoidable hospital stay times potential reduction compared to DM program fees • Standard financial cost methods may overstate savings • What are the savings assumptions used by your DM vendor? • Are they specific to your unique population? • High risk group ROIs may be less than commercial population • Confounding variable: member turnover and deaths, multiple conditions (diagnoses) • Population risk adjustment of baseline and intervention