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What Will it Take for DM to Demonstrate an ROI?
Ariel Linden, DrPH, MSPresident, Linden Consulting Group
www.LindenConsulting.org
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The Story LineDM is promoted as a major medical cost-savings mechanism.
Financial outcomes are typically measured in terms of ROI ($ spent vs. $ saved).
“Cost trends” are used to compare actual to predicted (diseased vs. non-diseased)
“The jury is still out” on whether DM is economically effective
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Plot
1. Demonstrate why cost is NOT a good measure of economic success.
2. Provide a more suitable alternative.
3. Demonstrate model to determine if there is sufficient opportunity to achieve economic savings – upfront!
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Where is the Savings Opportunity?
Prescription Drugs10%
Nursing Home6%
Physician and Clinical Services
21%
Other25%
Hospital31%
Program Administration
7%
17% of admissions come from ED17% of admissions come from ED
The Healthcare Dollar - 2004
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Inpatient Cost Trends
-8%-6%-4%-2%0%2%4%6%8%
10%
1994
1996
1998
2000
2002
2004
Year
Ann
ual I
npat
ient
Cos
t Cha
nges
(%
)
Year-Over-Year Cost Change
Cost “Trend” Line
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Hospital Days Trend(AMI, CHF, Asthma, Diabetes)
0100200300400500600700800900
1000
1990
1992
1994
1996
1998
2000
2002
Year
Hos
pita
l Day
s pe
r 10,
000 Hospital Days per 10,000 Population
Bed-days “Trend” Line
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Hospital Discharge Trends(AMI, CHF, Asthma, Diabetes)
0
20
40
60
80
100
1990
1992
1994
1996
1998
2000
2002
Year
Dis
char
ges
per 1
0,00
0
AMI (410)CHF (428)Asthma (493)Diabetes (250)
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ALOS Trends(AMI, CHF, Asthma, Diabetes)
0
2
4
6
8
10
1990
1992
1994
1996
1998
2000
2002
Year
Aver
age
Leng
th o
f Sta
y
AMI (410)CHF (428)Asthma (493)Diabetes (250)
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Emergency Department Trends
(AMI, CHF, Asthma, Diabetes)
0
40
80
120
160
200
1990
1992
1994
1996
1998
2000
2002
Year
ED V
isits
per
10,
000
Asthma (493)Heart DiseaseEndocrine (240-279)
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So What Have We Learned?
Hospital costs have increased over time;
Hospital days have decreased over time,
Discharges have been flat
ALOS has decreased
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Deductive Reasoning
Disproportionate increase in unit pricing
DM cannot impact unit price of services
DM can impact acute utilization
Thus:
Programs should be evaluated on acute utilization and not costs directly.
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Current Method (Scenario 1)Baseline: 1000 admits X 5.0 ALOS X
$1000 actual average day rate
= $5,000,000
Year 1: 1000 admits X 5.0 ALOS X
$1100 (estimated 10% increase in trend)
= $5,500,000
Actual = $5,200,000
Savings = $300,000
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Current Method (Scenario 2)Baseline: 1000 admits X 5.0 ALOS X
$1000 actual average day rate
= $5,000,000
Year 1: 1000 admits X 4.8 ALOS X
$1100 estimated 10% increase in trend
= $5,280,000
Actual = $5,200,000
Savings = $80,000
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Alternative Method
Measure admission and ED rates while holding unit prices constant:
Baseline: 1000 admits X $5000 = $5,000,000
Year 1: 900 admits X $5000 = $4,500,000
This controls for the confounding of unit pricing and secular decreases in ALOS (both beyond DM’s purview)
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Population vs. Diseased Cohort?
DM fees are typically PMPM not PDMPM
Unsolved issues in the identification of diseased patients, migration, disenrollment, etc.
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Disease Specific vs. Non Disease?
We would expect the intervention to decrease utilization in the targeted disease (primary outcome) and only then impact other non-specific outcomes.
“Therapeutic Specificity”: it should not be assumed that an intervention targeting one disease will impact another.
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Intervention SpecificityExample: Diabetes management and heart
disease
Clinical trials have not yet shown that aggressive management of HbA1c in diabetics leads to statistical reductions in CV events.
Intensive BP and lipid management is more cost effective than targeting HbA1c as a means of reducing CAD.
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Assessing Opportunity for DM
Review historic acute utilization trends for admission and ED visit rates:
Are the rates trending up/down/flat?
Are the rates high enough to warrant an intervention?
Perform a Number-Needed-to-Decrease (NND) analysis to determine ROI potential.
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NND Analysis (1)Assumptions
– Population Size = 100,000– Discharge Rate = 1045 per 100,000 – ALOS = 4.8 days– Hospital Day Rate = $1000– Cost per admit = $4800– Vendor fees = $0.90 X 100,000 X 12 =
$1,080,000
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NND Analysis (2)To break-even:
Vendor fees $1,080,000 Cost/Admit $4800
225 admissions (from these 4 diseases) must be reduced in order to break even on fees.
Percent decrease from baseline = 225 ÷ 1045 = 21.5%
= = 225
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NND Analysis (3)
32.433964.56753.027.028353.85632.5
21.622643.04502.0
16.217032.33381.5
10.811321.52251.0
% DecreaseNND% DecreaseNNDROI
Cost/day = $2000Cost/day = $1000
Table 1. Assume $0.90 PMPM program fees
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NND Analysis (4)
43.145086.19003.035.937571.87502.5
28.730057.46002.0
21.522543.14501.5
14.415028.73001.0
% DecreaseNND% DecreaseNNDROI
Cost/day = $2000Cost/day = $1000
Table 2. Assume $1.20 PMPM program fees
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First Set of Conclusions
Measuring cost directly does not “tease out” the program impact vs. unit pricing
National data has shown flat admission rates and declining ALOS which raises the question of “opportunity”
Using the population’s data, an NND analysis should be conducted a-priori.
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Criticisms
Measuring rates at the population level does not account for differential enrollment trends
Reviewing disease-only hospitalization data disregards changes in acute utilization for comorbidities of the primary condition
As a result, savings are underestimated
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NND in a Diabetic Population (1)
Claims data from a medium-sized health plan were retrieved for the period between 2001 and 2004
Diabetics in a health plan were identified retrospectively using HEDIS 2006 criteria
Overall prevalence was 5%
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NND in a Diabetic Population (2)
27.020.025.0Enrollment (months)
60.366.059.8Female (%)
46.571.348.9Age
Commercial (77.8%)
Table 3. Characteristics of the diabetic cohort under study
Medicare(14.2%)
Medicaid(8.0%)
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NND in a Diabetic Population (3)
Hospitalizations were categorized into 3 groups:
Diabetes only
Diabetes + Comorbities
Diabetes + Comorbities + “Possibles”
1150 primary codes were evaluated by an expert in field - (Tom Biuso, MD, MBA)
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NND in a Diabetic Population (4)
$2.4 M$2.4 M$2.4 MProgram Fees ($20/mo.)
4.54.74.3ALOS1018658377Admits per 10,000
Diabetes Only
Table 4. Break-even point for a diabetes disease management program
Diabetes,Comorbidities
Diabetes, Comorb, Possibles
Assumptions
267255279NND (break-even)
263974% Reduction
9,0009,4008,600Cost/Admit ($2k/day)
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Second Set of Conclusions (1)
Using a disease specific cohort elicits even more stringent performance requirements than at the population level for DM to break-even
Expanding the diagnoses to include nearly everything related to the disease does not make life that much easier.
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Second Set of Conclusions (2)
Fees are the only variable that can be manipulated. Thus more cost effective interventions should be considered to bring down costs.
Alternate measures of economic effectiveness should be considered
An NND analysis should be conducted using either the population or cohort.
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Health Researcher’s Oath
I (state your name), hereby acknowledge that the methods presented herein do NOT solve every source of bias in the evaluation of DM program effectiveness and should not be construed as such.
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References
Linden A. What will it take for disease management to demonstrate a return on investment? New perspectives on an old theme. Am J Manage Care 2006;12(4):217-222.
Linden A, Biuso TJ. In search of financial savings from disease management: applying the number needed to decrease (NND) analysis to a diabetic population. Under Review