lthough he works for a major insurer, Roger Kleppe of Blue Cross and Blue
Shield of Minnesota, in St. Paul, has the same concerns about rising health-care
costs as any other vice president of human resources. Last year the cost of
insuring Blue Cross’s 4,300 employees--11,100 if you include retirees and
dependents--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--including
asking employees to pay for 20 percent of their premiums--it is also expanding
the reach of the disease-management programs it uses to cover more conditions.
Kleppe believes that expanding disease management to cover conditions such as
multiple sclerosis and cystic fibrosis will help to rein in Blue Cross’s
rapidly rising health-care costs. Typically, he says, 3 percent of Blue Cross’s
population represents about 40 percent of the costs. The belief is that if you
work aggressively with people with chronic conditions to keep them healthy, then
costs will go down.
Beyond diabetes and coronary
Blue Cross and Blue Shield of Minnesota expanded the reach of all the
individuals it insures--not just its own employees--in disease-management
programs. As of March 1, 2002, it went from having 2 percent of its insured
population in disease-management programs to 11 percent. Prior to March 1, the
Minnesota Blues insurer had disease-management programs for individuals with
diabetes and heart disease. After beginning to see positive changes in results
and a reduction in the costs, the company decided to expand disease-management
programs, says Dr. William Gold, Blue Cross’s chief medical officer and vice
president of health management. "Our approach was that if disease management
works with diabetics, then why would it not work for everyone with any type of
chronic disease?" he asks. The company unveiled new programs for patients with
conditions such as Parkinson’s, hemophilia, cystic fibrosis, and end-stage
renal disease.
Among its own employees, Blue Cross now has 1,500 employees, retirees, and
dependents in the disease-management program, says Kleppe. And while it is too
soon to draw any conclusions about cost savings, Blue Cross is predicting a
dollar-for-dollar return on investment this year, and positive returns after
that.
The disease-management industry is adding new types of diseases and illnesses
to its rosters and going beyond caring for patients with simpler chronic
conditions such as high blood pressure, asthma, and heart conditions. Many of
these new programs focus on chronic diseases in which people get sicker over
time, not better.
Managing the 10 percent
In a nutshell, disease management works with patients who have specific
medical conditions to prevent more acute episodes requiring hospitalization or
other expensive treatments. The emphasis is on helping patients manage their
diseases, rather than treating periodic acute--and expensive--episodes. The
idea of disease management was conceived in the early 1990s, when it was
realized that the majority of health-care expenses are incurred by a limited
number 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, then
you 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 the
population accounts for 70 percent of the costs. The theory, says Marlowe, is
that if you target that 10 percent and work intensively with them, then it would
be 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 showing
that disease-management techniques appeared to save on health-care costs, the
next phase was to expand the list of diseases, says Robert Stone, executive vice
president of American Healthways, Inc., a disease-management firm located in
Nashville, Tennessee.
American Healthways is one of the disease-management firms working with Blue
Cross. This year the company rolled out a host of new programs for diseases such
as chronic hepatitis, cirrhosis of the liver, rheumatoid arthritis,
osteoporosis, and end-stage kidney disease. "These are diseases in which there
is evidence that the interventions will lead to an improved clinical outcome and
the costs of the interventions will be more than offset by the savings," says
Stone.
Accordant Health Services, Inc., of Greensboro, North Carolina, is the other
disease-management firm working with Blue Cross and Blue Shield of Minnesota.
Accordant focuses on seizure disorders, Parkinson’s, lupus, sickle-cell
anemia, hemophilia, cystic fibrosis, and Lou Gehrig’s disease for clients such
as Empire Blue Cross/Blue Shield, Oxford Health Plans, and Humana.
While these diseases are relatively rare, the average annual expenses for
individuals with these conditions can be quite high, says William McIvor,
executive vice president of business development and chief information officer
at Accordant. Individuals with multiple sclerosis, for example, often end up in
the 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 in
savings.
The jury is still out
As Kleppe’s experience at Blue Cross shows, given the double-digit annual
increases of the last two years, HR professionals across the country are trying
to save money on health-care costs any way they can. The disease-management
industry promises savings. But while some are trumpeting disease management as a
truly effective way for HR to cut health-care costs, others say that disease
management has yet to prove its worth.
Disease-management programs are generally only available to self-insured
employers through "administrative services only" contracts (a contract in
which an insurer handles all the claims processing and administration of a
health-care plan). But these programs are not standard in
administrative-services-only contracts, so if an HR manager is interested in
using such a program, it has to be bargained for.
For self-insured employers, the impact of cost savings is
obvious--lower
health-care expenditures have a direct effect on earnings. But the impact of
savings for the insured employer is subtler. The savings for premium-paying
employers may be lower because the insurer is able to keep down medical costs by
using the program. In other words, an HR manager who obtains insurance from an
insurer that aggressively pursues disease-management strategies should expect
lower premiums for his or her company.
Anecdotal evidence shows that disease-management programs lower the cost of
health care. The industry itself says it has the numbers to prove it. According
to McIvor, Accordant’s disease-management program can save up to 20 percent of
medical costs on an individual patient annually. Gold says that Blue Cross saw a
positive return on investment in its disease-management programs for diabetes
and coronary heart disease in the first year, with increasing returns in
following years.
Others say that the jury is still out as to the effectiveness of
disease-management programs in controlling medical costs. Part of the problem is
that proving that something keeps costs down is like proving a negative. As with
a lot of other HR programs, it’s hard to know what you would have spent had
the program not been in place. And while there is ample evidence of reduced
costs, no truly conclusive studies exist showing the return on investment, says
Marlowe.
Big employers on board
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