June 12, 2002

CATS AND DOGS LIVING IN HARMONY? THE CFO AND CMO HAVE COMMON INTERESTS IN DISEASE MANAGEMENT

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

YESTERDAY'S ERA OF AVOIDING RISK -- EXPLAINING CFO EARLY CONCERNS ABOUT DISEASE MANAGEMENT

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.

TODAY'S ERA OF MANAGING RISK AND CREATING VALUE -- CATS AND DOGS WITH COMMON INTERESTS

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 coffee...

(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 several companies.

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 this risk.

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 effective? 

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 done this?

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 archived press 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."

E-HEALTH: AN 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 conference.

Our Take: Must reading! This is one of the most practical and "tell it like it really is" recent reports written about eHealth.

THE AD

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, vincek@bhtinfo.com.

WHO REPORT -- ACTIONS TO PREVENT, TREAT CHRONIC DISEASE

"Innovative 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

NCHC CONFERENCE HIGHLIGHTS INNOVATIVE CARE FOR CHRONICALLY ILL

"Curing the 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

Report summary

This report features case studies of benchmark practices in leading organizations. Read the thoughtful introduction by Dr. Edward H. Wagner.

U.S. EXPERTS 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."

MEDPAC REPORT 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 Costs"
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 management innovation.

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 executives: 

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 

INSTITUTE FOR HEALTHCARE IMPROVEMENT AND DR. BERWICK ARE GAINING NATIONAL ATTENTION

"Doctor Prescribes Quality Control for Medicine's Ills: Donald Berwick Leads Crusade To Replace Many Visits With E-Mail, Phone Calls"
Wall Street Journal; May 30, 2002

"A 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."

COMPREHENSIVE 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
abstract

Full article available under "Publications" on Dr. Eysenbach's website

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

WORTH REVIEWING!

"Reducing the Cost of Poor-Quality Health Care through Responsible Purchasing Leadership"
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

"Use 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

Diffusion 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
Press release

"Trends and 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

"Cybercondriacs Update"
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

"A Comparative Analysis of Claims-based Methods of Health Risk Assessment for Commercial Populations"
Milliman USA, Inc.; May 24, 2002

Preventing Disability in the Elderly With Chronic Disease
Agency for Healthcare Research and Quality, April 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 (http://www.bhtinfo.com).  BHT provides consulting and business development services relating to disease management, demand management, and patient health information technologies.

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