June 25, 2001
OBSERVATIONS ABOUT DISEASE MANAGEMENT ASSEMBLING
"Build or buy?" is one of the most
fundamental questions faced by any organization. A few years ago, it
was unclear how this question should be answered in relation to
chronic disease programs. The question is raised by a wide range of
organizations involved in chronic disease management (DM) --
including delivery systems, physicians, health plans, and DM support
or outsourcing companies.
A third option -- assembling -- is
making sense to an increasing number of organizations. Assembling is
somewhere between building and buying. Assembling involves buying or
building program COMPONENTS, but tailoring the components and
integrating them to suit the unique needs of your organization.
Examples of DM program components include clinical guidelines, a
medical call center, web based education or tracking, program staff,
information technology (hardware and software), remote biometric
monitoring, and others.
We offer five critical observations
about make/buy/assemble options:
1) The jury is in -- building is too
2) The jury is in -- buying is a viable option for specialized, high
3) The jury is still out - will buying expand beyond specialized,
high impact conditions?
4) Assembling is growing. Assembling is becoming viewed as a core
competency by a growing number of organizations.
5) Assembling will continue to grow. Multiple trends fuel the growth
1) THE JURY
IS IN -- BUILDING IS TOO COMPLEX.
The jury is in -- the build approach is too complex, and we don't
expect to see any major players begin experimenting with this
Some delivery systems and health plans have attempted to build their
own comprehensive chronic disease management programs. (Those that
are showing success have been at it for the better part of a
decade.) While there are a few examples of organizations with
staying power (Kaiser, Group Health of Puget Sound), there are many
more examples of those that have dropped out of the race (e.g.,
University of Pennsylvania Health System, Oxford Health Plan). Most
recently, Aetna abandoned its build approach, seemingly driven more
by a need to improve it financial performance than due to a
systematic review of clinical operations.
The best reasons favoring building
relate to maintaining control over transactions with patients and
physicians and to capturing value. Over time, it's become apparent
that these advantages are more theoretical than real.
It's also becoming clear that NO ONE organization can develop all
the specialized DM expertise. Lessons learned: building is time
consuming, financially draining, and requires great organizational
tolerance for trial and error.
2) THE JURY
IS IN -- BUYING IS A VIABLE OPTION FOR SPECIALIZED, HIGH IMPACT
The jury is also back with a PARTIAL verdict about the buy
alternative. The buy alternative makes sense for specialized, high
impact diseases. It's not clear whether buying will expand beyond
The buy alternative makes most sense
under the following circumstances:
LOW PREVALENCE, HIGH COST
CONDITIONS (CHF, COPD, end-stage renal disease, rare conditions
such as lupus, etc.)
COST CONTROL is the primary goal
(i.e., prevention of emergency room visits and/or hospital
The contracting organization
(e.g., health plan, delivery system) is FINANCIALLY AT-RISK
ECONOMIES OF SCALE are not
available to one organization. For example, economies of scale
might not be achievable for small or medium sized health plans, or
for many highly specialized clinical conditions.
Buying has a number of advantages -
its fast (programs can be up and running in months), it avoids
capital expenditures, it avoids hiring new staff, and it provides
access to very specialized DM expertise.
3) THE JURY
IS STILL OUT - WILL BUYING EXPAND BEYOND SPECIALIZED, HIGH IMPACT
A question that's still open is whether buying will be seen as a
long-term solution or as an entree to acquiring internal expertise,
i.e., a foot in the door to the complex world of chronic disease
To say that buying is a "viable"
alternative doesn't necessarily mean that it's the best alternative.
Many organizations are choosing to assemble even for specialized,
high impact clinical conditions.
Buying is a particularly attractive
alternative when an organization is starting chronic care management
from scratch. A growing number of organizations view buying as a way
to get started quickly and develop their own in-house expertise over
ASSEMBLING IS GROWING. ASSEMBLING IS BECOMING VIEWED AS A CORE
COMPETENCY BY A GROWING NUMBER OF ORGANIZATIONS.
Assembling is becoming the modern version of building.
Health plans and delivery systems are being compelled to consider
managing chronic disease as a core competency of the organization.
Assembling is increasingly viewed as
a core competency to create and capture value -- both financially
What's the case for considering
assembling as a core competency?
To maintain more direct control
and consistency over relationships with customers (patients and
To avoid distermediation by third
party administrators (TPA's), defined contribution plans, and
To please employers that are
increasingly interested in proactive medical management
To capture value -- avoiding
giving away too much value to outsourcing companies
To avoid commoditization --
avoiding undifferentiated offerings that are purchased solely
based on lowest price
ASSEMBLING WILL CONTINUE TO GROW. MULTIPLE TRENDS FUEL THE GROWTH OF
We predict that a growing proportion of health care organizations
will be taking the assemble route. Many trends fuel the growth of
First, QUALITY is becoming more important as a DIFFERENTIATOR.
During the past decade, patients have had difficulties evaluating
health care quality and purchasers have been primarily concerned
with cost issues.
Today, health care consumerism is
becoming more prevalent. Numerous national quality initiatives
supported by employers are under way. Demonstrable quality is
becoming more important to patients and health care purchasers. This
creates incentives and expectations for health plans and delivery
systems to create superior offerings, e.g. by offering better care
for chronic conditions.
Second, SHIFTING DEMOGRAPHICS change
health care strategy. In the past some health care organizations
strategized TO attract the healthiest patients and NOT TO cater to
higher cost patients with chronic conditions. This strategy has just
about run its course -- baby boomers have gotten older.
As baby boomers age it becomes
difficult to rationalize avoiding enrolling high cost patients or
NOT proactively managing their care. The thinking becomes "if we can
no longer avoid treating or enrolling high cost patients, we better
get good at managing their care." Aging of the population
INCREASINGLY compels health plans and delivery systems to consider
managing chronic disease as a core competency.
Third, assembling better AVOIDS
LOCK-IN AND MINIMIZES SWITCHING COSTS. Can you pick the best DM
vendor today? Probably. However, how confident are you that today
you can pick who will be the best vendor 3 years from now? In plain
old English, assembling avoids risks and costs associated with
putting too many eggs in one basket. Assembling allows organizations
the option to switch individual DM components as it becomes apparent
that better and/or cheaper alternatives become available.
Fourth, assembling promises better
INTEGRATION of DM into local health care delivery. While DM
outsourcing companies have been able to deliver on the value
proposition of SPECIALIZATION (e.g., world class clinical
guidelines), they are still working at optimizing the value
proposition of INTEGRATION. For example, physician apathy/resistance
to DM is a sign of less than optimal integration into local care
delivery. Highmark Blue Cross Blue Shield is an example of an
organization taking an assemble approach, with one goal being
improved physician relations. While the jury is still out on this
issue, too, we observe that many DM outsourcing companies are being
asked to unbundle their offerings into components.
Fifth, pharmaceutical COMPANIES and
others are GIVING AWAY COMPONENTS of the assemble solution. Should
you create or buy patient education materials, clinical guidelines,
and patient management software when some vendors will provide these
offerings as value-added extras to their core products or services?
(Caution - beware of strings attached.)
Finally, many organizations ALREADY HAVE SOME OF THE COMPONENTS.
Examples of DM components are listed in the second paragraph. The
task now focuses on INTEGRATING various components.
Assembling DM components is more than just a tactic. It's a mindset,
a philosophy, a strategy. Many organizations are preparing for this
long journey and taking the first steps.
TECHNOLOGIES SUPPORT DIABETES CARE
"Making a difference with interactive technology: Considerations in
using and evaluating computerized aids for diabetes self-management
Diabetes Spectrum, Spring 2001
This article examines four interactive technologies (ITs) showing
actual or potential positive outcomes on the self-management of
diabetes: 1) handheld, portable, or mobile devices; 2) automated
telephone disease management systems; 3) CD-ROM programs; and 4) the
The authors conclude: ITs do not currently appear to be sufficiently
sophisticated or data-based to be recommended as the sole modality
for diabetes self-management education. Rather, their optimal use is
as a supplement to other forms of patient education.
HAVE YOU NOTICED?
....that one disease and care
management company has shown SPECTACULAR stock performance recently?
That company is
American Healthways (AMHC). In March 2000, the company's stock
was at $3.63; as of June 22, 2001 shares sold for $35.93! You can
view a slide presentation and/or listen to management's discussion
(click on the text near the upper right corner of the page)
EMPLOYERS COMMITTED TO PLAYING AN ACTIVE ROLE IN HEALTH CARE DESPITE
CONCERNS ABOUT RISING COSTS
"Facing Health Care Challenges in an Era of Change"
Towers Perrin, May 2001
The vast majority of employers
surveyed in a new Towers Perrin study say they are committed to
remaining actively engaged in providing health care benefits to
their employees. Despite concerns about rising costs, only one in
eight respondents indicate that they will switch to a more passive
role within the next two to three years.
Most Important Health Benefit Issues
(Issue Rated "Highly Important" by Respondents)
Rising health care
Health plan administration .........92
Vendor management ................86
Retiree health ..........................51
Group purchasing ....................43
Defined contribution approach ...24
to health benefits
Exit strategy ...........................16
....Seeing health care "quality" near the top suggests we're moving
to a RELATIVE cost/quality employer purchasing mindset....is this a
shift from the predominantly cost focused mindset of the past
decade? Keep an eye on this trend.
NURSES, PHYSICIANS -- QUALITY OF CARE IS "UNACCEPTABLE"
"Pursuing Perfection" Survey
Conducted for The Robert Wood Johnson Foundation by Wirthlin
May 8, 2001
Press release and
A nationwide survey of more than one thousand health care
professionals shows that:
58% of providers and
administrators think health care in this country is not very good
as many as 95% of physicians
report that they have witnessed a serious medical error.
4 of 5 state they believe
fundamental changes are needed in the American health care system.
PROGRAM IMPROVES SURVIVAL RATE, LOWERS HOSPITALIZATION
"Evaluation of Disease-State Management of Dialysis Patients"
American Journal of Kidney Disease, May 2001
Humana press release
Results for the end-stage renal dialysis (ESRD) disease management
program (provided by RMS Disease Management) included:
Nearly 93% of Humana members in
the program achieved or exceeded dialysis adequacy targets as
compared to the national average of 80%.
Nearly 90% of members in the
program achieved targeted hematocrit levels, compared to the 83%
Hospital bed days for patients
were nearly 45% lower than the USRDS average.
Emergency room visits for patients
in the program dropped 75% between 1998 and 2000.
STUDY SHOWS HIGH
RISK PATIENTS CAN PREVENT DIABETES WITH LIFESTYLE CHANGES
"Prevention of Type 2 Diabetes Mellitus by Changes in Lifestyle
among Subjects with Impaired Glucose Tolerance"
New England Journal of Medicine; May 3, 2001
Conclusion: Type 2 diabetes can be
prevented by changes in the lifestyles of high-risk subjects. These
changes include simple lifestyle changes such as moderate exercise
and adoption of a prudent diet.
AHA - "DIABETES
PATIENTS DON'T UNDERSTAND RISKS OR CAUSES OF HEART DISEASE"
"Diabetes Patients In Dark Concerning Heart Disease"
American Heart Association; May 21, 2001
63% of diabetes patients experience cardiovascular disease, yet only
33% consider heart conditions to be among the "most serious"
THE SIX HABITS OF
HIGHLY EFFECTIVE BETA-BLOCKER PRESCRIBING HOSPITALS
"A Qualitative Study of Increasing Beta-Blocker Use After Myocardial
Journal of the American Medical Association; May 23/30, 2001
Results: The interviews revealed 6 broad factors that characterized
hospital-based improvement efforts: goals of the efforts,
administrative support, support among clinicians, design and
implementation of improvement initiatives, use of data, and
modifying variables. Hospitals with greater improvements in
beta-blocker use over time demonstrated 4 characteristics not found
in hospitals with less or no improvement: shared goals for
improvement, substantial administrative support, strong physician
leadership advocating beta-blocker use, and use of credible data
EXAMINES QUALITY OF WWW HEALTH INFORMATION
"Proceed with Caution: A Report on
the Quality of Health Information on the Internet"
Commissioned by the California HealthCare Foundation (CHCF) and
Conducted by RAND, May 2001
Press Release, Summary, Complete Study, Chart Pack
From the press release: The study....is the most comprehensive
evaluation to date of the quality, accessibility, and readability of
the data in a vast, rapidly expanding e-health universe that now
numbers millions of Web pages and thousands of sites. The study is
also the first to analyze both English- and Spanish-language Web
sites and search engines. Research focused on information about four
common medical conditions: breast cancer, childhood asthma,
depression, and obesity.
Finding 1: Search engines are inefficient tools for locating
relevant health information
Finding 2: Answers to important questions that consumers should be
able to find are often incomplete, although when information is
provided it is generally accurate.
Finding 3: Most Web-based health information is difficult for the
average consumer to understand.
Disclosure -- No clients were
mentioned this issue.
E-CareManagement News is an
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