August 29, 2002
DMPC REALIGNS ITS
BUSINESS MODEL -- A MAJOR STEP FORWARD!
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
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
INDUSTRY TREND --
QUALITY BECOMES IMPORTANT
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.
POLARIZED VIEWS OF
THE DMPC ROLE IN DM CONTRACTING
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
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
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."
OUR OPINION -- A
MAJOR STEP FORWARD!
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
- 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.
- 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.
- 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
IS THERE MORE?
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:
Clinical outcome measures
Long-term value creation, not just short-term return on
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!
CONFERENCES FEATURING BHT SPEAKERS
Preview the PowerPoint presentation
of "Remote Patient
Monitoring for Disease Management: 10 Observations about the
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
September 18-20, 2002 in Chicago, IL
Health Care -- Practical Implementation: Tools, Policies, and Best
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.
RECENTLY INTRODUCED FEDERAL LEGISLATION -- DM AND TELEHEALTH
Federal Telemedicine Update; August 15, 2002
Action on Medicare Creates Opportunities for NCCC Agenda
National Chronic Care Consortium; July 18, 2002
SUCCESSFUL SELF-MANAGEMENT PROGRAMS
"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
2) Role management
3) Emotional management
IMPROVEMENT REPORTS HIGHLIGHT CHRONIC CONDITIONS
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:
2) Pediatric Asthma
3) Breast Cancer
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.
EMPLOYER VIEWS OF
"Changes in How Employers Manage
Healthcare- A Closer Look at Disease Management"
National Business Coalition on Health; July 18, 2002
Request a copy of the
study (some great nuggets of insight!)
SIGNIFICANT -- BUT
DISAPPOINTING -- STUDY ON EVIDENCE BASED, EMR TREATMENT OF
"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
PERSPECTIVES ON DM
"Wall Street Comes to
Market Watchers and Policy Analysts Evaluate the Health Care Market
Center for Studying Health System Change, July 2002
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
release, August 14, 2002
developments. Management of chronic heart failure"
British Medical Journal; August 24, 2002
"Future of Disease Management Programs Questioned"
Medscape; August 15, 2002 (registration required)
Management Allowed to Operate Without Authorizations, and Survive"
Report on Patient Privacy, July 2002
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
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
Improve Childhood Asthma Outcomes"
Rand Health, 2002
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.
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
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