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E-CareManagement News

August 29, 2002


Who's REALLY influential in the world of disease management (DM)? You don't have to go very far before you bump into the name of Al Lewis, Executive Director of the Disease Management Purchasing Consortium (DMPC). 

Don't let his grin fool you. Alfred B. Lewis (Al) is a shrewd businessman....and getting shrewder every day. This article will describe how Al has recently realigned the DMPC business model and how this change will benefit both DM vendors and health plans. 

In a nutshell, the DMPC business model is shifting from one emphasizing FINANCIAL GUARANTEES as the primary factor in DM contracting to one also including BIOSTATISTICAL VALIDITY -- accurate measurement and improvement of biostatistically valid outcomes.

The DMPC acts as a broker and information clearinghouse on behalf of customers (mostly health plans and state Medicaid agencies) that want to contract for disease management outsourcing services. Al estimates that 70%+ of all competitively bid US disease management contracts negotiated by health plans and states with DM vendors come through the DMPC.

Those of us who know Al will suspect that the changes are NOT purely out of the kindness of his heart, but are motivated by intentions of continuing to position the DMPC as THE dominant intermediary in DM contracting. ....and you're right.


Let's call a spade a spade -- to date, the driving force in implementing DM programs has been cost savings, NOT quality improvement. This parallels the overall focus on cost that dominated the 1990s era of managed care.

IIn recent years this has begun to change. Health care purchasers -- primarily employers and government -- have called attention to quality improvement opportunities in health care. Examples include the formation of the Leapfrog Group and the Institute of Medicine's landmark reports -- "To Err is Human" in 1999 and "Crossing the Quality Chasm" in 2001.

With employer health benefit costs going up at a rate of 12%+ in 2002, the cost issue isn't going away, it's just being put in perspective. 


Until now, the DMPC also has emphasized the cost savings potential of DM programs.

To put it mildly, DM vendors and health plans would describe the DMPC business model in very different terms.

Here's how Al describes the DMPC value proposition to health plans: "I hate to self-promote so my quote might not be very good but here goes... Would you buy a house without getting an appraisal, looking at comparables or having it inspected? That's what like buying DM on your own is. We do all those things for you, and we done 'em almost a hundred times on those exact same houses so we know what to look for and what to pay. And we also guarantee that (1) you'll pay less for that house than your neighbors paid for theirs and that (2) for the next three years, if you don't love living in it, you can resell it at a profit."

DM vendors have a different version of the story. They have been none too happy about the DMPC role in DM contract negotiations. "Al drags us in to a DM contract negotiation by the scruff of our necks. He works for and gets paid by the guys who are already the big gorillas -- the health plans. We know that if we don't play the game Al's way we won't even be invited to bid for the next contract. 

"But our biggest beef has been the DMPC emphasis on requiring financial guarantees to win contracts. Once the negotiations start, Al squeezes the vendors on price. He has taken all the margins out of being a DM vendor and has brought premature commoditization to an industry that has struggled to get established. The overemphasis on price creates a win/lose contracting model, with savings achieved by the health plan coming out of the DM vendors' pockets." 


The DMPC business model is shifting:

FROM: emphasizing FINANCIAL GUARANTEES as the primary factor in DM contracting 

TO: emphasizing FINANCIAL GUARANTEES and BIOSTATISTICAL VALIDITY, i.e., emphasis on accurate measurement and improvement in statistically valid outcomes in DM contracts.

It's beyond the scope of this article, but the topic of DM measurement is strewn with methodological challenges: regression to the mean, selection bias, motivation bias, presence or absence of comorbid conditions, etc. Sound confusing? Good, then you've got the picture.

Put in plain old English, Al's realigned business model goes beyond "Show me the money" to "Show me the money and prove the outcomes are real".

Al believes the DMPC new approach better aligns the economic incentives for the health plan and the DM vendor. "The difference is huge. At many points along the way in the assumptions--physician buy-in, immediacy of patient referrals from case management, timely data transfer, and finding hard-to-find patients, to name just some--the RFP is set up so that the more the health plan cooperates, the better the financial deal it gets. 

"For example, the vendor wants newly diagnosed members offered the program as soon as the health plan knows about them. The sooner a member enrolls, the better the member does. In the RFP, the health plan targets an early-referral percentage. If it refers more, the vendor commits to greater savings. If it refers fewer, the vendor's contractual commitments are relaxed a bit. Incentives are thus aligned for the health plan to identify potential participants earlier."


While the change is subtle, the impact will be dramatic. The realignment of the DMPC business model is good news both for DM vendors and for health plan purchasers.

The realignment of the DMPC business model parallels the shift in emphasis occurring in the broader health care environment -- from one of emphasizing primarily cost to one emphasizing BOTH cost and quality improvement. This has SIGNIFICANT implications:

  1. Reduced emphasis on cutthroat pricing. Competitive pricing has created thin margins and has made it difficult to attract new investor capital to the DM industry.
  2. Increased emphasis on quality as a differentiator. DM companies will be able to compete more on the basis of quality, which we suspect is a much more comfortable playing field for most.
  3. Greater opportunities for partnerships between DM vendors and health plans. Health plans will benefit by being able to provide incentives to maximize the value of DM programs, as opposed to simply hitting thresholds for financial guarantees. This becomes much more of a win/win contracting approach.


While improved biostatistical validity is ONE important measure of quality improvement, over time we'd like to see OTHER IMPORTANT DIMENSIONS OF QUALITY become emphasized in the DM contracting process:

Patient satisfaction
Clinical outcome measures
Long-term value creation, not just short-term return on investment (ROI)


Do you remember the saying about a journey of a thousand miles starting with the first step? The DMPC incorporating quality measures into its contracting process is a GIGANTIC step, and certainly in the right direction!


Preview the PowerPoint presentation of "Remote Patient Monitoring for Disease Management: 10 Observations about the State-of-the-Art"

To be presented at the eDisease Management Workshop, featuring David B. Nash, MD, MBA, FACP, Associate Dean, Jefferson Medical College; Chris Selecky, CEO, Lifemasters; and Vince Kuraitis, Principal, Better Health Technologies.

NMHCC Disease Management Congress
September 18-20, 2002 in Chicago, IL

Mobile Health Care -- Practical Implementation: Tools, Policies, and Best Practices
October 15-18, 2002 in Las Vegas, NV
"Legal and Business Strategies in Mobile Healthcare: Protecting Patient Privacy and Security" will be co-presented by Jim Jacobson, Esq., Partner, Holland & Knight and Vince Kuraitis, Principal, BHT.

For your next conference, planning session, or Board meeting....
Are you looking for a speaker or facilitator to enlighten, energize, excite, provoke, entertain, challenge, inspire, educate?
Call (208) 395-1197.


Capitol Hill News
Federal Telemedicine Update; August 15, 2002

Senate Action on Medicare Creates Opportunities for NCCC Agenda
National Chronic Care Consortium; July 18, 2002


"Essential Elements of Self-Management Interventions"
Robert Wood Johnson Foundation (RWJF) and Center for the Advancement of Health (CFAH), June 2002

This report describes a December 2001 meeting convened by the RWJF and the CFAH. It identifies the essential elements of interventions to improve individuals' ability to manage their chronic illness.

1) Disease, medication and health management
2) Role management
3) Emotional management


Improving Quality of Care White Papers
Prepared for the California Health Care Foundation (CHCF) by Powers Associates, July 2002

The white papers cover a range of topics:

1) Overview 
2) Pediatric Asthma 
3) Breast Cancer
4) Diabetes
5) Heart Failure
6) End-of-Life Care


"History of Risk Adjustment in the US"
Healthcare Review Online, June 2002

Commentary: Risk adjustment...sounds like a pretty dry topic, right? The lack of an acceptable risk adjustment mechanism is a dealbreaker in addressing the imminent chronic disease tidal wave in the U.S. 


"Changes in How Employers Manage Healthcare- A Closer Look at Disease Management"
National Business Coalition on Health; July 18, 2002
Press Release

Request a copy of the study (some great nuggets of insight!)


"A Randomized Trial Using Computerized Decision Support to Improve Treatment of Major Depression in Primary Care"
Journal of General Internal Medicine, July 2002

CONCLUSIONS: Screening for major depression, electronically informing PCPs of the diagnosis, and then exposing them to evidence-based treatment recommendations for depression via EMR has little differential impact on patients' 3- or 6-month clinical outcomes or on process measures consistent with high-quality depression care.


"Wall Street Comes to Washington"
Market Watchers and Policy Analysts Evaluate the Health Care Market
Center for Studying Health System Change, July 2002


most health plans are only "scratching the surface" of what can be done to improve care and reduce costs. 
disease management efforts are more likely to improve the quality of care than reduce costs


"Medical Care and Treatment for Chronic Conditions, 2000"
Agency for Healthcare Research and Quality
Press release, August 14, 2002

"Recent developments. Management of chronic heart failure" 
British Medical Journal; August 24, 2002

"Future of Disease Management Programs Questioned"
Medscape; August 15, 2002 (registration required)

"Disease Management Allowed to Operate Without Authorizations, and Survive"
Report on Patient Privacy, July 2002

"New technology updates the house call. A technological advance is giving new meaning to the words 'house call.' Americans who need their health monitored regularly are finding a lifeline at the end of a phone line."
MSNBC MedzOnline

"Disease Management Programs Come Slowly to Rural Health Plan Enrollees"
Reprinted from Managed Care Week; July 12, 2002

"Telehealth System Keeps Patients at Home"
Health Data Management; August 14, 2002

"How to Improve Childhood Asthma Outcomes"
Rand Health, 2002

"Technology holds promise for disease management"
Employee Benefit News, August 2002

"Crossing the Chasm with Information Technology: Bridging the Quality Gap in Health Care"
California Health Care Foundation; Press Release, August 27, 2002

Disclosure -- No clients were mentioned this issue.

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 © 2002, Better Health Technologies, LLC. All rights reserved.

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