June 12, 2002
CATS AND DOGS
LIVING IN HARMONY? THE CFO AND CMO HAVE COMMON INTERESTS IN DISEASE
A quiet, yet dramatic disconnect has
existed in many health care organizations for the past decade. The
disconnect relates to how the Chief Financial Officer (CFO) and the
Chief Medical Officer (CMO) view disease management (DM).
This subtle dynamic has impacted the
course of disease management development and implementation in many
provider and health plan organizations. In many organizations CFOs
took a predictable point of view -- "Show me the money." In other
words, they would only endorse DM programs if they could be
convinced that risks were minimal and that there will be a definite
return on investment.
Today things are different. DM has
become mainstream. It's time for the CFO and CMO to sit on the same
side of the table when discussing DM. This essay will describe:
Yesterday's Era of Avoiding Risk -- Explaining CFO Early
Concerns About Disease Management
Today's Era of Managing Risk and Creating Value -- Cats and Dogs
With Common Interests
ERA OF AVOIDING RISK -- EXPLAINING CFO EARLY CONCERNS ABOUT DISEASE
Many health care CFOs expressed
concerns about DM -- ones primarily related to the RISK of doing DM.
Their objections can be boiled down to three points:
1) "Where's the evidence showing
clinical benefits of DM and stability of DM companies?"
2) "Doing DM will only attract sick, chronic patients to our health
plan or health system. Why would we want to do that?"
3) "Where's the return on investment (ROI)?"
...and since CFOs control the purse
strings, in many health care organizations they effectively have had
control over DM program decisions.
OF MANAGING RISK AND CREATING VALUE -- CATS AND DOGS WITH COMMON
Let's revisit the CFO's concerns in
light of changing times and changing organizational strategy.
1) DM Works! Ten years ago the CFO's
point of view was understandable. While DM might have been
intuitively appealing to many people, there was little evidence to
back up it's clinical or cost effectiveness.
Today, things are different...
The evidence is in...
The jury is back...
The clouds have parted, the sun in
shining, the birds are singing...
The handwriting is on the wall...
It's time to wake up and smell the
(add your own cliché here)
It's time to get with the DM program!
DM has become mainstream. It produces
major changes in outcomes across four dimensions: cost, clinical
quality, patient satisfaction, and utilization of health services.
While it's beyond the scope of this essay to share the particulars,
hundreds of studies and program evaluations have confirmed this.
And what about the risk of working
with new DM companies? Of the 150+ initial entrants into the DM
marketplace, 10-15 are emerging as survivors and thrivers. Still not
convinced? DM reinsurance policies are readily available from
2) DM helps manage risk. At best, the
argument of "we don't want to attract sick, chronic patients" was a
reason not to be an early adopter of DM?
Why? Because while in the past there
was risk in adopting something new, today there's risk in NOT
adopting something proven. DM has entered the mainstream, and should
be viewed as a necessary risk management tool by every CFO.
Rather than worrying about attracting
the sickest patients to your health plan, it's time to acknowledge
the baby boomer tidal wave and acknowledge that the need to manage
Today's enlightened CFO is thinking
along these lines: "As much as we don't want to attract sick
patients, the reality today is that we cannot avoid this. Baby
boomers are aging and living longer, and the result is they have a
much higher incidence of chronic conditions. Hoping NOT to attract
sick, chronic patients is like standing in front of a tidal wave
with an umbrella over your head, hoping that you won't get wet. The
tidal wave is coming, and we need to deal with it realistically."
Ask your CFO the following question:
"Are there ANY patients who would incur lower costs if we intervened
in their care? Is there ANY evidence that ANY interventions are cost
Medical management is becoming a
strategic priority to most health care organizations. Responding
"no" to these questions is an indefensible position.
If he answers "yes", effectively the
discussion immediately shifts to "HOW MUCH disease management should
we do", rather than "Should we do ANY disease management?" The CMO
and the CFO now have a strong common interest in asking "What is the
OPTIMAL amount of resources to devote to disease management?"
Try this from another angle. In the
same way that the CFO takes an indefensible position in suggesting
the right amount of DM is "zero", the CMO takes an equally
indefensible position in hoping for a blank check with which to do
DM. The reconciliation between these two extremes is to consider the
OPTIMAL amount of resources to devote to DM...something that the CFO
and CMO now have a common interest in defining precisely.
3) DM's ability to create value is a
more relevant metric than ROI. Without opening the can of worms
associated with measuring short-term ROI for DM, we will point out
that focusing on short-term ROI misses the bigger picture.
DM's ability to create value
(customer value and shareholder value) is a far more relevant
metric. (This topic is complex, and we'll provide further details in
a future article.)
Sounds good, but has anybody actually
The poster child for success in
increasing shareholder value is American Healthways (AMHC). If you
take the clock back just two years, AMHC's market capitalization was
around $50 million. As of May 31, AMHC's market cap is $388 million.
Not a bad increase....and their success is a powerful testimonial to
the power of focusing on value creation, and not just short term ROI.
An example of longer term thinking is demonstrated in the recent 10
year partnership between American Healthways and Blue Cross and Blue
Shield of Minnesota (see the
release of December 12, 2001). Matria and QMed are two other
publicly traded DM companies showing successes.
The bottom line for health care CFOs:
"Think it's risky to do DM? Day by day, it's becoming far riskier
NOT to do DM."
ASSESSMENT OF THE STATE-OF-THE-ART
"eHealth After the
Bubble Period: Focusing On the Value Proposition"
eHealth Institute, April 2002
This is a summary report of the 2001 eHealth Developers Summit
Our Take: Must reading! This is one
of the most practical and "tell it like it really is" recent reports
written about eHealth.
Better Health Technologies'
Principals are accomplished speakers, strategists and group
facilitators. Would your organization benefit by getting the cats
and dogs to work together on DM? To discuss a strategy session,
seminar, or conference keynote presentation, please contact Vince
Kuraitis at (208) 395-1197,
WHO REPORT --
ACTIONS TO PREVENT, TREAT CHRONIC DISEASE
Care for Chronic Conditions: Building Blocks for Action"
World Health Organization (WHO), May 2002
Eight essential elements for action:
1) Support a Paradigm shift
2) Manage the Political Environment
3) Build Integrated Health Care
4) Align Sectoral Policies for Health
5) Use Health Care Personnel More Effectively
6) Centre Care on the Patient and Family
7) Support Patients in Their Communities
8) Emphasize Prevention
HIGHLIGHTS INNOVATIVE CARE FOR CHRONICALLY ILL
System: Profiles of individuals, institutions, and organizations
that have demonstrated excellence in chronic disease care"
National Coalition on Health Care (NCHC), Institute for Healthcare
Improvement; May 2002
This report features case studies of
benchmark practices in leading organizations. Read the thoughtful
introduction by Dr. Edward H. Wagner.
TESTIFY ON NEED FOR DISEASE MANAGEMENT IN MEDICARE
Testimony Before the Committee on Ways and Means, Subcommittee on
Health; April 16, 2002
Of particular note is the testimony of a Medicare higher up who gets
it -- Ruben King-Shaw, Jr., Deputy Administrator and Chief Operating
Officer, Centers for Medicare and Medicaid Services.
"Disease management is also one of
the principal reasons why the President and Secretary Thompson have
advocated immediate action to give seniors reliable private plan
options in Medicare, and to prevent further pullouts of private
plans from the Medicare program.
"Disease management is a critical
element for improving the nation's health care delivery system."
DISCUSSES NEED FOR MEDICARE REFORMS
"Trends in Medical Coverage That Active Workers Receive from
Employers: Implications for Reforming the Medicare Benefit Package"
Submitted to the Medicare Payment Advisory Commission (MEDPAC) by
Mathematica Policy Research, Inc.; April 2002
"...neither employment-based coverage nor Medicare do a good job of
supporting care management, prevention, or integrated treatment of
chronic conditions. An effective benefit package for Medicare
beneficiaries may therefore mean rethinking the current benefits
structure." (from the Executive Summary, p. 34)
CGE&Y RELEASES 2
HEALTH TREND REPORTS
"Outcomes Management: A New Model For Enhancing Care While Reducing
Cap Gemini Ernst & Young (CGE&Y), May 2002
Commentary: Some very good analysis. This report becomes much easier
to understand if you're aware that CGE&Y has developed a strategic
partnership with American Healthways. American Healthways is
promoting "outcomes management" as its next generation care
CGE&Y 2002 Hospital Executive Survey
"What's keeping our nation's hospital executives up at night?"
Cap Gemini Ernst & Young, April 2002
This report lists 8 top current issues of concern for hospital
1) Inadequate reimbursement levels
2) Severe staffing shortages
3) Unwieldy regulatory requirements
4) Rapidly changing patient demands
5) Constrained capacity
6) Encroaching specialty facilities
7) Growing liability issues
8) Endangered capital investments
HEALTHCARE IMPROVEMENT AND DR. BERWICK ARE GAINING NATIONAL
"Doctor Prescribes Quality Control for Medicine's Ills: Donald
Berwick Leads Crusade To Replace Many Visits With E-Mail, Phone
Wall Street Journal; May 30, 2002
User's Manual For The IOM's 'Quality Chasm' Report"
Health Affairs, May/June 2002
Dr. Berwick writes that patients' experiences should be the
fundamental source of the definition of "quality."
ASSESSMENT OF QUALITY OF HEALTH INFO ON THE WEB
"Empirical Studies Assessing the Quality of Health Information for
Consumers on the World Wide Web"
Journal of the American Medical Association; May 22/29, 2002
Full article available under "Publications" on
Conclusions: Due to differences in study methods and rigor, quality
criteria, study population, and topic chosen, study results and
conclusions on health-related Web sites vary widely. Operational
definitions of quality criteria are needed.
Additional commentary from Dr. Eysenbach
Informatics Review; June 1, 2002
"Reducing the Cost of Poor-Quality Health Care through Responsible
Midwest Business Group on Health, June 2002
"Vital Decisions: How Internet users decide what information to
trust when they or their loved ones are sick."
Pew Internet Project; May 22, 2002
of the Internet at Major Life Moments"
Pew Internet Project; May 8, 2002
"Beyond 50.02: A Report to
the Nation on Trends in Health Security"
AARP, May 2002
of Innovation in Health Care
California HealthCare Foundation, May 2002
"Quality of Health Care in the United States: A Chartbook"
The Commonwealth Fund, May 2002
Indicators in the Changing Health Care Marketplace 2002"
Kaiser Family Foundation, May 2002
"Managing Illness by Phone and E-Mail"
Business Week Online; May 15, 2002
The Harris Poll #21, May 1, 2002
How to Improve
Childhood Asthma Outcomes
RAND Health, May 2002
"Four-Nation Survey Shows Widespread but Different Levels of
Internet Use for Health Purposes"
Harris Interactive; May 28, 2002
New Rules for Managing Health Costs - Seventh Annual WBGHealth/Watson
Wyatt Survey Report - 2002
Comparative Analysis of Claims-based Methods of Health Risk
Assessment for Commercial Populations"
Milliman USA, Inc.; May 24, 2002
Disability in the Elderly With Chronic Disease
Agency for Healthcare Research and Quality, April 2002
Disclosure -- No clients were
mentioned this issue.
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 (http://www.bhtinfo.com). BHT
provides consulting and business development services relating to
disease management, demand management, and patient health
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 © 2002, Better Health Technologies, LLC. All rights