Incorrect Cost Measurement Found to Overstate Savings from Disease State Management Programs
June 2005
Contact: Al Lewis 781-856-3962,
Disease Management Purchasing Consortium

Industry Experts Concur on and Urge Adoption of Revised Industry Standard

Philadelphia, PA- Three leading authorities from the disease management (DM) industry today announced they have identified and solved one of the major sources of bias in cost savings measurement. The finding and solution, outlined in the industry's first ever consensus White Paper, Measuring Savings in Disease Management , directly invalidates the industry's current standard--but erroneous--practice of savings measurement from DM programs.

The consensus methodology calls for adoption of a new industry standard and has widespread financial implications for the managed care industry and large employers who pay for DM programs. With projected variations from current measurement practice likely to reduce plans' return on investment (ROI), large numbers of payers will need to recalculate their savings and re-size their DM programs.

"Such discrepancies in calculating savings undermine the industry's credibility by overstating ROI and creating a backlash," says Alfred Lewis, President of the Disease Management Purchasing Consortium (DMPC) and a leading authority in the DM industry. "We needed to eliminate once and for all the major known measurement fallacy in disease management which will restore faith in the validity of savings reports, enable comparisons of health and financial outcomes, and expand the implementation of beneficial disease state management programs." Lewis leads the DMPC with nearly one hundred payers as members and leads the industry's first certification program to validate savings measurement validity.

Thirteen nationally known managed care payers have already adopted this new metric, and have earned certification from the DMPC for valid savings measurement, while three state Medicaid RFPs rely exclusively on it. "Together with the new industry growth projections released today from the Health Industry Research Co., this is a red-letter day for DM," says Lewis.

The subject of Return on Investment (ROI) has been a great source of controversy among health care payers. For years, major payers have embraced disease management programs as a way to manage high cost and debilitating health conditions. The ROI from disease state management has been associated with both improved health outcomes and measurable cost savings. Until recently, inconsistent and invalid application of measurement tools have forced large payers of health care dollars to implement programs without valid tools, approve programs on "good faith," or inaccurately estimate savings from disease management programs. Reports questioning the programs' ROIs, such as one released by the Congressional Budget Office (CBO), have further fueled skepticism.

"Lewis and his co-authors continue to propel the industry forward through their efforts to highlight the importance of rigorous evaluation methodologies," said George Bennett, Chairman and CEO of Health Dialog, a Boston-based health management firm. "Lewis does the industry a service by identifying flaws in common methodologies and driving toward a standard of excellence in reporting."

Leading chronic respiratory disease management vendor AirLogix hailed the revised measurement methodology as a means to level the playing field among some competitive vendors which were claiming savings in excess of asthma medical spending. "We have been arguing for years that the traditional "pre-post" measurement methodology overstates savings," says Susan Riley, CEO of AirLogix. "We are pleased that this initiative is compelling our industry to put standard outcomes measurement methodologies into practice."

About the New Industry Savings Measurement Standard
"It's rare to get three rather opinionated experts to agree on anything but we all felt that there was a huge hole in current savings measurement validity, and that we could fill it," said Lewis.

The "hole" in current practice is caused by the overlooked the reality that when estimating savings from disease state management of a chronic disease, not all patients with a disease will file a claim during the initial measurement period. This creates a situation where the entire diseased population is not counted in the baseline measurement. As improvement is measured from an artificially underrepresented baseline, plans will find an overstated program improvement and an inflated return on investment (ROI).

"Given that the DM industry is adamant about using the population-based evaluation approach, this methodology represents an important step forward in strengthening the validity of this design," notes Ariel Linden, the field's leading biostatistician.

The authors also offer a "plausibility test" based on rates of adverse events. Increasingly, health plans, such as Pacificare, use the event rate ‘plausibility test" as a population-based check on overall disease management success.

"This plausibility test provides a convenient directional validity check for DM outcomes — the functional equivalent of a 'check-sum' calculation for debunking impressive yet implausible results as determined by more elaborate methods," said Gordon Norman MD, Vice President for Disease Management at PacifiCare.

About the Authors of the White Paper
The authors are Ariel Linden, DrPH, who has written 18 peer-reviewed publications on DM evaluation, actuary Ian Duncan, FSA, MAAA, who wrote the official Disease Management Association of America Dictionary of Terms, and Al Lewis, who invented disease management contracting (source; Managed Healthcare Executive 3/2002) and is ranked by Managed Healthcare Executive (12/2004) as the most influential person in the field.

About the Disease Management Purchasing Consortium
The Disease Management Purchasing Consortium Int'l, Inc. (DMPC) provides strategy and procurement services to support the disease management efforts of six dozen health plans and eleven states. Associate members include national health care accreditation organizations such as JCAHO and URAC, the Harvard School of Public Health, Bain & Co., Boston Consulting Group and McKinsey, and eight investment banks. The DMPC specializes in obtaining "most favored nations pricing" and guarantees of savings calculated using the field's only valid counting metrics. Details on the White Paper, the Savings Measurement Certification Program, conferences at which Certification training is offered (next presented at www.diseasemanagementcongress.com ) and services are available at www.dismgmt.com .

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