9th Population Health & Disease Management Colloquium

David Mirkin, MDKathryn Fitch, RN, MEd

Principals, Milliman New York

Chronic Condition Management & Wellness:Measuring Financial Outcomes

-2-March 3, 2009

Presentation Outline

Introduction – Who is Milliman and who are we

The problems with measuring financial outcomes for– Chronic condition management

– Wellness

Milliman research

Q&A

-3-March 3, 2009

Milliman Inc

Actuarial and consulting firm

Health discipline– Consult to almost all US based health insurers

– Health Cost Guidelines™ (used by most US payers for cost & utilization benchmarking)

– Care Guidelines™ (used by most US payers to determine best clinical practice and medical necessity)

– Hospital Inpatient Profiler – shows potentially avoidable admissions and LOS

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Milliman New York – Kate & David

Milliman’s largest consulting office

Kate & David’s work portfolio – All major national US health insurance companies & associations

– Many Northeast regional health insurers

– NYC & New England hospitals and hospital systems

– Advocacy organizations – ACS, CF Foundation, Hospice

– A majority of large pharma

– UK NHS and the major private medical insurers

– Kate has authored over 20 publications

– David is the only “healthcare expert” shorter than David Nash

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The Problem

General skepticism due to past history of producing inaccurate forecasts and results for financial outcomes

Producing credible forecasts and measuring actual financial outcomes is not easy and methods are not straightforward

Marketplace continues to expect cost savings from chronic disease management and wellness

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DMAA: The Care Continuum AllianceOutcomes Guidelines Report III - 2008 Guidelines for measuring outcomes for the five most common

chronic condition management programs; Diabetes, asthma, COPD, CAD and CHF

Major Recommendations for measuring financial outcomes– Matched control - Pre-post study design with an internal or external

comparison group that is “equivalent” to and assessed over the same time period.

– Annual qualification using 24 months of claims

– Use of non-chronic population for trend calculation

– Adjust trend for current year chronic condition by the average difference between historical chronic and non-chronic trends

– Financial outcomes should be reported both as per member per month (PMPM) and per participant per month (PPPM)

-7-March 3, 2009

Practical Issues

The most readily available methods are the non-participating and trended historical control models

Non-participating control suffers from significant potential selection bias and poor credibility of causality statements

As a result, trended historical control method is often selected and accurate estimation of trend becomes critical

-8-March 3, 2009

Trend for Chronic Conditions

Milliman has published and unpublished research showing that trends for populations with chronic condition are less than for non-chronic populations and that the relationship between non-chronic and chronic trends may vary significantly from year to year

“Cost trends for chronic condition cohorts with Medicare benefits” – May 2008, Milliman Research Report – Kathryn Fitch, et al.

-9-March 3, 2009

Medicare Chronic & Non-chronic Condition Cost Trends – Milliman Research

0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%8.0%9.0%

10.0%

2002-2003 2003-2004 2004-2005 2005-2006

CAD

DM

COPD

CHF

Asthma

Non-chronic

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Difference Between Non-chronic and Chronic Medicare Cost Trends – Milliman Research

-7.0%-6.0%-5.0%-4.0%-3.0%-2.0%-1.0%0.0%1.0%2.0%3.0%4.0%

2002-2003 2003-2004 2004-2005 2005-2006

CAD

DM

COPD

CHF

Asthma

Non-chronic

-11-March 3, 2009

Illustrative Savings CalculationThe Deal & What You Know:Save 5% below Trended Disease PMPM, using adjusted non-disease trendReduction for Contract Period 5.0%Reduction for Fees 3.0%

Disease PMPM

Disease Trend

Non-Disease PMPM

Non- Disease Trend

Trend Differential

2007 $550 $2002008 $600 9.1% $220 10.0% 0.9917

Guess 2009 $655 9.1% $242 10.0%Contract Period (Guess) 2010 $714 9.1% $266 10.0%

Target $658Reduction for Contract Period 7.9%

Disease Trend Higher by …. 2%

Disease PMPM

Disease Trend

Non-Disease PMPM

Non- Disease Trend

Trend Differential

2007 $550 $2002008 $600 9.1% $220 10.0% 0.9917

2009 $667 11.1% $242 10.0%Contract Period 2010 $740 11.1% $266 10.0%

Target $658Reduction for Contract Period 11.1%

Disease Trend Lower by …. 2%Disease PMPM

Disease Trend

Non-Disease

Non- Disease

Trend Differential

2007 $550 $2002008 $600 9.1% $220 10.0% 0.9917

2009 $643 7.1% $242 10.0%Contract Period 2010 $688 7.1% $266 10.0%

Target $658Reduction for Contract Period 4.4%

What you know before deal for 2010

What you know before deal for 2010

What you know before deal for 2010

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Plausibility of DM Savings Targets Contract

– 5% savings guarantee

– Must recover DM program fees -may need an additional 3% to 5% savings

– Total required savings = 8% to 10%

Is this plausible??

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Plausibility of DM Savings Guarantees If program impacts 10% of those enrolled (highest risk), the

amount of required savings per person increases 10 fold

Using our previous example - $56 PMPM ($714 – $658) reduction is required to meet target or $560 PMPM for the 10% highest risk = $6720 annually

A significant amount of savings is typically due to avoiding ambulatory care sensitive admissions (exacerbations of asthma, COPD, CHF, complications of poorly controlled diabetes, etc.)

ACSAs on average $7,000 per admission

Need to reduce 1 admission for each high risk individual to meet target

Also need to consider additional costs from increased compliance, prevention uptake etc.

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Ambulatory Care Sensitive Admissions: A Plausible Outcome Metric for DM?

ConditionACSA per 1,000 W M

ACSA per 1,000 LM

Manage-ment

MarginCost Per

ACSABACTERIAL PNEUMONIA 9.3 13.5 31% $7,000CHF 8.9 16.5 46% $10,300URINARY INFECTION 3.6 5.7 37% $7,200COPD 2.9 5.5 46% $4,900DEHYDRATION 1.2 2.3 48% $7,600DIABETES LONG-TERM COMPLICATION 0.8 1.6 47% $5,400ADULT ASTHMA 0.7 1.3 47% $7,600ANGINA 0.5 0.7 26% $5,800HYPERTENSION 0.4 0.9 60% $4,200LOWER EXTREMITY AMPUTATION 0.2 0.3 46% $6,000DIABETES UNCONTROLLED 0.1 0.3 49% $6,200DIABETES SHORT-TERM COMPLICATION 0.1 0.2 47% $18,400Total ACSA 28.7 48.7 41% $7,200Total Adm iss ions (ACSA and non-ACSA) 202.7 330.6 39%% ACSA In Total Adm iss ions 14.1% 14.7%

Costs are based on Medicare 5% paid claims and trended to 2009 by 3% annual trend rate

Management Margin = (ACSA per 1,000 LM – ACSA per 1,000 WM)/ACSA per 1,000 LM, which suggests the percentage of potential savings for LM

Categories of diseases follow the definition by AHRQ of Prevention Quality Indicators, version 3.2,

Data Sources: Milliman analysis of Medicare 5% sample data, 2006;

Milliman Health Cost Guidelines and DRG models; and AHRQ Prevention Quality Indicators, version 3.2.

March 3 2009

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ACSA Illustration with Prevalence Adjustment for Global Measurement for a Commercial Population - Alternatively measure for DM population only

Taken from presentation by Iver Juster, MD - Active Health Management

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Measuring Financial Outcomes for Wellness

DMAA recommends: – Process measures:

• Contact frequency, duration and type, participation rates, type and number of contacts

– Behavior change for modifiable risk factors/unhealthy lifestyle choices

– Productivity/quality of life (absenteeism)

– Utilization and medical costs• Medical claims, short and long term disability, absentee days, workers’

comp

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How are Financial Outcomes for Wellness Programs Measured

– Monetize Behavior change:– Weight loss

– Smoking cessation

– Hypertension control

– Hyperlipidemia control

– Flu shots

– Cancer screening

Cost of doing business:– Employee morale

– Attracting and retaining employees

-18-March 3, 2009

Challenges for Wellness Financial Outcome Measurement

Wellness focuses on low-cost people – There are a lot of them (38% of working age adults have under

$1,000/year in claims)

– Most low-cost people will stay low cost for years whether or not their behaviors change

– Program / employee turnover means “treated” people lost to follow-up

Usually impossible to create treatment arm / control arm – participants in wellness programs may self select

Many other changes in healthcare costs (medical practice, disease management, and public education) can easily overwhelm impact of wellness

-19-March 3, 2009

How Much Can Wellness Programs Cost?

Source: Milliman Proprietary, Health Cost Guidelines, 2006, national average. Costs will vary.

Benefit Unit Cost Comment

Annual Utilization/1000 Factor Comment PMPM

Smoking Cessation 0.50$

HRA Incentive 200$ for filling out HRA 355 80%80% of Ees, no Dep 5.91$

Obesity Benefit (not DM) 2.00$

Wellness Promotion $1 per EE per Mo 0.44$

Gym Subsidy 30$ per mo/ family 1,064 20% uptake 2.66$

WebMD license 0.75$

EAP 2 $2 per EE per Mo 0.89$

Total 13.15$

Admin $150,000 1 FTE + overhead 22565 members 0.55$

Total 13.70$

Does Not Include Wellness-Induced Utilization Increases

-20-March 3, 2009

Which Wellness Programs make Sense:Evaluate Value ((Prevalence x Cost) - Offsets) & Evidence Base

Great if only it would work

Proven to Work & Valuable

Smoking CessationHospice

Care

Bariatric Surgery

Weak Strong

Evidence Base for Efficacy

Doesn't Work & Harmful

Works but Low Value

High Value

Cervical Cancer Vaccine

Low Value

Faith Healing

Routine PhysicalVal

ue

to P

op

CT Scan for Low Risk People

Herbal Supplements for

Cancer

Most Weight Loss Programs

-21-March 3, 2009

IF Wellness Works, What Will Happen to Costs Long Term? Medical Cost Trend Analysis? Does it make sense to expect a

reduction? Some cost up, some down.

Low High Before After0 - 0 11.0% 9.0%1 - 1,000 27.4% 33.3%

1,001 - 2,500 19.2% 21.1%2,501 - 5,000 14.2% 13.9%5,001 - 10,000 11.5% 9.2%

10,001 - 50,000 14.0% 11.2%50,001 - 2,000,000 2.7% 2.1%

Claims costs represent all coverages and adult claims in the 2007 Health Cost Guidelines

% PeopleAnnual Claims Costs, $PYPM

Hypothetical Distribution of Members' Claims Costs Before and After Wellness Program

-22-March 3, 2009

Illustrative, Hoped-for Long-Term Impact of Wellness on ADULT CPD

0%

2%

4%

6%

8%

10%

12%

$0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00

Log of Annual Claims

Pro

bab

ility

BeforeAfter

Fewer people with no claims

More people with relatively low cost annual claims

Fewer people with relatively high annual claims

-23-March 3, 2009

Status Report

Current methods for measuring financial outcomes for DM and Wellness program are less than ideal and often produce inaccurate results

Marketplace is unlikely to stop expecting to obtain net financial savings from DM and Wellness programs

We have no magic solution other than;

Purchasers – be skeptical of reported savings, these are unlikely to ever show up as real medical claims cost reductions for healthplans or plan sponsors

Vendors – try and avoid overly optimistic savings calculation methods and caveat reported financial “savings”.

-24-March 3, 2009

Cutting Edge Research

Is there a better way to monitor outcomes for people with chronic conditions?

A subset of the advisory board for the Value Based Insurance Design Institute in Ann Arbor decided to tackle this question during 2007 and came up with this conclusion;– Current methods for measuring outcomes for populations (including

those with chronic conditions) do not produce information helpful to physicians because the process is designed from an actuarial and financial perspective, not a clinical one. People requiring very different clinical management strategies are grouped together in the same “bucket” so it is difficult to decide what to do clinically if costs or utilization are higher than expected.

-25-March 3, 2009

Value Based Management Groups

In late 2007 the group, composed of Michael Chernew (Harvard), Mark Fendrick (Univ. of Mich), Lonnie Reisman (Aetna), Patricia Sabler (Center for Practical Health Reform) and David Mirkin (Milliman) – completed the initial stage of setting design parameters for a new grouping system called “Value Based Management Groups” or VBMGs. The core principle is people should fall into unique groups based on the condition that has the greatest impact on clinical decisions.

During 2008 Milliman working with Fendrick and Chernew developed the grouper and used it to analyze MedStat data for 1999, 2002, 2004 and 2006

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Value Based Management Groups

33 discrete categories including 24 for specific chronic conditions, 1 for “all other” (chronic conditions) and 8 for “healthy” individuals.

Grouping hierarchy based on the impact of a condition on clinical decision making. For example, a patient with both a major psychosis and CAD would be grouped as Major Psychosis since this conditions would drive clinical decision making. The CAD can not be managed effectively without out first managing the Major Psychosis.

The 24 specific chronic conditions account for approximately 76% of total cost for a commercial group insurance population

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VBMG Chronic Condition Category Hierarchy Major psychosis

Severe dementia

Active cancer

Renal failure

Liver disease

HIV

Connective tissue disease

HF

Chronic blood disorders

CAD & diabetes

CAD without diabetes

Diabetes without CAD

HTN alone

COPD Asthma Neurologic disorders Developmental disorder Musculoskeletal Mental health (other) GI TB Thyroid disease Dermatologic disorders Unhealthy newborns Other chronic conditions

-28-March 3, 2009

Trend Drivers Per VBMG System

Categories with largest share or cost growth 1999 to 2006 – Preliminary Figures for a Commercially Insured Population

VBMG Category % of Population (2006)

% of Total Cost Growth From 1999 to 2006

HTN 9.4% 14.0%

Active Cancer 2.6% 13.5%

CAD & Diabetes 4.6% 10.5%

Heart Failure 1.9% 6.4%

Musculoskeletal 3.8% 6.3%

All numbers are subject to revision as results are still under development

-29-March 3, 2009

Recommended Reading

Outcomes Guidelines Report – dmaa/The Care Continuum Alliance

http://www.milliman.com/expertise/healthcare/publications/rr/cost-trends-for-chronic-condition-RR5-1-08.php