should the Disease Management companies be worried?
Lyceum Associates Newsletter - November, 2009
Abstract: Neighborhood Diabetes, a ‘high touch’ diabetes durable medical equipment (DME) provider, was able to dramatically reduce the incidence of Inpatient Admissions and ER visits for a Medicaid Managed Care Plan. This suggests that a better way to achieve ‘Disease Management’ for patients with diabetes may be to look to existing members of the value chain rather than to outside parties.
According to the CDC, medical care costs from chronic diseases were estimated to represent $1.5 trillion in 2005. Diabetes is one of the most expensive of these, accounting for $174 billion each year in direct and indirect costs; [direct medical costs of $116 billion]. Managing the costs of chronic disease in general and diabetes in particular is widely cited as the key to any meaningful progress in de-escalating the increases of healthcare in the United States. Neighborhood Diabetes was recently made aware by a Medicaid Managed Care Plan that beneficiaries of the plan who used Neighborhood’s services realized stunning reductions in utilization when compared to members that did not use Neighborhood – reductions in hospitalizations of 71% and ER visits of 55%.
These results, while preliminary, substantially exceed those achieved through traditional disease management. This suggests that perhaps a better way for disease management companies to perform their work is to become more involved with tangible aspects of the value chain, such as product delivery. In the long term, it is possible that companies like Neighborhood, joined perhaps by pharmacies, oxygen providers or other suppliers, could have a greater impact on patients than a traditional disease management approach.
NEIGHBORHOOD DIABETES SERVICE MODEL AND VALUE ADDED –
A CASE STUDY
About Neighborhood Diabetes:
Neighborhood Diabetes offers diabetes-related products to beneficiaries via direct home delivery in the Northeastern and Southeastern U.S. Provided products include diabetes testing supplies, insulin pumps and pump supplies, and prescription medications (of all types). Neighborhood is one of the country’s ten largest DME providers of diabetes supplies.
Neighborhood’s business model is built upon the premise that if the company can use its position in the distribution chain to help its clients reduce the incidence of the complications and co-morbidities that are common with diabetes, the ‘world will beat a path to its door’. This model appears to be working, as the company’s revenue growth has averaged almost fifty percent per year over the past five years.
Neighborhood Diabetes Service Model and Value Added:
For many populations of patients diagnosed with Type II diabetes, our observation is that the patients fall into two ‘buckets’:
- Patients who adhere to their treatment regimen, and generally suffer relatively few complications and experience low human and financial costs from diabetes.
- Patients who have trouble adhering to their regimen (or whose other medical conditions worsen) escalate from oral medications to insulin therapy to complications from the disease, leading to substantial human and financial costs.
Neighborhood Diabetes sees it as its mission to maximize the number of its clients falling in the first (more adherent) bucket, while minimizing those in the second (less adherent).
How does the company do this? Neighborhood reinforces physician-prescribed protocol adherence with a service model that includes the following elements:
- Free in-home training on glucose self-monitoring and key elements of adhering to a diabetes treatment regimen is provided to most clients at start-up. Training is provided in nine languages and is tailored to a patient’s unique needs (e.g. special training for visual-impaired clients.)
- Patients are placed on the glucose monitoring system (within their insurance formulary) that best meets their individual needs, reflecting literacy or language issues, dexterity problems, vision impairment, linkage to a pump system, need for ketone measurement, etc.
- Printed educational information and training materials in several languages are provided that help our patients adhere to their doctor’s treatment regimen. Our meter training ‘placemats’ walk a patient through the use of a glucose monitor and the basic steps for testing blood glucose levels.
- If desired, ND can also provide information to clinicians or stakeholders regarding patient adherence by locations or provider.
Verification of The Neighborhood Diabetes Model: Medicaid Managed Care Example
A Medicaid Managed Care Plan was considering undertaking a cost reduction opportunity for diabetes testing supplies recently. The plan was considering a change from providing supplies on an ‘open formulary, pharmacy and DME benefit’ model to focusing on only one supply option wit limited product choices. Neighborhood Diabetes, which serviced about a third of the plan’s current beneficiaries with diabetes, proposed an exclusive program with the plan, and suggested that the plan compare the medical costs of beneficiaries supplied by Neighborhood to those serviced by other providers.
With populations (n =~500) which were comparable in terms of age and sex, the Plan’s in-house research staff analyzed hospitalizations and emergency room visits for a test group of beneficiaries supplied with product by Neighborhood and a test group of Non-ND supplied beneficiaries. The results were as follows:
The results above translate into the following results per 1,000 member months:
According to the American Diabetes Association, hospital inpatient stays represent $58 billion in annual direct medical costs from diabetes, or over 50% of the $116 billion total. ER visits represent a substantially smaller portion – 3.3% of total spending. Even if the results above are only partially or directionally accurate, this suggests (screams?) that there is a huge opportunity for ‘high touch’ providers like Neighborhood to reduce the human and financial costs of chronic diseases like diabetes. Admittedly, the work shown above was done by the Plan for internal decision-making purposes, and was not subject to typical ‘research quality’ standards. Still, the results were quite striking.
Neighborhood Diabetes Results and The Future of Traditional Disease Management
Previous research programs, such as the ‘Asheville Project’(which showed how pharmacies involved in servicing patients with chronic disease could reduce total costs), have supported the idea that product distributors can create substantial value by working closely with patients to increase their adherence to physician-prescribed treatment regimens. The recent results obtained by Neighborhood Diabetes corroborate the value that can be added by a distributor committed to going beyond a narrow definition of its position in the value chain.
Especially as it relates to diabetes, the disease management model as we know it – where DM-company nurses attempt to ‘nudge’ patients toward better adherence - has not be able to achieve results of the same magnitude as Neighborhood appears to achieve with its ‘high touch’ model. Is it really surprising that a person representing a company involved in many important aspects of diabetes self-care, such as performing home training and regularly delivering diabetes supplies and medications, can get the ‘better adherence’ message to resonate more with beneficiaries than a person who is hired by an insurance company to call them periodically? Also, disease management companies often appear to struggle with convincing beneficiaries to ‘opt in’ to their programs. Product suppliers are required to be in regular contact with beneficiaries in order to service them, and do not face the ‘opt in’ challenge.
For some disease states, tomorrow’s best disease management could look like yesterday’s local product supplier!