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Disease Management

October 28, 2002
Related Topics: Benefit Design and Communication, Health and Wellness, Featured Article, Compensation
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Although he works for a major insurer, Roger Kleppe of Blue Cross and BlueShield of Minnesota, in St. Paul, has the same concerns about rising health-carecosts as any other vice president of human resources. Last year the cost ofinsuring Blue Cross’s 4,300 employees--11,100 if you include retirees anddependents--rose 15 percent.

    The Blue Cross plan is self-insured. Employees currently pay no premiums.While Blue Cross is considering the typical menu of cost-containment strategies--includingasking employees to pay for 20 percent of their premiums--it is also expandingthe reach of the disease-management programs it uses to cover more conditions.Kleppe believes that expanding disease management to cover conditions such asmultiple sclerosis and cystic fibrosis will help to rein in Blue Cross’srapidly rising health-care costs. Typically, he says, 3 percent of Blue Cross’spopulation represents about 40 percent of the costs. The belief is that if youwork aggressively with people with chronic conditions to keep them healthy, thencosts will go down.

Beyond diabetes and coronary
    Blue Cross and Blue Shield of Minnesota expanded the reach of all theindividuals it insures--not just its own employees--in disease-managementprograms. As of March 1, 2002, it went from having 2 percent of its insuredpopulation in disease-management programs to 11 percent. Prior to March 1, theMinnesota Blues insurer had disease-management programs for individuals withdiabetes and heart disease. After beginning to see positive changes in resultsand a reduction in the costs, the company decided to expand disease-managementprograms, says Dr. William Gold, Blue Cross’s chief medical officer and vicepresident of health management. "Our approach was that if disease managementworks with diabetics, then why would it not work for everyone with any type ofchronic disease?" he asks. The company unveiled new programs for patients withconditions such as Parkinson’s, hemophilia, cystic fibrosis, and end-stagerenal disease.

    Among its own employees, Blue Cross now has 1,500 employees, retirees, anddependents in the disease-management program, says Kleppe. And while it is toosoon to draw any conclusions about cost savings, Blue Cross is predicting adollar-for-dollar return on investment this year, and positive returns afterthat.

    The disease-management industry is adding new types of diseases and illnessesto its rosters and going beyond caring for patients with simpler chronicconditions such as high blood pressure, asthma, and heart conditions. Many ofthese new programs focus on chronic diseases in which people get sicker overtime, not better.

Managing the 10 percent
    In a nutshell, disease management works with patients who have specificmedical conditions to prevent more acute episodes requiring hospitalization orother expensive treatments. The emphasis is on helping patients manage theirdiseases, rather than treating periodic acute--and expensive--episodes. Theidea of disease management was conceived in the early 1990s, when it wasrealized that the majority of health-care expenses are incurred by a limitednumber of people.

    "It was recognized that chronic disease was a major contributor to costs,and if you worked with people with chronic diseases and changed lifestyles, thenyou could reduce the risk of complications and hospital stays and reduce costs,"says Joseph Marlowe, a senior vice president at Aon Consulting in Philadelphia.According to actuarial studies, he says, in a typical group, 10 percent of thepopulation accounts for 70 percent of the costs. The theory, says Marlowe, isthat if you target that 10 percent and work intensively with them, then it wouldbe possible to keep those costs down.

    The traditional areas for disease management were diabetes, asthma,hypertension, and cardiac disease. Once the anecdotal evidence came in showingthat disease-management techniques appeared to save on health-care costs, thenext phase was to expand the list of diseases, says Robert Stone, executive vicepresident of American Healthways, Inc., a disease-management firm located inNashville, Tennessee.

    American Healthways is one of the disease-management firms working with BlueCross. This year the company rolled out a host of new programs for diseases suchas chronic hepatitis, cirrhosis of the liver, rheumatoid arthritis,osteoporosis, and end-stage kidney disease. "These are diseases in which thereis evidence that the interventions will lead to an improved clinical outcome andthe costs of the interventions will be more than offset by the savings," saysStone.

    Accordant Health Services, Inc., of Greensboro, North Carolina, is the otherdisease-management firm working with Blue Cross and Blue Shield of Minnesota.Accordant focuses on seizure disorders, Parkinson’s, lupus, sickle-cellanemia, hemophilia, cystic fibrosis, and Lou Gehrig’s disease for clients suchas Empire Blue Cross/Blue Shield, Oxford Health Plans, and Humana.

    While these diseases are relatively rare, the average annual expenses forindividuals with these conditions can be quite high, says William McIvor,executive vice president of business development and chief information officerat Accordant. Individuals with multiple sclerosis, for example, often end up inthe hospital because of falls, which could easily cost a health-insurance plan$20,000. Examining the home and taking measures to prevent falls can result insavings.

The jury is still out
    As Kleppe’s experience at Blue Cross shows, given the double-digit annualincreases of the last two years, HR professionals across the country are tryingto save money on health-care costs any way they can. The disease-managementindustry promises savings. But while some are trumpeting disease management as atruly effective way for HR to cut health-care costs, others say that diseasemanagement has yet to prove its worth.

    Disease-management programs are generally only available to self-insuredemployers through "administrative services only" contracts (a contract inwhich an insurer handles all the claims processing and administration of ahealth-care plan). But these programs are not standard inadministrative-services-only contracts, so if an HR manager is interested inusing such a program, it has to be bargained for.

    For self-insured employers, the impact of cost savings isobvious--lowerhealth-care expenditures have a direct effect on earnings. But the impact ofsavings for the insured employer is subtler. The savings for premium-payingemployers may be lower because the insurer is able to keep down medical costs byusing the program. In other words, an HR manager who obtains insurance from aninsurer that aggressively pursues disease-management strategies should expectlower premiums for his or her company.

    Anecdotal evidence shows that disease-management programs lower the cost ofhealth care. The industry itself says it has the numbers to prove it. Accordingto McIvor, Accordant’s disease-management program can save up to 20 percent ofmedical costs on an individual patient annually. Gold says that Blue Cross saw apositive return on investment in its disease-management programs for diabetesand coronary heart disease in the first year, with increasing returns infollowing years.

    Others say that the jury is still out as to the effectiveness ofdisease-management programs in controlling medical costs. Part of the problem isthat proving that something keeps costs down is like proving a negative. As witha lot of other HR programs, it’s hard to know what you would have spent hadthe program not been in place. And while there is ample evidence of reducedcosts, no truly conclusive studies exist showing the return on investment, saysMarlowe.

Big employers on board
    The lack of evidence supporting the disease-management industry’s costsavings has not dampened the enthusiasm of employers, who have jumped aboard thedisease-management ship and are asking that more conditions be subject todisease management. According to a 2001 survey of very large employers (averagefirm size more than 11,000 employees) conducted by Hewitt Associates, 76 percentprovide disease-management programs to their employees. And, says Marlowe, thereare factors other than cost savings behind the growth in disease management.

    Patients like the idea. According to Kleppe, employees at Blue Cross arealready expressing a high level of satisfaction with the disease-managementprogram. These high levels of satisfaction (as judged by focus groups) willresult in yet another benefit for the HR function at Blue Cross, he says:increased retention. If the disease-management program is perceived as makingthem healthier, then employees who either have chronic diseases or havedependents who do would be less likely to move to another employer that did notoffer the program. "They’d think twice about leaving," he says.

Increased productivity
    In addition to containing costs, managing these diseases can help an HRprofessional by improving productivity, says Kleppe. This is true even if it isa member of the employee’s family who is ill, and not the employee himself.McIvor says, for example, that if an employee has a wife with multiple sclerosiswho falls and injures herself, then that can mean lost productivity if theemployee has to take time off to care for her.

    Kleppe also says that disease prevention and management improves the company’seffort to be a place where people want to work. "We are creating a better workenvironment for our employees, and we are advancing the opinion among employeesthat this is a great place to work."

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