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Disease Mismanagement?

Texas has spent tens of millions of dollars on “disease management” — phone calls and check-ins with Medicaid patients designed to control costly chronic illnesses and save money. The jury's still out on whether it worked, but the state's preparing to rebid the contract anyway.

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Texas has spent tens of millions of dollars since 2004 on “disease management” — phone calls and check-ins with Medicaid patients designed to control costly chronic illnesses and save the state money. But the jury's still out on whether it worked.  

Over the last four years, McKesson Health Solutions, the company that the state contracted with to adminster the program, saw some promising health improvements but didn’t meet its target cost savings or care outcomes, state health officials say. Despite mixed results at home, and research questioning the merits of disease management programs nationally, the state is re-bidding the contract.

“All I can tell you is that the savings to the state haven’t shown up,” said former state Rep. Dianne Delisi, R-Temple, who filed the bill creating the program. “It doesn’t matter if McKesson or the pope got the contract. These are very, very difficult patients to manage.”

Texas got into disease management in 2003 with a largely fiscal incentive: Medicaid coverage takes up a quarter of the state budget, and 27 percent of state Medicaid patients account for 63 percent of its costs. Lawmakers believed if they could find a way to control chronic illnesses and reduce hospitalizations, they could save millions of dollars and improve the health of Texas’ neediest patients. “If we can help people improve their health and save the state money at the same time, that’s good for everyone,” Health and Human Services Commission spokeswoman Stephanie Goodman said.

Texas wasn’t the only state considering disease management. Across state governments and the private sector, health care companies — many of them insurance providers — designed and sold their own preventative care programs. But success varied. Those that improved care didn’t always save money; those that saved money didn’t always improve care. A 2004 study by the Congressional Budget Office fired a warning shot: It found “insufficient evidence to conclude that disease management programs can generally reduce overall health spending.”

Texas forged ahead anyway, signing its first disease management contract with McKesson in 2004, in the midst of a budget crunch. The company said it would use persistent phone calls, a 24-hour hotline, and house visits if necessary to persuade Medicaid patients to take better care of themselves, saving the state an estimated $14 million a year in hospitalizations and other costs. The so-called Medicaid Enhanced Care Program, which focused on nearly 60,000 patients with six chronic illnesses, including asthma and diabetes, would meet its savings and health targets, or else it would forfeit some of its fees back to the state.

After more than four full years of the program, the state has reported several strong health results: Coronary artery disease patients in the program saw their hospitalizations drop by 37 percent; the number of them getting flu vaccines more than doubled. Asthma patients saw an 88 percent improvement in daily inhaler use, and hospitalizations dropped by 15 percent. But state health officials say other important targets weren’t met. Thirty-seven percent of the program's patients still smoke, and 73 percent don't know their blood pressure, a particular challenge among coronary artery disease patients. Only half of patients are taking so-called ACE inhibitors, drugs that reduce the risk of hypertension and heart attack.

The other missed target has been financial. McKesson reports saving the state $20.6 million over the first four years of the program — all the data that's currently available. But that's far less than what state officials had anticipated. The program lost between $2 million and $3 million in each of its first two years, according to state health figures. In 2007 and 2008, the program saved millions of dollars, but not, state health officials say, as much as McKesson had predicted. In all, the state paid McKesson more than $63 million to run the program — but the company was forced to pay back $6.7 million for missing health and savings targets.

“The program has shown some very positive improvements in health outcomes,” Goodman said. "But there are areas where we’d like to see even better results.” A 2009 report on Texas' disease management effort took a stronger stance. The report, commissioned by state lawmakers and written by a third-party research consultant, noted: “There is no conclusive evidence that [disease management] reduces overall costs and only limited evidence that it can improve quality of care for some conditions.”

McKesson officials declined to be interviewed for this story because they're in the running for the state's new disease management contract. But they said in a statement that they've worked closely with Texas since 2004 to "reduce unnecessary emergency department use and in-patient hospitals," and that their clinical outcomes have exceeded expectations.  

Disease Management in Texas — How McKesson Performed

Year Amount State Paid McKesson
Savings Amount McKesson Repaid
2004-05 $16 million
-$2.9 million
$4.7 million
2005-06 $18.3 million
-$2.1 million
$1.4 million
2006-07 $15.6 million
$4.2 million
$259,000
2007-08 $13.3 million $13.8 million $340,000

Source: Texas Health and Human Services Commission

Disease management experts say there's no cut and dried formula for determining savings. It's incredibly hard to count how many people with chronic illnesses are not hospitalized due to disease management interventions. And they say Medicaid and Medicare disease management programs present unique challenges, because of the transient nature of those patients. "Finding those people and engaging those people is really the most important component of success," said Tracey Moorhead, president and CEO of the Disease Management Association of America.

But Moorhead and others say disease management programs have been just as successful in the public realm as they have been in the private sector — and cite Oklahoma, Indiana and Pennsylvania as examples. They argue even if the programs haven't saved as much money as anticipated, they've still provided more value to patients per dollar than most other health interventions. Jaan Sidorov, a disease management consultant who calls McKesson a competitor, said while states get annoyed with their disease management providers over the failure to meet certain targets, "that doesn't mean that any are prepared to abandon the whole concept" — particularly when their only other cost-saving options are cutting benefits or increasing eligibility requirements. "Everyone wishes that they would save money. But there's also this rising opinion that, even if it doesn't reduce health care costs. ... it's a good value for the dollar," Sidorov said. "You could argue the taxpayers of Texas are still getting their money's worth."

Opponents of the state's disease management strategy say the evidence isn’t there to continue the current program. In independent study after independent study, national health care analysts say even the most optimistic disease management numbers fall short of real savings for state governments. Nor can they reproduce all of the positive health benefits that private sector providers show in their in-house studies. “In order for disease management to work, you have to change patients’ way of life. You have to make them aware of the very real consequences of their lifestyles,” said Gino Tenace, chief operating officer of the health care services company Rise Health and a former disease management executive. “There’s nothing about that process that you can do efficiently.”

Primary care physicians — some of the toughest critics of the current Medicaid program — say the money would be far better spent on doctors, who have personal and persuasive relationships with their patients. They say the reason many disease management programs haven’t worked is because they’ve been driven not by doctors but by insurance companies, who patients naturally distrust. “You could incentivize a doctor to bring in a case manager, to dedicate a nurse to this kind of outreach,” said Tom Banning, CEO of the Texas Academy of Family Physicians. “What’s the value of paying some outside entity when that money could be going into primary care?” 

But these questions have done little to stem the disease management tide, in Texas or nationally. Employers and government agencies spend about $2.5 billion a year on disease management, according to a recent Business Week analysis. And the health care reform Congress is considering will likely include more incentives for employers who provide the service. Many disease management providers are expanding their programs to include new mobile health technology and to emphasize the so-called "medical home" — a primary care model that revolves around doctors.  

Goodman said deciding whether to continue the state disease management program is up to the Legislature, not the commission. In the meantime, the agency has revised the program to focus more on high-risk, high-cost Medicaid clients — “not just people with a certain chronic health issues” — and is evaluating proposals from seven different bidders, including McKesson. “The question is: What’s the best way to encourage positive health behaviors in our clients?” Goodman asked. “I think we’re still trying to figure that out.”

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