© Disease Management Purchasing Consortium & Advisory Council (1998) DM in the Private Sector Spring 2003 Job Info Here: Job #, Template used, LIBs, colors,

© Disease Management Purchasing Consortium & Advisory Council (1998)

DM in the Private Sector

Spring 2003

DM in the Private Sector

Spring 2003

© DMPC 2003. Www.DisMgmt.com, [email protected])

Agenda

History of Disease Management in the Private SectorSize and Growth Rates Build vs. Buy trendsPricing and FeesEmployers vs. Health PlansWhat's Hot and What's Not Issues facing the industry

ROIROIROI


History of Disease Management in private sector: Milestones


Agenda


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© DMPC 2003. Www.DisMgmt.com, [email protected]) 3

Industry Trends: Market Sizes and Compositions (1997)

Maternal/Neo39%

Maternal/Neo39%

Asthma19%

Diabetes3%

CHF/Cardio19%

Rare Diseases2%

ESRD1%

Cancer17%

Cancer17%

Total Size: $77MM


Industry Trends: Market Sizes and Compositions (2002)Total Size: 530MM in fees

Maternal/Neo

Resp.

Diab/CHf/CAD

Postacute

Cancer

ESRDRare DiseasePop Mgmt

Other

Diabetes/CAD/CHF

RareDiseases


Industry Trends: share of industry growth by consultant type

2002-2003Total New Business (to be) Awarded: est. $120-million

DMPC

SelfBenefits Con.

"Big Five"

Self

DMPC


Industry Trends: Consulting industry revenues

Total consulting revenues in DM 2002-2003 est. $15MM

DMPC

Benefits Con.

"Big Five"


Growth rate of DM industry

$0$100$200$300$400$500$600$700

$-millions Revenues


You can’t tell from that slide but…

Much of 2002 growth was add-ons and implementations of contracts signed in 2001 or early 2002


2002 was down in # of bids undertaken

0

5

10

15

20

25

30

Number of Bids

1998 1999 2000 2001 2002

19981999200020012002

Second half

First Half


2002 was down in # bids but up in est. bid size

$0.0$0.5$1.0$1.5$2.0$2.5$3.0$3.5$4.0

Bid Size ($-millions/

year

1998 1999 2000 2001 2002E

19981999200020012002E


Other 2002 observations

Growth was from expanding in existing business, not new business

Many bids undertakenPurchase cycle hasn’t gotten shorter so……Few contracts awardedEven fewer scale contracts consummated and

announced

Many awards and announcements being made in 2003


How does the rest of 2003 look?

3 new bids (small)3 more large bids expected soon (private sector)2 major Medicaid bids expected soon

Action definitely shifting to public sector


Agenda


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Source of Disease Management

0102030405060708090

100

1994

1995

1996

1997

1998

1999

2000

2001

2002

% of all programs

"Assemble"DM CompanyBuildPharma/PBM


Why Building is Declining

Very few health plans get it rightMost need to account for it in admin (guaranteed

“bought” plans accounted for in medical)Takes a long timeEmployers looking for “Intel Inside” in DM programsTwo issues in detail:

Most built programs measure wrongNetwork health plans are a different business from DM


Issue #1—How built Programs Measure WrongDollars spent per $20 in claims— typical built vs. bought

$0.00 $0.10 $0.20 $0.30 $0.40

Enrollment

Basel/Strat

EducOB

Unsched IB

Materials/Fulfillment

MD Interf

Superv/training

Facilities

Analysis/Reporting

Vendors

Health Plans


Dollars spent per $20 in claims— typical built vs. bought

$0.00 $0.10 $0.20 $0.30 $0.40

Enrollment

Basel/Strat

EducOB

Unsched IB


MD Interf

Superv/training

Facilities

Analysis/Reporting

Vendors

Health Plans

So you measureOnly on the 15-25%Who are easiest toEnroll!


Dollars spent per $20 in claims— typical built vs. bought

$0.00 $0.10 $0.20 $0.30 $0.40

Enrollment

Basel/Strat

EducOB

Unsched IB


MD Interf

Superv/training

Facilities

Analysis/Reporting

Vendors

Health Plans

So you measureOnly on the 15-25%Who are easiest toEnroll!

And you don’t spend nearly what you needTo spend to measure right because there Is no guarantee “on the line”


Issue #2: How Health Plans are a different business

“It’s our core competency”


Myths of “Building”

“It’s our core competency” No--it’s a highly specialized “custom shop” vs. an HMO throughput shop

Buying is itself a core competency




“Why should we pay someone to do what we can do ourselves?”

No--it’s a highly specialized “custom shop” vs. an HMO throughput shop





“Why should we pay someone to do what we can do ourselves?”

No--it’s a highly specialized “custom shop” vs. an HMO throughput shop


You can also deliver your own packages absolutely, positively overnight


Agenda


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Fee Migration (index 1997 to 100)

050

100150

1997 1998 1999 2000 2001 2002 2003

1997 = 100

DiabetesTPMAsthmaCHF


Why have prices come down?

Vendors more efficientFewer home visits (except in COPD)Larger contractsBuyer purchasing power increasingly concentrated


Guaranteed Savings falling due to better contracting

00.5

11.5

1997 1998 1999 2000 2001 2002 2003

% guaranteed net savings

AsthmaDiabetesCHFCADESRD


Guaranteed Savings still popular

0

2

4

6

8

10

12

1996

All

Co

nso

rtiu

m C

on

trac

ts

19991997 1998 2000

Not Guaranteed

Guaranteed No LOC/Reinsurance

Guaranteed with LOC or Reinsurance

2001 2002


Why are guarantees falling?

“Usual care” improving (example: ESRD)Competition is more fee-based once guarantees are

high enoughGuarantees aren’t falling much—counting is getting

better (example: asthma)

source; gregg meyer © DMPC 2003. Www.DisMgmt.com, [email protected])

Asthma studies suffering from regression to the mean (plus ACAAI study just published)

Program Study Type

1. Massachusetts Respiratory Hospital/Air Watch A 26 Historical Control

2. Valley Home Care P 30 Historical Control

3. Jacksonville University Medical Center A 25 Historical Control

4. University of Tennessee, Memphis A 39 Non-randomized Control

5. Access Health — BC/B, Massachusetts A 67 Historical Control

6. Lutheran Medical Center Brooklyn, New York P 50 —

7. United Health Care of Ohio A/P — Historical Control

8. Lovelace HMO, Albuquerque, N.M. P 86 Historical

Control

9. Kaiser Permanente, Santa Clare — — —

10. Harvard Community Health Plan (1995) P 53 Historical Control

11. Managed Care Services P 11 Historical Control

12. University of Pennsylvania, Philadelphia A — —

13. National Jewish Medical Center A/P 317 Historical Control

14. University of Laval, Quebec A 126 Non-randomized Control

15. Henry Ford Hospital A 241 Randomized Control

16. Harvard Community, Health Plan (1999) P 57 Randomized Control

17. Hartford Hospital, Connecticut A 23 Historical Control

18. Olsten Kimberly Quality Care A/P 257 —

19. Blue Cross/Blue Shield of South Carolina — 3,000 —

20. Harvard Pilgrim Health Care, Boston — — —

Emergency Room Visits Hospitalization

AnnualizedSavingsper Patient

R e d u c t i o n s i n : E c o n o m i c s :

$5,981 —

4,026 407

1,676 278

— —

— —

3,400 —

— —

— 45

— —

3,296 418

— —

1,500 —

2,260 606

— —

628 85

2,217 190

4,137 —

11,172 —

— —

$1.07 million —total savings

Patient #in Study

Adult/Ped

AnnualizedCostper Patient


To guarantee or not to guarantee

ProAssures return on investmentEasier to compare vendorsTests for confidence in vendor outcomesEasier to sell internallyEasier to get budget for scale programLess career risk if program doesn’t save money (may

even boost career)No need to micro-manage vendor



ConsComplexity of baseline and reconciliation (easier to put the

complexity in the RFP and contract)Higher price (not much higher)Most people will contract incorrectly anyway (example),

giving the worst of both worlds

Synthesis



SynthesisALWAYS ask for guarantees even if you aren’t going to

use them– A lot of the “pro’s” (comparability, selling internally,

confidence in outcomes) are in the purchase processAfter a few years of positive reconciliations, switch to FFS

(e.g., Humana--COR)


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Employers and Disease Management

What mattersMarket sizePlayersThrough health plan vs. independentlyMarkup


Mostly HMOs equal

Mostly Employers

Guarantees

"Soft" Savings

Drugs

Wellness

Big RFPs

Opt-in programs

Low back pain

Biostatistical soundness

combine with UM

What Matters to Employers


Market Size of employer-direct market in 2002

Health PlansMedicaidCMS DemosEmployer-direct


Why so little employer-direct?

A lot of employers looking…but median is c. 10,000 employees

Programs are more likely to be “lite” and opt-in (chart is revenue-based)

Some very large employers still on sidelinesSome don’t think it works (GE)Biggest waiting for its UM vendor to come up with

somethingSome don’t interfere with employees

Many go through health plans Note: A lot of heat (“big” RFPs) but not much light


Arguments to go independently vs. through health plan

IndependentlyMakes more sense with

multiple health plansDon’t like your health plan’s

own offeringContinuity if you change

health plans

Through health planEasier (if there is only one)More will enroll—won’t be

obvious it’s coming from you– Can do opt-out

Uses the UM and other tools to enroll members

Should be a better financial deal (but often isn’t)


Agenda


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2003-4: What’s hot and what’s not

Hot COPD Post-acute care (Medicare

plans) “Significant Medical conditions” Medicaid disabled Total population management Vendors with correct metrics Cancer PPOs

Not Single-disease RFPs in

diabetes, CHF, asthma Medicaid HMOs Large straight HMO bids (not

many left to bid) “Builds” Pharmaceutical company

initiatives (except PHS) “Soft” savings


Agenda


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Issues facing the Industry: ROI

Still a great deal of skepticism about ROI “Peer review” in published accounts can be worthless

“Peer reviewers” usually physicians, not actuaries – Trust your in-house actuary!

Proliferation of “experts” making things more confusingHopkins paper an excellent starting point (though other

methodologies are valid) “Built” programs measure ROI too highA good rule of thumb from yesterday’s workshop: If you

show more than 2:1 ROI in first year, you measured wrong

© Disease Management Purchasing Consortium & Advisory Council (1998) DM in the Private Sector Spring 2003 Job Info Here: Job #, Template used, LIBs, colors,

Documents

industry slide

self dmpc slide

industry roi slide

half slide

industry trends

public sector slide

industry growth

bid size slide