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E-CareManagement News

May 30, 2000


Remember the story about the blind men and the elephant? The first felt the side of the elephant and said it is "very like a wall". The second touched the tusk and declared it is "very like a spear." Another man held the elephant's swinging tail and said it is "very like a rope." And so on....

This is not unlike how people use the term "disease management" (DM). The meaning of the term DM depends very much on your knowledge and perspectives. People are often referring to VASTLY different things when they use the term.

This essay will offer two PRACTICAL DISTINCTIONS that will illustrate different implicit meanings of DM. Understanding these distinctions can help you better to understand DM in the context in which it is being used.

First, distinguish between DM as a PROCESS and DM as a BUSINESS.
Second, when referring to DM as business, distinguish among three common meanings.


Often when people speak of DM, they are in fact referring to the PROCESS of DM -- a series of steps bringing about a result. 
For example, here is one way to view basic process steps of DM:

  • Identifying highest risk/cost patients in a population
  • Developing treatment protocols and algorithms
  • Developing capabilities to intervene in patient care
  • Monitoring and measuring results of interventions
  • DM as a process is very difficult to get your arms around (is it like a wall, a spear, a rope? ....depends on your perspectives and knowledge, which might be different than mine).

    Just try to measure or quantify a DM process in terms of budgets, FTEs, capital expenditures, etc. A process tends to become invisible or transparent within an organization. It becomes part of "The way we do things around here," rather than a discrete set of identifiable activities. A parallel can be seen in organizations that adopted total quality/continuous improvement processes in the late 1980s and 1990s - today, it's virtually impossible to distinguish what's part of the total quality process and what's not.

    So a first step in understanding the context of the term DM is to understand whether it is being referred to as PROCESS or as a BUSINESS. If the speaker is using the term DM to describe a business, then it's also necessary to distinguish "Which DM business?"


    When people speak of DM as a business, they tend to have one of three very different meanings in mind:

    1. Today: DM Outsourcing Services as a $390 million business.
    2. The Future: DM Outsourcing Services as a potential $50-100 billion   business (over the next decade).
    3. Today: Chronic Care DM as a $700 billion business.

    So what's the big deal about these different meanings of DM? After all, they're all within a few hundred billion dollars of each other?

    Here's a brief summary of each of these classifications of DM revenues:

    1. Today: DM Outsourcing Services as a $390 million business.
      The Disease Management Purchasing Consortium (DMPC) is a central source of information about DM outsourcing services.
      "DM outsourcing services" refers to DM services provided primarily on behalf of health plans by a group of about 150 companies. The DMPC estimates revenues for this industry at approximately $390 million in 2000. These companies mostly were formed in the mid to late 1990s. Within this group, the largest companies by disease category are: Asthma/COPD -- AirLogix; Cancer -- Quality Oncology; Cardiology -- CorSolutions; Diabetes -- American Healthways; End Stage Renal Disease -- Baxter Renal Management Strategies; Hospitalist -- Hospital Inpatient Management Services; MCH/Neonatology -- Paidos Health Management Services; Rare Diseases -- Accordant Health.
    2. The Future: DM Outsourcing Services as a potential $50-100 billion business (over the next decade).
      An upbeat future of DM Outsourcing Services was described by Joel Ray and Julie Sydnor of First Union Capital Markets, in "Disease Management: The Future of Managed Care" April 1999.
      "If one were to apply a 60% chronic disease ratio to total healthcare spending, this implies over $700 billion would flow to chronic care products and services this year. ...initial outcomes analyses of disease management programs appear to be generating 15-30% or more cost savings. If disease managers garner half of these saving, this would imply that the industry has the potential to generate top-line sales in the $50 billion to $100 billion range, generating what we forecast will be a huge ramp-up over the next decade." (Commentary: Our point here is to show great divergence in how the business of DM is being defined, not necessarily to agree or agree with these estimates....that's for another day.)
    3. Today: Chronic Care DM as a $700 billion business.
      The Robert Wood Johnson Foundation's "Chronic Care in America: A 21st Century Challenge" describes a much broader meaning of DM. Chronic Care DM represents estimated annual direct medical costs for persons with chronic conditions -- $425 billion in 1990, $700 billion in 2000.


    We have found PROFOUND CONFUSION even among our most sophisticated clients about these basic distinctions relating to DM. The term has VASTLY different meanings when used by different people.

    Is there a correct definition for the term "DM"? Perhaps over time we'll reach more precise definitions, but today's lesson is simply to recognize that each of us is describing our perception of different parts of the elephant.

    "Things should be made as simple as possible, but not any simpler." Albert Einstein


    An insightful analysis of the "ePPI" -- electronic Provider-Partner interface -- has been published by US Bancorp Piper Jaffray with assistance from Sybase.

    A few highlights:

    "Automating the administrative shortcomings in the health care industry will be the low-hanging fruit for the ePPi; however, the real value is created when the focus is on care....industry leaders can focus on generating profits by carving costs from the current broken system or focus on profit by introducing a new paradigm to the industry. The new paradigm focuses on improving the quality of care for patients by enabling them and their providers to more effectively and efficiently make decisions regarding the therapy options available-be those options procedural, pharmaceutical, biotechnical, lifestyle-related, or other....vendors to the health care industry can focus on last century's solutions, financially based solutions, or they can focus on this century's solutions, improving clinical workflow. We believe a clinical focus is necessary to compete in the new health care economy" (pp. 8-9).


    Two chapters of a study sponsored Blue Cross Blue Shield of Michigan (BCBSM) show how Michigan residents with a similar disease often receive completely different treatments, depending on where they live. The authors are the father-and-son team of John Wennberg, MD, MPH and David Wennberg, MD, MPH. They are nationally recognized leaders on research into how health care services vary by geographic region.

    The chapters of the study currently available:

    1. Coronary artery disease 
    2. Practice Variations and the Use of Prescription Drugs 

    "We have found in Michigan, as we have found elsewhere in the country, that there is substantial variation -- sometimes up to ten-fold -- reflecting differences in how likely people with similar conditions are to receive particular medical interventions," said Dr. John Wennberg.

    High or low rates of utilization are not necessarily good or bad. However, the presence of variation does suggest opportunities to improve quality and reduce costs.

    The state-of-the-art in U.S. health care quality improvement:

  • A national study suggests up to 98,000 Americans die each year as a result of preventable medical errors.
  • The BCBSM study (above) and Dartmouth Atlas document variations in medical treatment patterns of up to 10 times within regions (not 10%, but 10x !)
  • The state-of-the-art in quality improvement in other sectors of the American economy: "How do we reduce our error rate in manufacturing widgets from 2 in a million to 1 in a million?"

    What's wrong with this picture?


    A survey of Healthcare Information and Management Systems Society (HIMSS) members explored trends in healthcare information and technology. For example:

    Top Healthcare Application Areas Considered Most Important Over Next 2 Years by Providers

    Web-based applications- 71%
    Clinical Data Repository- 63%
    Point-of-care Support- 52%
    Intelligence/Decision Support- 52%
    Enterprise Master Patient Index- 47%
    Financial Information Systems- 36%
    Ambulatory systems- 26%
    Supply Chain Management- 24%
    CRM/Call Center- 22%
    Tele-medicine Systems- 19%
    ERP Systems- 18%

    A summary of the survey is available, (see slide #11 - Top Healthcare Applications)


    American Healthways has released a study showing its diabetes DM program improved health status and lowered costs for Medicare beneficiaries. Key findings include:

  • Improvements in clinical measures relating to A1C participation, A1C values, eye exams, foot exams, serum creatinine, and cholesterol screening.
  • A reduction of 17% or $114 per diabetes member per month in total direct health care costs for the first year of operation.

    A report ("DÉJÀ VU ALL OVER AGAIN: The Soaring Cost of Private Health Insurance and its Impact on Consumers and Employers") by the National Coalition on Health Care notes that health insurance premiums are rising faster than ever at four times the rate of inflation, and that these rates of increase are expected to continue over the next three years. While overall premium increases of 9-12% are expected in 2000, small employers are experiencing 15-20% increases.

    A combination of traditional forces and emerging factors are driving up costs. The TRADITIONAL FORCES pushing up premium prices include:

  • New medical technology
  • Overuse and misuse of medical services
  • Oversupply of hospital beds
  • High administrative costs
  • Cost shifting among payers
  • The EMERGING FACTORS, both economic and demographic, that are intensifying pressure on premiums include:

  • A longer and deeper insurance underwriting cycle, shifting from two or three years up to four or five years
  • Wall Street pressure on for-profit health plans to raise premiums in order to increase profits
  • Rapidly escalating prescription drug costs and utilization
  • Tougher provider negotiations with health plans for higher reimbursement
  • Consumer demands for easier and broader access to care
  • The medical needs and demands of 77 million baby boomers

    The Pew Research Center has recently released an Internet Project Report relating to women's use of the Internet.

    Findings About Online Health and Medical Information:

  • Six in ten women (61%) with online access have gotten medical information, while 47% of men have done this. On a typical day, 9% of online women get health information on the Web and just 4% of men do this.
  • The difference in behavior between the sexes is most evident in generational terms; older online women (those over 50) are the most likely to have sought health information. Some 65% of women that age have sought health information online. In contrast, young men (those under 30) are less likely to have sought such material. Only 40% of young men have accessed health information online. And just 48% of older men get medical material from the Web.
  • Other fascinating findings from the Summary:

  • ...women have used email to enrich their important relationships and enlarge their networks. The Internet has the opposite of an isolating effect on these users. They report that email has helped them improve their connections to relatives and friends.
  • In general, Internet users have more robust social lives than non-users and the most fervent Internet users are the ones who more frequently say email use has improved their bonds with relatives.
  • 62% of those who email relatives say they like email because they can stay in touch without having to spend so much time talking to them.
  • Parents and children who email each other regularly now communicate online as often as they talk by phone -- more than 75% of parents and children who email each other talk on the phone once a week or more often and they email each other with the same frequency.

    The Health Care Financing Administration (HCFA) has announced that it will make extra payments to Medicare+Choice organizations to reflect the additional costs of treating congestive heart failure (CHF) patients outside the hospital.

    Payments for outpatient care for patients with CHF will begin in 2002. This is an interim step before comprehensive risk adjustment is fully implemented in 2004.

    HCFA Administrator Nancy-Ann Deparle said "Medicare will begin to reward those organizations that commit their resources to treat patients outside the hospital who have congestive heart failure, while demonstrating improvement in patients' quality of care."

    This announcement is good news. Why is this significant?

  • Medicare is putting its money where its mouth is. Lack of reimbursement has been a restraining force in the growth of disease management and care coordination programs.
  • As the largest single payer, Medicare is influential in setting industry direction.
  • Medicare continues to signal the eventual coverage of care coordination/disease management services.

    A recent article in Modern Physician explores Internet applications for disease management approaches.

    E-CareManagement News is an e-newsletter that tracks a major change in health care and managed care—the paradigm shift from “managing cost” to “managing care”.  This e-newsletter is brought to you by Better Health Technologies, LLC (  BHT provides consulting and business development services relating to disease management, demand management, and patient health information technologies.

    You may copy, reprint or forward this newsletter to friends, colleagues or customers, as long as the use is not for resale or profit and the following copyright notice is included intact. Copyright © 2000, Better Health Technologies, LLC. All rights reserved.

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