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83–477 PDF 2002

S. HRG. 107–818

DISEASE MANAGEMENT AND COORDINATING

CARE: WHAT ROLE CAN THEY PLAN IN

IMPROVING THE QUALITY OF LIFE FOR

MEDICARE’S MOST VULNERABLE?

HEARING

BEFORE THE

SPECIAL COMMITTEE ON AGING

UNITED STATES SENATE

ONE HUNDRED SEVENTH CONGRESS

SECOND SESSION

WASHINGTON, DC

SEPTEMBER 19, 2002

Serial No. 107–36

Printed for the use of the Special Committee on Aging

(

SPECIAL COMMITTEE ON AGING

JOHN B. BREAUX, Louisiana, Chairman

HARRY REID, Nevada

HERB KOHL, Wisconsin

JAMES M. JEFFORDS, Vermont

RUSSELL D. FEINGOLD, Wisconsin

RON WYDEN, Oregon

BLANCHE L. LINCOLN, Arkansas

EVAN BAYH, Indiana

THOMAS R. CARPER, Delaware

DEBBIE STABENOW, Michigan

JEAN CARNAHAN, Missouri

LARRY CRAIG, Idaho, Ranking Member

CONRAD BURNS, Montana

RICHARD SHELBY, Alabama

RICK SANTORUM, Pennsylvania

SUSAN COLLINS, Maine

MIKE ENZI, Wyoming

TIM HUTCHINSON, Arkansas

JOHN ENSIGN, Nevada

CHUCK HAGEL, Nebraska

GORDON SMITH, Oregon

MICHELLE EASTON, Staff Director

LUPE WISSEL, Ranking Member Staff Director

(II)

C O N T E N T S

Page

Statement of Senator Larry E. Craig ..................................................................... 1

PANEL I

Dan L. Crippen, Ph.D., Director, Congressional Budget Office, Washington,

DC .......................................................................................................................... 2

Ruben King-Shaw, Jr., Deputy Administrator and Chief Operating Officer,

Centers for Medicare and Medicaid Services, Washington, DC ....................... 29

PANEL II

Sister Anthony Marie Greving, Director, Area Agency on Aging, Pocatello,

ID ........................................................................................................................... 46

John Rusche, M.D., Senior Vice President and Chief Medical Officer, Regence

BlueShield of Idaho, Lewiston, ID ...................................................................... 53

Alan Wright, M.D., Senior Vice President and Chief Science Officer, Centers

for Health Improvement, AdvancePCS, Hunt Valley, MD ............................... 65

Matthew A. Michela, Senior Vice President, American Healthways, Nashville,

TN .......................................................................................................................... 75

APPENDIX

Testimony by American Dietetic Association ........................................................ 91

Statement of Richard M. Wexler, Medical Care Development Inc./ME Cares,

Augusta, ME ......................................................................................................... 93

(III)

(1)

DISEASE MANAGEMENT AND COORDINATING

CARE: WHAT ROLE CAN THEY PLAY IN

IMPROVING THE QUALITY OF LIFE FOR

MEDICARE’S MOST VULNERABLE

THURSDAY, SEPTEMBER 19, 2002

U.S. SENATE, SPECIAL COMMITTEE ON AGING, Washington, DC.

The committee met, pursuant to notice, at 9:31 a.m., in room

SD–628, Dirksen Senate Office Building, Hon. Larry E. Craig

(ranking member of the committee) presiding.

Present: Senator Craig.

STATEMENT OF SENATOR LARRY E. CRAIG

Senator CRAIG. Good morning, everyone. The Senate Special

Committee on Aging will convene. Thank you all very much for

joining us this morning to discuss the topic of disease management

and care coordination. A very special thanks to Chairman Breaux

who allowed me to facilitate this hearing and to chair it. He will

be here in a few moments. I think he just called in tied up in downtown traffic and was there earlier for another engagement, so he

will be joining us in a few moments. He is as interested in this

topic as am I.

Disease management is an emerging technology with the potential to improve patient quality of life and may reduce health care

costs. Disease management can best be described as a coordinated

and proactive approach to managing care for patients with chronic

illnesses.

Chronic illness is common among Americans on Medicare, and I

would like to call attention to some charts that now have been

turned in my direction. The yellow bar chart—why do we not spin

that around. I have got a copy of it here at the desk so we can

show it to the audience. The yellow bar chart shows several diseases with a high prevalence among America’s seniors. Two of the

chronic diseases shown are found in over half of Medicare beneficiaries.

Even more striking is the fact that almost half of Medicare beneficiaries have three or more chronic conditions. The pie chart shows

that 47 percent of those on Medicare have three or more chronic

conditions. These citizens are especially vulnerable to medical complications. They also have high medical costs paid out of their own

pocket and by Medicare.

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Unnecessary hospitalizations are one of the costly consequences

that disease management programs are designed to prevent. These

unnecessary hospitalizations are often a result of cross-drug interaction, poor medication compliance, deviation with treatment plans,

and a lack of patient self-management skills. Lack of coordination

and fragmented monitoring of seniors with chronic health conditions can also contribute to unnecessary health spending.

Our population is aging. As the baby boom generation begins to

retire, the share of chronically ill seniors is expected to increase.

Future Medicare costs are certain to reflect both increased numbers of seniors as well as extraordinary medical inflation.

Evidence-based disease management is a promising technology

for helping to reduce avoidable spending and improve the quality

of life for Medicare’s most vulnerable in the near and the long

term.

We are here today to learn more about the opportunity that disease management presents. We hope to learn about the challenges

faced in moving these techniques into the Medicare population. We

also hope to learn about the breadth of disease management programs and lessons learned from models already underway in the

non-Medicare marketplace.

Today’s hearing will consist of two panels. The first panel that

is before us now, we are pleased to have and to welcome Dr. Dan

Crippen, Director of the Congressional Budget Office, and Mr.

Ruben King-Shaw, Jr., the Deputy Administrator and Chief Operating Officer at the Center for Medicare and Medicaid.

The second panel of experts includes Sister Anthony Marie

Greving, Director of Pocatello, Idaho Area Agency on Aging; Dr.

John Rusche, Senior Vice President and Chief Medical Officer,

Regence BlueShield of Idaho, headquartered in Lewiston; and Dr.

Alan Wright, Senior Vice President and Chief Science Officer, Center for Health Improvement, AdvancePCS, in Fort Hunt, MD; and

Matthew Michela, Senior Vice President for American Healthways

in Nashville, TN.

Well, ladies and gentlemen, to all of you welcome. As I have said,

this is an area that I believe Congress must explore, as we move

toward Medicare reform and a prescription drug program for our

most needy, and to do both with two thoughts in mind, providing

better health care to our seniors and controlling costs through more

effective management.

With that, let me welcome our first panel of witnesses, and Dan,

we will let you start. Thank you.

STATEMENT OF DAN L. CRIPPEN, PH.D., DIRECTOR,

CONGRESSIONAL BUDGET OFFICE, WASHINGTON, DC

Mr. CRIPPEN. Mr. Chairman, thank you. I really appreciate the

opportunity to be here today. This is an important topic, not only

to me, but perhaps more saliently to my kids and my grandkids.

We all thank you for holding this hearing.

I hope to make three points. One, Medicare is a program in need

of reform. Hopefully, that point will not take a lot of convincing.

Two, there is a part of the Medicare population that, as you said,

Senator, is fairly expensive. The question is, are they the same

people each year—or who are these people? There is a concentraVerDate 11-MAY-2000 10:13 Jan 22, 2003 Jkt 000000 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 C:\DOCS\83477.TXT SAGING1 PsN: SAGING1
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tion of expenditures within the Medicare population that invites

further examination.

Third, disease management, or case management, as is more

probably the case with this population, has great potential, we expect, to reform the delivery of Medicare services. We think, however, that it is not yet proven that it will provide significant cost

savings in this program. But that is not because we think it does

not. We just simply do not have enough evidence yet.

I have, I am sure, imposed this first chart on you, Senator, somewhere else, in some other forum, because I use it all the time. It

essentially shows what we are now spending on the programs for

the elderly at the Federal level: Medicare, Medicaid and long-term

care, and Social Security.

Senator CRAIG. Again, why do we not turn that to the audience

who is here to listen and gain information. I have got copies here,

and the chairman will also have, so we can share that with everyone. Thank you.

Mr. CRIPPEN. We are currently spending a little over 7 percent

of gross domestic product (GDP), or a little more than a third of

our budget, on these programs for the elderly. But as my generation retires, we will quickly, over the course of only two decades,

drive that up to over twice as much—and those are relatively conservative projections. So we will be spending 15 percent or 16 percent of GDP on these programs—and we are now spending about

18 percent or 19 percent of GDP on the entire budget.

What this means, of course, is there is likely to be a dramatic

change in our fiscal policy. We will either need to dramatically

raise taxes when the time comes, increase borrowing from the public, or significantly cut other government spending—and we have

not seen that kind of tidal change for a long, long time. We could

end up with a tax system, for example, that looks a lot more like

a European country’s than like what we have experienced here.

For example, since World War II, we have taxed at the Federal

level at an average of 18 percent of GDP. One could see a future

here where that would be 28 percent. So it is a daunting challenge,

to be sure, and something we cannot really avoid. The demographics are baked. The folks who will retire are alive today, and

most of the folks who will be working are alive as well today. We

cannot change those factors. All we can hope to do is change the

growth of the economy, which is the denominator here, and perhaps reform the programs so that the numerator is not quite as onerous for our children. That brings us to the topic of today’s hearing, Mr. Chairman.

A little over 2 years ago, we began to ask the same kinds of questions you have posed for us today. That is, can we identify high

cost procedures as well as high cost beneficiaries in the Medicare

population? We quickly discovered that existing data were inadequate to thoroughly examine those questions, so we joined with a

team at Stanford, who had received funding from the National Institute on Aging, to take the literally millions and millions of

records that the Centers for Medicare and Medicaid Services (CMS)

has accumulated over the years and construct a database, which at

the moment covers 1989 through 1997. We will be adding 1998 and

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1999 soon, so we will have records covering essentially 1989

through 1999.

What we have done is accumulate, over these years and for each

Medicare beneficiary, a great deal of detail on the nature of their

health care needs and the services that they are using from Medicare. In fact, we have a month-by-month rack-up for each beneficiary over those 10-plus years of data. So we can now identify individuals as they enter the program, as they incur illness, and as

they incur expenditures throughout Medicare, which is something

we have not heretofore been able to do.

We will soon publish a series of three papers, essentially explaining this database and how it was constructed, as well as the characteristics of the beneficiaries that the database covers. But I can

tell you some of the preliminary findings today, which I think will

enlighten the discussion of this topic.

First, and of importance to this hearing, we confirm what earlier

analysis has suggested—that is that there is a relative handful of

beneficiaries each year who incur most of the expenses. Five percent of Medicare beneficiaries account for about 50 percent of the

program’s total costs, and 25 percent incur 90 percent of the costs.

I am going to repeat that second point because I think it is an

important number; that is, in any given year, 25 percent of the

Medicare population incurred 90 percent of the program’s total

costs. That is not a new fact, Mr. Chairman. CMS and others have

determined through sampling that it is a very heavy, very skewed

distribution.

But we can start from that point and further analyze our data

now and see what some of the implications are. First, it might suggest that if 75 percent of the folks are only incurring 10 percent

of the costs, we might want to figure out a way to handle them differently than we do the more expensive patients.

That 75 percent might be able to go to any doctor they wanted

to fill prescriptions or to do other things that an average Medicare

recipient might do today without all of it being funded by the government and without all the current limitations in the Medicare

program. Again, because this 75 percent of beneficiaries only incur

10 percent of the costs, it may not be worth imposing all of the limitations of the current Medicare program on them.

But more to the point of today’s hearing, that finding suggests

that we need to examine the 25 percent of beneficiaries with the

highest costs because as Willy Sutton has reportedly said, the reason he robbed banks is because that is where the money is. Certainly if we are going to examine this program from a cost view

point, we need to look at that 25 percent. But it is also the 25 percent of the population in a given year that needs most of the health

care, and so we can examine them as well from the point of view

of determining their illnesses and, how they are being treated, in

addition to their costs.

There are questions we might ask as a first cut to look at both

the data and the issue you have placed before us. Is it many of the

same folks who incur high costs each year because of chronic conditions? If it is, that would suggest a particular kind of approach.

What are their clinical characteristics, and can they possibly be

treated in another way, such as with disease management, to

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produce better outcomes? That is the question you posed at the top

of the hearing.

Another question is, are these folks high cost largely because

they are at the end of their life? We know that is a phenomenon

that can be quite expensive. If it is, the case, what are we buying

for those high expenditures? Heroic measures? Extended stays in

hospitals? The question then is is there a better way to provide

care for these elderly dying patients as well?

Fortunately, we can now begin to answer some of those questions

with a little more precision, but before I do, I want to offer a definition of disease management so that my statement, at least, can be

taken in that context. Basically, and admittedly simplistically, disease management identifies the best evidence-based protocols and

practices for a specific condition and tries to get both the patients

and providers to follow those protocols.

It is important to remember, however, that most of the best practices referred to here were developed for a single condition, not for

one condition among multiple co-morbidities, and do not often account for unique characteristics of the elderly population, such as

dementia.

Many disease managers also try to predict which patients will ultimately become expensive, so as to target preventative measures

more efficiently. Generally, the savings accrue because of fewer

hospitalizations and emergency room visits.

To begin answering some of the questions we identified, we examined in our data a cohort of beneficiaries for the years 1993

through 1997, beneficiaries who were the most expensive 25 percent in any of those 5 years. We then looked for patterns of expenditures and found that while many high-cost patients do die from

one year to the next, a significant number have high expenditures

in two or more consecutive years.

It is those persistently expensive patients, Mr. Chairman, that I

think disease management or case management might address

more straightforwardly. Those patients account for only 20 percent

of beneficiaries but nearly 60 percent of all spending.

The clinical characteristics of this population, as you have already suggested, are quite complicated. Most of the spending is accounted for by patients with multiple chronic conditions rather

than just, for example chronic heart failure. In fact, nearly 90 percent of spending—to translate the numbers of individuals you have

in your charts—90 percent of Medicare spending is incurred by patients with three or more chronic conditions.

Often, one or more of those conditions is among those that have

been treated with disease management in a private, younger population, but as I noted above, it is unclear how successfully those

protocols developed for single conditions for younger folks could be

applied to an older population with several chronic conditions.

An additional complication is that there is not anywhere near a

perfect correlation between exhibiting a condition as a patient and

incurring high, persistent costs. For example, 50 percent of those

persistently high-cost patients that we identified have coronary

artery disease, but only 35 percent of the patients with coronary

artery disease are persistently expensive.

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In other words, persistently expensive patients—by our definition, patients with high expenditures in two or more consecutive

years—are likely to have multiple chronic conditions, but having

any one of those conditions does not mean the patient will become

high cost in the future. So the conditions are not a good predictor

of who the high-cost patients are going to be.

It becomes difficult to identify, therefore, which patients should

receive the additional attention of an intervention such as a disease

management protocol in order to avoid hospitalizations. For nonMedicare populations, disease management companies use predictive modeling and additional data to increase the likelihood of

picking out those with future high costs.

Some of those additional data, such as pharmaceutical spending,

are not readily available for the Medicare population, and the models may not fit the elderly very well. Because we do not have a

pharmaceutical benefit as part of Medicare today, we therefore, do

not have, pharmaceutical data for this same group of elderly people.

We hope at some point in the future to be able to augment our

database with things like that. A number of companies have offered to let us try applying their models to the Medicare population, and it is an exercise that we will pursue shortly. As I suggest, though, it is likely that the lack of comparable data on the

Medicare population will prove to make these models less effective

for predicting future expenditures.

Before I move on, let me simply sum up at this point. While

there are Medicare beneficiaries who exhibit persistently high

costs, it is not clear that disease management as it is now practiced

could be utilized successfully for that population.

But if we assume for a moment that it could, then we can examine what we know about the health results and potential savings,

at least, of utilizing disease management as it is currently practiced in the private sector.

A recent study by the Employee Benefits Research Institute

found that while case studies of particular programs have shown

positive results, there is no—and this is a quote, I believe—‘‘There

is no conclusive evidence that disease management programs in

general improve health or reduce costs in the long term.’’

We at the Congressional Budget Office (CBO) are reviewing

other research, but many studies examine the process of health

care delivery, not the outcomes or the frequency of utilization of

services. Admittedly, evidence on quality and cost is difficult to

construct, especially for this population, and I know many are

loathe to conduct what is usually considered to be a rigorous

study—with a control group that does not receive the better treatment, to provide comparisons.

It may well just be that we are going to have to let more time

pass to see the results of some of these interventions.

My colleague here on the panel obviously is in a much better position to describe to you in more detail the various studies and

demonstration projects being conducted by CMS to begin to answer

some of those operational questions and questions of savings.

In the meantime, or at least for the moment, until more clear

and compelling evidence materializes on health outcomes and costs,

7

I cannot tell you how CBO would evaluate a legislative proposal

promoting disease management.

First, of course, there are a great many design issues that, as

outlined in my written testimony, come into play. But more to the

point, we remain to be convinced of significant savings from disease

management as it is currently practiced, especially when applied to

the Medicare population.

I would hasten to add, however, that we are not agnostic on the

issue. We expect that the continued examination of persistently expensive Medicare patients will enlighten us further, and perhaps,

if companies offering disease management were willing to take on

some of the financial risk for the medical care provided to those patients, as opposed to putting only their own fees at risk—we would

be more confident that companies would have incentives to watch

those costs more closely.

The key, ultimately, at least to savings is the avoidance of hospital costs through lower admission rates and the avoidance of

emergency room visits probably both for persistently expensive patients and for those at the end of their lives. So on both sides of

this distribution, Mr. Chairman, we have work to do in identifying

both the patients who are likely to become high cost and these who

are at the end of their lives and how they are being served through

Medicare. Thank you.

[The prepared statement of Mr. Crippen follows:]

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Senator CRAIG. Well, Dan, thank you very much. Before I ask

questions of you, let us hear from our second member of this panel,

the Honorable Ruben King-Shaw, Deputy Administrator, Chief Operating Officer, Centers for Medicare and Medicaid Services.

Ruben, welcome before the committee.

STATEMENT OF RUBEN KING–SHAW, JR., DEPUTY ADMINISTRATOR AND CHIEF OPERATING OFFICER, CENTERS FOR

MEDICARE AND MEDICAID SERVICES, WASHINGTON, DC

Mr. KING-SHAW. Thank you, Mr. Chairman. I appreciate being

here. It is always good to talk about what we are doing over at

CMS, and particularly on this very important topic as it relates to

our overall strategy to modernize Medicare for all the people that

we serve.

As the Chief Operating Officer of CMS, I am very much, you

know, responsible for the day-to-day operations of the nation’s, if

not the world’s, largest insurance company and financial services

firm.

In that sense, I have got two major product lines in the insurance business, an indemnity fee-for-service Medicare product and

Medicare+Choice product. My comments in the oral testimony will

be focused on the fee-for-service, or indemnity environment. The

written statement does have more information on what we are

doing on managed care.

But, as you can appreciate, most of the world outside of Medicare

has moved away from the indemnity model toward more types of

managed indemnity or managed care or care coordination. In the

insurance benefit administration field we are a good 20 years if not

more behind in that.

So there are implications for that for Medicare, and as you heard

from Dr. Crippen’s testimony, in fact, a relatively small number of

beneficiaries do account for a disproportionately large amount of

our expenditures, and so we are looking at the possible ways that

a disease management, population management, care management

strategy can impact those costs, and beyond that improve our product, again, referring to the fact that we are very much an insurance

company among other things.

We need to make sure that we continue to improve our product,

better serve our beneficiaries and deliver on the true promise of

Medicare, and so disease management gives us an opportunity to

talk about ways we will do that.

My comments will go through some of the environmental factors

that we are looking at and the demonstrations we are currently

pursuing to answer some of the very same questions that we have

talked about already here this morning, keeping in mind that the

promise of disease management is most realized in having a positive impact on both the performance, the outcome, the clinical condition of the patient, as well as the cost, the overall cost of care.

So it’s the integration of resources, of information, of strategies,

of data, the elevation of evidence-based practices, best practices, in

a patient-centered way where these outcomes and cost savings can

be realized.

So we do look to disease management as a way of identifying the

best ways to improve or increase access to care, the best strategies

30

for intervening in the development of disease or the maintenance

of illness—I’m sorry—of wellness for beneficiaries.

We are looking for ways we can improve the clinical outcomes by

having clinical performance of caregivers and physicians and patient participation brought to the mix so that we can produce a better outcome for the patient, the Medicare system overall.

So as we are looking at the ways to do this, we have a few demonstration programs under way. One of these consists of 15 different demonstrations that are the more the disease management

variety. These demonstrations are focused on conditions such as

congestive heart failure or coronary heart disease or hypertension

or asthma.

These individual vendors come from a variety of sources. Some

of these are proprietary, commercial vendors that have been successful in the commercial market. Some of these are academic medical centers including historically black colleges and universities

and other types of institutions. Some of these are not-for-profit entities that specialize in, for example, coronary heart disease.

But through a variety of combinations of expertise, these vendors, if you will, partner with us to bring these best practices to

organize a delivery system on behalf of the patient in a way that

they believe will have a positive impact on the cost and the outcome of the patient.

They are free to use various degrees of technology. Some of them

are quite technologically advanced in their applications; some of

them use a more traditional model of coordination of care. Some of

these are telephonic. Some of these are face-to-face.

Our objective here would be to have these 15 different demonstrations that serve currently over 3,000 Medicare beneficiaries

explore the different strategies so we can collect data at the end

of demonstration to identify some of these best practices and what

the cost implications were, what the performance measures were,

as a result of different interventions, different types of organizations, different populations, and, in fact, different parts of the nation.

Another type of these demonstrations were enabled by BIPA legislation, where again these demonstrations do give us an opportunity to include a prescription drug benefit, not just for a specific

disease, but for all of the prescription drug needs of the enrolled

population. It is commonly known that if you are going to do an

effective job at managing the overall care of a patient, then a major

part of that care plan would be the inclusion of the appropriate

prescription drug therapies.

So by including prescription drugs in the mix, the attempt here

would be to have a disease management organization work with

the entire continuum of care including pharmacology to produce

this outcome. We have just, you know, recently gone through a

process. We are finalizing that information. We hope to get those

underway very quickly, but again that is a second variety of demonstrations that we are pursuing.

We are looking soon to move into a demonstration environment

for various strategies to better improve the performance of the

ESRD, end-stage renal dialysis patients, a significant cost factor in

the Medicare program, and also one that is very ripe, we think, for

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the kind of interventions a disease management program can

bring.

So in a very few words what I hope I have done in this introduction is give a sampling of what we are doing in this field of disease

management with the understanding that we at CMS, the Federal

Government as a whole, the trust funds, are at full risk in the feefor-service environment. There is no intervening force, and so if you

have a disorganized, if you will, non-coordinated system of delivering care, which is what we have in fee-for-service, and you have a

small number of people who are disproportionately consuming your

resources, one of the strategies would be to have an integrator, a

coordinator, use data techniques to identify those individuals and

build a community of care, a system of care, coordination of care,

to have a positive impact on those individuals, but again the Medicare program overall.

Thank you very much, Mr. Chairman. I would be happy to answer whatever questions you and others may have.

[The prepared statement of Mr. King-Shaw follows:]

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Senator CRAIG. Well, thank you very much. I appreciate both of

your testimonies and let me ask several questions of you. Dr.

Crippen, you have provided I think an excellent testimony on what

appears to be a fairly complicated issue, trying to understand if, in

fact, you can affect the current trends significantly.

You discuss the problem of identifying best candidates for disease

management and referred to the concept of regression to the mean.

Now that sounds a bit like an economist speaking.

Mr. CRIPPEN. It is.

Senator CRAIG. I am not. From the testimony I was not sure if

this theory applied to the Medicare population because you did

identify a persistently expensive group in your analysis. Question

therefore is: does the regression to the mean concept apply to Medicare enrollees?

Mr. CRIPPEN. The answer is yes, but probably not in the same

way. The term regression to the mean is roughly saying that a person will over their lifetime, exhibit average spending. These, if we

had a Medicare recipient who in one year was a very high-cost patient, there is some probability that over the next year they will

be a low-cost one—that is, if their are expenditures episodic, or

acute expenditures and not for chronic conditions.

There are certainly many of those folks in this population. Indeed, there are two things that you need to look for as we look at

the data. One is unfortunate but true: those folks who die are not

representative of the future costs of beneficiaries of the program,

for an obvious reason: and those who incur high costs in one year

may not be representative of those who will incur high costs in following years. That is why we looked for people who had high costs

in at least two consecutive years.

That is the population that we think you would first want to look

at to say do they have chronic conditions, are they treatable in a

different way like disease management or case management, because if they are just an acute health problem, there is no use trying to manage that very much. You are going to experience expenditure in the next year that will be out of this group.

Likewise if folks die. But it’s a very important thing, as you

pointed out, to keep in mind. Some of the studies frankly that have

been done over the years looking at this population have done

things, partly because of data necessity, like throw out anyone who

died during the course of the year, and then look at costs. That is

not a representative sample certainly for this population.

So your question is very much on point. We do not have the complete phenomenon of regression to the mean, but we certainly do

have that show up to some extent here as well.

Senator CRAIG. OK. The end of your testimony lays out several

obstacles for achieving direct scoreable savings with any Medicare

disease management program. If successful, will the Medicare demonstration projects that Mr. King-Shaw is talking about provide

enough evidence to show a scoreable savings; do you think?

Mr. CRIPPEN. I expect so; it always seem too soon to tell, particularly for those that are being designed with capitated payments.

That is important so that providers have some financial risk as

well, in looking at the costs, but any additional data on how much

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it takes to support this population and how these disease management concepts could apply will enlighten this discussion.

As I said, part of our reluctance at the moment to say that we

know this is going to save money is not because we do not think

it will. It is because we do not have enough evidence, and these

demonstration projects should be quite informative in that as well

as other research we and others intend to do.

Senator CRAIG. OK. Is there a way to design a Medicare fee-forservice disease management program without creating adverse incentives among providers?

Mr. CRIPPEN. The answer is yes. I suspect, however, that there

are a lot more ways to create a program that does have adverse

incentives, so it is important to keep our eye on that—as you are

suggesting by this question.

Let me digress for a minute, if I might, because I think, as my

colleague here suggested, that we do not often think of this population as an insurable pool, even though we are effectively providing some types of insurance. We think of it more as the Federal

beneficiaries who are participants in this program, and the benefits

we are providing, and how to pay for them.

But if you think of these groups as risk pools, it can sometimes

be informative. We have, by our simulations, estimated that it

takes about 100,000 Medicare recipients to have a pool with average risk. We do not have insurance pools that are in the country,

that large although clearly we could, because we have 39 million,

roughly, people in this program. But given the division between

providers and geography and other factors, we do not have pools

that large.

So you need to look at the risk within the pools, which is one of

the things that drives our interest in this topic. If you look for

high-cost procedures or patients, that is the risky tail of this pool.

If you devise a system for removing those beneficiaries from the

risk pool—because you are paying for them differently, independently—you would then create a much more average risk for the remainder of the pool. We are convinced that it takes some financial

risk by providers and probably beneficiaries, as well, to get the incentives right. By bearing some risk, everyone has a bit of an incentive to watch how much of a service they use.

That is not to say there has to be a large risk, but at least there

needs to be some. So, until disease management companies are

part of a provider system that bears some financial risk, they will

not have those incentives that we as economists think are important to control costs.

It is entirely possible, I think, to construct a system that could

avoid adverse selection—or the incentives that encourage. We also

have an opportunity here—and it is one of the few silver linings

to the cloud that is the doubling of this population, from 40 million

to 80 million, over a relatively short period of time. With all those

new entrants, we would have the ability to assign them to risk

pools in, say, a random fashion.

As a result, there may be some opportunities with the rapid expansion of this population to compensate for any selection that becomes evident; even after the fact, a risk pool that showed lowerthan-average spending, for example, or a healthier population could

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be repopulated with random assignment of folks who are coming

into the program.

Senator CRAIG. OK. I thank you not only for your interest in this

and the involvement of the Congressional Budget Office. I think

that is critically important because those of us who are spending

time looking at these issues and seeing this phenomenal explosion

of costs out there—— Mr. CRIPPEN. Yes.

Senator CRAIG [continuing]. Trying to understand how we get

this all done, and I think your example of talking about moving

from the, well, nearly doubling, 18 to 28, is a very high factor here.

Mr. CRIPPEN. Absolutely, and this kind of approach might also be

useful as you develop other policies on pharmaceutical benefits——

Senator CRAIG. Yes.

Mr. CRIPPEN [continuing]. As my colleague here suggested. It is

entirely possible that you could give pharmaceutical benefits

through a disease management protocol where most of the pharmaceutical costs probably are anyway.

Senator CRAIG. Well, in one of the versions of the pharmaceutical

effort, at least here, prescription drug effort in the Senate this

year, a piece of legislation I supported dealt with allowing pharmacists to become skilled in education, training, cross-referencing,

really working with, if you will, the client or the patient in a much

broader knowledge of the use of, the application of pharmaceuticals

as an important part of not only understanding and creating and

disallowing the problems that can result, but also bringing down

some of those costs. So, thank you.

Mr. King-Shaw, you talk about, I guess I would have to say,

quite a few different management demonstration projects. Why so

many?

Mr. KING-SHAW. Well, I think it is important as we go down this

road to have really good research, good information on what works

and what does not. I think it is also true that different approaches

have been successful in the commercial sector or in the Medicaid

sector. They may not all be successful in the Medicare space, and

so it is important, we think, to have very good credible data about

the range of activities that are possible before we would select any

one or even a few to become the mainstream effort in disease management.

I think it is also important for us to stay current with the developments of technology. For example, one of the realities in the

Medicare program is that there is no natural coordinating force.

We have many different people paying claims, organizations paying

claims on one individual. There is no easy way to pool data together on either patient performance or outcomes or utilization or

anything like that, and so when you do not have anyone in the system who has the ability to coordinate across the system, obviously

you have weaknesses and concerns from that alone.

There are different strategies underway to organize or galvanize

or centralize information and coordination on behalf of patients. We

need to know which ones work better than others and with which

populations.

Senator CRAIG. OK. In January, you selected 15 demonstration

sites for coordinated care projects, as I read it, four rural, one rural

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urban, ten urban. The reason I ask this particular question, my

State by definition is a rural State, is the availability of

Medicare+Choice programs is very low. As an appropriator and a

senator from the rural State, I have worked hard to develop a couple of demonstration projects to try to bridge this urban-rural gap,

and one of those that is developing a good deal of interest is the

tele-health demonstration projects.

Can you tell me if any of your disease management demonstration projects are using tele-health or tele-monitoring devices?

Mr. KING-SHAW. We believe that there are programs out there,

disease management vendors, who will use and, in fact, are beginning to implement those strategies. All of them will not. We have

encouraged these disease management demonstration proposers to

come up with the best approaches based on who they are and

where they are. The tele-medicine/tele-health capabilities are extremely applicable in the rural areas and in some of the urban environments as well. So it is our understanding, it is our belief, and,

in fact, our expectation that those tele-medicine/tele-health applications will be used in some of the demonstrations, and at least one

of them in the rural areas.

Senator CRAIG. OK. Your written testimony discusses potential

payment options and the idea of a competitive bidding process is

notably absent. Is this an oversight or an omission by design?

Mr. KING-SHAW. Actually neither.

Senator CRAIG. OK.

Mr. KING-SHAW. There is a competitive process that we use for

identifying these disease management programs. We have a process that can work in two ways. We can actually release a statement

saying we are interested in proposers in this way, and so individuals can submit their responses to us. They are vetted thoroughly.

We select the best ones. There is a series of criteria that we use.

There is a panel of experts that we bring together from throughout

CMS, and at times we will consult with entities outside of CMS.

But there is a competition for the best, most robust, most tested

proposals. Now, that is slightly different from competitively bidding

for a commodity where you would just pick the lowest price or the

best deal, so to speak. Many of these proposals are submitted with

nuance and strategies and different approaches, and so you are

comparing the various strategies that people will use to achieve an

outcome.

So a commodity like competitive bidding process is probably not

well suited, but they are quite competitive. The selection criteria,

you know, is quite intense, and so when we do have a series of winners, they have been thoroughly vetted.

Senator CRAIG. OK. Of course, the ultimate question is how long?

How long before we see any published final results in these demonstration projects?

Mr. KING-SHAW. We think that the final results are about 2

years, at least a year beyond the completion of a demonstration. So

we have these demonstrations that are running from 1 to 3 years,

more often 2 to 3 years in length. So a year after that, we would

have some conclusive data. They are staggered, and so we will

begin to have some data coming in over a period of time.

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I think what is also important to note is that many of these disease management demonstrations, population management demonstrations, are built around evidence-based practices, and once

evidence-based practices are made available and disseminated to

the delivery system, there tends to be relatively rapid adoption of

them among the caregivers, the clinical community.

So you can begin to see very quickly changes in behavior, patterns of utilization, some outcome data. We will be getting regular

reports from these disease management demonstration projects

that we can compile into some type of interim report card or update. But for something final and conclusive, that would take

longer and it would include some external verification as well.

Senator CRAIG. Well, gentlemen, thank you. Thank you both very

much for your time and your valuable testimony this morning. Of

course, as you all know, this committee is not an authorizing committee; it is an investigative committee, an information-gathering

committee, a record-building committee, that we hope can supply

information and evidence to authorizers as we get into these critical areas of policy design and decisionmaking. Thank you both very

much.

Mr. KING-SHAW. Thank you.

Mr. CRIPPEN. Thank you.

Senator CRAIG. I would ask our second panel and panelists to

come forward please. Thank you all very much. That is the difficulty of cell phones when you do not turn them off. I apologize.

Let me welcome our second panel and let me start with Sister

Anthony Marie Greving, Director of the Pocatello, Idaho Area

Agency on Aging. I always foul that up, Sister. I apologize. We welcomed you before the panel. Please proceed.

STATEMENT OF SISTER ANTHONY MARIE GREVING,

DIRECTOR, AREA AGENCY ON AGING, POCATELLO, ID

Sister GREVING. Thank you very much. I appreciate the opportunity to showcase our health promotion program in southern

Idaho. As Senator Craig says, I am Sister Anthony Marie Greving,

Director of the Area Agency on Aging in Pocatello, ID.

The southeast Idaho area encompasses 9,200 square miles of

rural and desert areas, sagebrush and juniper trees. The area is

dotted with people not in large metropolitan areas or cities, but in

small rural towns. Elderly in southern Idaho number a little over

22,000 or 15 percent of the total population.

I come today to share with you our health promotion program for

the low income elderly. The Area Agency on Aging contracts with

the Southeast Idaho Community Action Agency, Retired and Senior

Volunteer Program, to provide health promotion services to some

1,500 rural elderly. This program has seen a monumental growth.

Over the past 7 years, the Southeast Idaho Health Promotion

Program has received a total of some $90,000 in Older American

Act funds, an increase of 38 percent since initial funding in 1996.

The current year contract, however, with the RSVP program is

not $90,000, but a mere $18,300. In service numbers, 176 people

were served the first year, and now over 1,500 rural elderly are

being served, a monumental 752 percent over the past 7 years. We

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are talking about commitment of dedicated staff and volunteers

who see the need for services to the underserved and vulnerable.

This program began with medication reviews called brown

baggers in local senior centers, and has now grown beyond belief

in assisting the homebound elderly with home safety checks, as

well as a medication assistance program for those elderly who cannot afford the full cost of prescription drugs.

Permit me to cite an example here which happened in southern

Idaho. We have an elderly gentlemen who is 66 years of age, who

has no primary physician, yet he has many diseases for which he

takes many medications daily. On his kitchen table were two coffee

cups. He would fill each coffee cup with 23 medications, take one

cupful in the morning with breakfast, the other cupful in the

evening with dinner, whether he needed them or not.

Through our health promotion staff medication review, we assisted him in getting a primary doctor, who prescribed only seven

medications on a daily basis. I am here to say that now he is serving as a volunteer within his local community.

Elderly people have voiced to me that greater coordination is

needed between physicians and pharmacists on prescribing drugs

for elderly people. So many doctors do not take the time to know

what drugs elderly people are now taking, all the while prescribing

another better pill to ease the pain.

They have also stated that pharmacies need to write not only in

large print, but also give very specific directions on the medication

label when to take the meds, not just the phrase ‘‘take as directed.’’

Those are two of the concerns that local elderly people have.

Besides the standard health promotion program, the RSVP staff

coordinate with Idaho State University Senior Health Mobile Clinic

to provide medication review for the rural Idaho homebound elderly.

This interdisciplinary mobile team travels the isolated areas of

southeast Idaho in a van clinic that is equipped with health-related

supplies, equipment, and educational resources. Yes, Idaho is a

very rural State. Its population is made up of a shifting trend from

those who have aged in place to those who are moving around the

country as they age.

In our health promotion program, we are seeing a number of

older adults who are taking 16 to 18 medications daily, prescribed

by a number of health care professionals to make the individual

feel better. But the picture is by no means bleak. I highlighted

what one health promotion program can do with drive, determination, and a readiness to solve problems in small rural communities.

Disease management is possible in some rural areas, especially

to those elderly desirous of a home and community-based service

system, those who are homebound and those who wish to remain

independent. I have given you a brief portrayal of how southeast

Idaho has utilized the Older Americans Act funds to implement an

effective health promotion program with a limited budget.

There is always room for more services to our vulnerable elderly.

I would ask for greater support of a disease management program

like health promotion and medication management under the Older

Americans Act, so elderly as Medicare beneficiaries can continue to

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maintain their health and quality of life and gain greater longevity

and independence. I thank you for this opportunity.

[The prepared statement of Sister Greving follows:]

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Senator CRAIG. Sister, thank you very much for that very valuable testimony about effective utilization of resource.

Now, let me introduce before the committee Dr. John Rusche,

Senior Vice President and Chief Medical Officer, Regence

BlueShield of Idaho, headquartered in Lewiston, ID. Doctor, I am

traveling to Lewiston, ID tomorrow morning.

Dr. RUSCHE. Say hi for me.

Senator CRAIG. I will do that. I think I am going to beat you

home. Welcome before the committee. Please proceed.

STATEMENT OF JOHN RUSCHE, M.D., SENIOR VICE PRESIDENT

AND CHIEF MEDICAL OFFICER, REGENCE BLUESHIELD OF

IDAHO, LEWISTON, ID

Dr. RUSCHE. Thank you, Senator. I appreciate the opportunity to

give testimony to the committee. I am Senior Vice President and

Chief Medical Officer of Regence BlueShield of Idaho. We are a mutual health insurer and an independent licensee of the BlueCross

BlueShield Association.

We are a member of the Regence Group, which is four northwest

Blues, BlueCross BlueShield of Utah, BlueCross BlueShield of Oregon, Regence BlueShield in Washington, and ourselves.

I appreciate this opportunity to discuss disease management programs from the health plan point of view. I believe that this model

of care coordination will be an important tool over the next few

years as we continue to struggle with the issues of cost and quality.

Disease management works by focusing effort and limited resources on those individuals who are most likely to utilize services

and whose clinical course can be improved by the intervention. You

saw from the charts before that in the Medicare population, half

have three chronic diseases. From an analysis of our population,

21⁄2 percent of our insured population account for 60 percent of the

cost. It really is concentrated.

The range of interventions can extend from patient education

and self-management to medication and therapy management and

reminders to intense, individually crafted care plans involving the

entire array of physician, facility, drug and nursing care available.

In our experience, there are four components of a successful population health program. First is identification. Of any population,

only a subset has a condition.

Second is stratification. Once you have identified the members

with the condition, you need additional data. Not all people with

a condition are of the same likelihood to incur expense.

Third, the intervention has to be palatable. The program must be

acceptable to the members and providers it supports. Simplicity,

ease of service, and customer service are really important.

Finally, outcome data. Any program needs to be able to show

that the end effects are there in order to be able to judge the value

of the intervention, or if you make later changes, that you have

had a positive effect.

In my more than 15 years of clinical practice, it has become clear

that optimum care of complex chronic disease could be handled in

better ways than our current one-on-one physician and patient behind a closed door system. As the managed care organizations of

the 1990’s become the care management organizations of the fuVerDate 11-MAY-2000 10:13 Jan 22, 2003 Jkt 000000 PO 00000 Frm 00057 Fmt 6633 Sfmt 6633 C:\DOCS\83477.TXT SAGING1 PsN: SAGING1
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ture, we will be doing a lot less utilization management, the authorization and approval approach, and more guidance in the best

evidence-based approach to care.

We will be more focused on the opportunities for greatest success. The written testimony I have provided describes our use of a

cardiovascular program and a high risk psychosocial program for

our Medicare HMO population. We will be looking at other chronic

conditions that have modifiable courses. Currently, we are evaluating renal disease, cancer, depression, and arthritis programs.

Some will be internally managed with our staff. Some will be

contracted with vendors. The nature of the population served really

defines the best model, I believe, for financing these programs.

For example, we operate our maternity program internally. We

could get a good result at as low or lower cost than from a vendor.

The services and expertise in our cardiovascular program provided

by QMed could not be replicated internally, so contracting was our

best bet.

A predictable rate of complications or disease incidence in a large

population ordinarily allows a health plan to accept risk or retain

the risk. Unpredictable risks, small populations, make risk-sharing

or guaranteed return contracting with a vendor more attractive.

Chronic disease increases with age. Complications and comorbidities increase with age. Our senior population is what one

might call a target-rich environment for disease management tools.

If there is any population that the tools will benefit, if there is anywhere they will prove their value in health improvement and cost

avoidance, it is among seniors.

Senator, this concludes my oral comments. I would like to thank

the committee for this opportunity to discuss disease management

programs, and would be happy to answer any questions that you

might have.

[The prepared statement of Dr. Rusche follows:]

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Senator CRAIG. Thank you very much, Doctor, for being here and

for offering the testimony and the experience that your companies

are going through.

Now, let me introduce before the committee Dr. Alan Wright,

Senior Vice President and Chief Science Officer, Centers for Health

Improvement, AdvancePCS—I will let you explain that—in Fort

Hunt, MD. Doctor, thank you.

STATEMENT OF ALAN WRIGHT, M.D., SENIOR VICE PRESIDENT

AND CHIEF SCIENCE OFFICER, CENTERS FOR HEALTH IMPROVEMENT, ADVANCEPCS, HUNT VALLEY, MD

Dr. WRIGHT. Thank you, Senator Craig. I would like to thank the

committee for calling this hearing today.

Senator CRAIG. Pull your mike a little closer down maybe just a

bit. Thank you.

Dr. WRIGHT. How is that?

Senator CRAIG. That is better maybe.

Dr. WRIGHT. Our company, AdvancePCS has been creating disease management programs to improve the delivery of health care

in this country for many years. We are pleased that Congress is interested in exploring the integration of disease management into

the Medicare program and look forward to working with Congress.

My name is Alan Wright. I am a physician and I am the Chief

Medical Officer of AdvancePCS. During my tenure at AdvancePCS,

I have been responsible for the development and oversight of disease management programs. I am currently focused on integrating

new and emerging technologies into these programs.

By way of background, AdvancePSC is the nation’s largest independent provider of health improvement and pharmacy benefit

services, touching more than 75 million lives. Our clients include

BlueCross and BlueShield programs, health plans, self-insured employers, other employer groups, labor unions and government agencies including the Federal Employee Health Benefits Program.

AdvancePCS health improvement capabilities range from pharmacy benefit management to clinical programs to disease management programs to specialty pharmacy services. We believe that

these services are critical components in helping our clients balance their objectives of cost containment and quality.

What I would like to do in my testimony today is first describe

our current disease management programs and our approach and

delivery of these programs. Second, highlight the current status

and future plans for our programs. Third, describe the potential

value of these programs to Medicare.

Disease management programs are application and management

strategies for the chronically ill, relying on a wide array of delivery

models that improve the overall health of targeted populations. The

benefit of our disease management programs are numerous. Aggressive management of chronically ill patients typically enables

individuals to require less intensive care which enhances the quality of life and reduces the medical costs.

In addition to providing health and financial benefits, disease

management also reinforces care standards and strengthens physician-patient relationships. AdvancePCS disease management programs are developed internally, using established national guideVerDate 11-MAY-2000 10:13 Jan 22, 2003 Jkt 000000 PO 00000 Frm 00069 Fmt 6633 Sfmt 6633 C:\DOCS\83477.TXT SAGING1 PsN: SAGING1
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lines such as the Joint National Committee on Hypertension, sponsored by the AMA; the guidelines created by the National Institutes of Health; the American Hospital Association; and the American Diabetes Association.

We select programs for development based on the potential improvements of quality of life and cost impacts in the population.

Quality and quantitative effectiveness of AdvancePCS disease management programs are measured using specific indicators that compare results to clinical benchmarks or goals. We enhance programs

continually based on changes in clinical guidelines, feedback from

practitioners, patient experience and program effectiveness, basically determining what works, what does not work, and adopting

those things that work.

We use principles of continuous quality improvement in collaboration on behalf of our sponsors in execution of programs so they

achieve compliance with NCQA, the National Committee on Quality Assurance.

AdvancePCS has a clinical research division called Innovative

Medical Research that is devoted to clinically assessing and improving these programs through cooperation with numerous Federal agencies.

The agencies that we work with include the Centers for Education Research and Therapeutics, sponsored by AHRQ. We also

work with the FDA in post-marketing surveillance programs, and

we have participated with other agencies as well in projects.

Our programs have evolved over time. We maximize the number

of methods available to communicate and educate patients and

physicians. Our disease management programs are now tailored to

specific conditions with interventions that extend from telephone

outreach, mail and web-based interventions to personal nursing

counseling.

A good disease management program begins with a specific plansponsored goal, and when we initiate programs with a sponsor, in

this case Medicare, we would begin discussing what is the objective

of the program, and then build a program out from that objective.

Without that kind of conversation, it is very difficult for everybody to be satisfied at the completion of the program. I would like

to emphasize that patient privacy is a priority in our program, and

we work closely with our plan sponsors to ensure protection of patient confidentiality.

We would like to recognize that the Congress and the administration have made progress in bringing disease management approaches into the Medicare program, but there is more work to be

done. We believe that Medicare can greatly benefit from appropriately designed and tailored disease management programs.

As evidenced earlier in the exhibit from the Kaiser Foundation,

patients in the senior population, the Medicare population, vary

dramatically from those in the commercial population. The problems are more complex and those issues need to be directed and

addressed when developing programs for a Medicare population.

However, there are a number of disease management programs

that could be adopted within Medicare today by focusing on pharmaceuticals and interventions already sponsored by Medicare.

Given the high cost of illness, disease management programs that

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are focusing on some of the new and innovative biotech interventions that are paid for by Medicare Part B are suitable areas for

disease management intervention and continue and will continue

to be a rapidly growing area of both cost and quality within the

Medicare population.

Ultimately implementation of disease management into a Medicare program on a large scale requires consideration of payment reform and creation of financial systems that improve and enhance

the deployment of disease managed services. We look forward in

working with Congress to develop flexible payment systems for

these types of disease management tools, and Congress can support

CMS by ensuring that the agency has broad authority and latitude

within the Medicare program to test new models.

We believe that disease management programs directly address

the challenges faced by Medicare in coming years by delivering

high cost, cost-effective, quality care to chronically ill populations

and would encourage further studies. That concludes my comments, and thank you for this opportunity to testify.

[The prepared statement of Dr. Wright follows:]

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Senator CRAIG. Doctor, thank you very much. Let me turn to our

last panelist, Matthew Michela, Senior Vice President from American Healthways in Nashville, TN.

Matthew, welcome before the committee.

STATEMENT OF MATTHEW A. MICHELA, SENIOR VICE

PRESIDENT, AMERICAN HEALTHWAYS, NASHVILLE, TN

Mr. MICHELA. Thank you, Senator. How is that? Is that all right?

My name is Matthew Michela, and I am Senior Vice President of

Operations of American Healthways which is headquartered in

Nashville, TN. Thank you for the opportunity of appearing this

morning to highlight our previously submitted written testimony.

American Healthways is the nation’s largest independent disease

management organization, providing services to approximately

600,000 Americans with chronic diseases in all 50 States, Puerto

Rico and the District of Columbia.

Our programs were the first in the country to be accredited by

both the NCQA and URAC, and are provided to a wide variety of

populations including HMO, PPO, Medicare+Choice, and for some

of our programs the Federal Employee Health Benefits Program.

We are also the only disease management organization providing

services to a Medicare fee-for-service population today, as we know.

Because of commitment to quality we have led the way in submitting our outcomes, both clinical and financial, for third-party

validation and peer review. Of particular pertinence to this committee, we believe, is the unpublished study reflecting our first 10

months’ results with approximately 6,000 Medicare fee-for-service

beneficiaries with diabetes in Hawaii.

This study shows improvement in all clinical and a net reduction in total health care costs of about $5.1 million or a 17.2 percent net

savings on an inflation-adjusted basis.

Now, disease management is a treatment-support concept predicated on the principle that the way to reduce health care costs is

to actually improve health. The goal of all disease management

programs is to create and sustain behavior change among patients

and providers to assure the most effective management of each patient’s health.

But while the precepts of disease management are uniform, program design and the method of delivery reflect significant differences, and as a result, so do the outcomes. Accordingly, the key

factor in our success is not really a matter of what we do; rather,

it is a matter of how we do it.

Our programs are based on three underlying principles. The first

holds that the fundamental interaction in health care is the one between the patient and physician, and that the rest of the health

care system exists solely to make that interaction more effective,

more efficient or preferably both.

Between office visits, patients are essentially responsible for

their own care and management. The current delivery system provides little or no support for them in that effort. That is what our

programs do.

The second foundation principle holds that creating and sustaining behavior changes necessary to improve the health of people

with chronic disease is best achieved through personal, trusting reVerDate 11-MAY-2000 10:13 Jan 22, 2003 Jkt 000000 PO 00000 Frm 00079 Fmt 6633 Sfmt 6633 C:\DOCS\83477.TXT SAGING1 PsN: SAGING1
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lationships between patients and caregivers. Accordingly, our program interventions are delivered by over 600 highly trained, experienced and caring registered nurses who not only help patients

deal with their condition or conditions, but also with the reality of

living with chronic disease.

That approach underscores the third principle that holds that patients we work with are people and are not diseases. By meeting

each patient’s needs, wherever that patient is, we are sure that we

always prepared to support whatever behavior change the patient

is willing to make.

Another important issue is accreditation. American Healthways’ early advocacy for accreditation had two bases. First, we believed

that every health care organization ought to open itself to meaningful third-party scrutiny. Second, the historical absence of a uniformly recognized definition of disease management has allowed

many programs, really thinly disguised marketing efforts, to prey

on a vulnerable population by masquerading as disease managers.

Accordingly, we needed, the industry needed a reliable external

body to certify program quality. Whether or not accreditation programs serve that role effectively, however, will depend on their acceptance and use by private and public purchasers.

The last topic I will address in my summary is how Congress can

help. At a conference last week, David Kreiss, special assistant to

the CMS Administrator, said ‘‘The last frontier in disease management demonstration projects is population-based projects focused

on outcomes.’’ That he anticipated a request for proposals that

would be released in the month or two. We urge this committee to

provide whatever support may be required for CMS’ efforts in this

regard.

Finally, we would ask Congress to revisit the issue of Federal

preemption with respect to HIPAA and State privacy laws. Health

care while delivered locally is no longer bought or paid for in that

way. Health plans must provide uniform services to national corporations. The continued ability of individual States to enact laws

more restrictive than HIPAA presents a significant barrier to meeting that requirement.

So let me conclude, Senator, by emphasizing that disease management programs properly designed, properly implemented, and

properly delivered improve health care outcomes and reduce the

cost of care.

As we have shown in Hawaii and in many other places, effective

disease management programs can improve the health of Medicare

beneficiaries and reduce the cost of care sustained by the trust

fund. Further, the introduction of disease management services to

Medicare beneficiaries does not require reform of either the health

care system itself or the Medicare program. What it does require,

however, is the support of this committee and this Congress. Thank

you very much.

[The prepared statement of Mr. Michela follows:]

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Senator CRAIG. Matthew, thank you very much. I am going to

spend probably no more than the next 15 minutes with questions,

because I have got other commitments to make this morning. So

what I am suggesting in asking you questions is there may be some

I will have submitted in writing to you, and if you would respond,

if we do not get to all of them, I would appreciate that as we build

this record.

Sister, I think we are all impressed over time when I have associated myself with the senior community and programs of the phenomenal volunteer effort that can be generated in a community of

interest to provide service and educational training and programming. Have you received any interest from other area agencies on

aging to replicate your pharmacy management program?

Sister GREVING. I would answer yes, and it was probably a jealous nature that we have such a good program in Pocatello, ID. I

have had inquiries not only from our other five Area Agencies on

Aging Directors within Idaho, but also from neighboring States,

and their question is how do we do it on a limited budget?

I keep saying to them it is only because of the coordination efforts that we can really do it. We do not duplicate what someone

else has already done. I think that is our secret within southern

Idaho, and we would really like to replicate it throughout Idaho

and the United States.

Senator CRAIG. Is your health promotion program linked in any

way to the tele-health demonstration program at Idaho State?

Sister GREVING. I can honestly answer with an affirmative yes.

Dr. Beth Stamm and I are in constant coordination because we see

the needs of the elderly, especially the rural elderly in Idaho, as

someone who really needs these kinds of services, especially in relation to the lack of transportation that the elderly people might

not have within rural communities. So if tele-health care serves

those rural communities in that way, the linkage will have been

served, yes.

Senator CRAIG. Thank you.

Sister GREVING. Thank you.

Senator CRAIG. Dr. Rusche, how many disease—I should say how

many diseases does Regence have disease management programs

for at this moment?

Dr. RUSCHE. Currently, we have five. We started out with

maternity—— Senator CRAIG. Yeah.

Dr. RUSCHE [continuing]. For a commercial health insurer makes

a lot of sense, but include cardiovascular disease, psycho-social

problems, in particularly our Medicare-managed care, diabetes and

migraine or chronic headache.

Senator CRAIG. How did you first recognize the value of the disease management approach?

Dr. RUSCHE. By an analysis of the data, the Willy Sutton approach of going where the money is. We had for a long time identified that there was a small sub-set of members that were the most

expensive, and part of what a health plan does or an insurance

company does is underwrite. You take information and you assign

a financial risk or a price to it. Well, that same information can

direct your services.

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Those people that are your members that have a likelihood of

consuming resources deserve an opportunity to do better. It does

not make the disease go away. It just kind of puts things off, delays

or decreases complications, and that is all we are hoping to get

with disease management programs.

Senator CRAIG. Well, then ultimately the question is have these

management programs met your expectation?

Dr. RUSCHE. I would have to say definitely yes and no.

Senator CRAIG. OK. I would like to hear why yes and why no,

but more about why no?

Dr. RUSCHE. Why yes, because I do think they showed demonstrated cost savings. No I think is two reasons. One is that the

way the medical system is structured, the way I was trained, the

way most doctors are trained, is to work one-on-one with a patient

without coordination into a system. To do things otherwise is kind

of like walking uphill. You know it really is not the easiest thing

to do. So I think that is difficult.

The second is that while we have in the subset of the population

that we have looked at or treated for a particular condition shown

an effect in their costs, we have not done a whole lot to lower the

high rate of premium increase for our members, and that has been

somewhat disappointing.

Senator CRAIG. Not only obviously providing the service but controlling costs, and then that cost being reflected in premiums was

part of——

Dr. RUSCHE. That is right.

Senator CRAIG [continuing]. Your goal that you did not achieve

as well?

Dr. RUSCHE. That is true, Senator.

Senator CRAIG. OK. Thank you very much, Doctor. Dr. Wright,

you notice that I picked up on tele-medicine as an extension of capabilities and services. You have mentioned the technologies. Could

you tell us about any that you have used in the tele-medicine area?

Dr. WRIGHT. Well, yes, over the years, we have had numerous

tele-medicine pilots, anywhere from devices that were essentially

alarm clocks that would remind people when to take their medication to peak flow meters that could assess how lungs were functioning, and you could put these in a holster and it would upload clinical parameters to glucometers.

One of the issues that we encountered through our pilots was

that the tele-medicine, the medical device industry in this particular sector is emerging, and is unstable. Companies are in business.

They go out of business, and working with these new and emerging

companies and bringing them along remains a challenge in that industry.

Currently, we are working with a program looking at blood pressure cuffs that we distribute in populations and they upload their

blood pressures and make that determination, and it seems to be

working well right now on a pilot basis.

Senator CRAIG. Good, good. You also discussed the necessity of

Medicare payment reform before a large-scale implementation of

disease management could be undertaken. Would you elaborate on

that statement?

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Dr. WRIGHT. I think that the thought process of approaching

management of disease as a system rather than individual transactions between paying for the device, paying for the physician,

how do we reimburse tele-medicine, for instance, how do we work

that into payment schemes?

How do we make sure when we are modifying physician reimbursement, we are not adversely affecting the delivery of a new

biotech drug, or does the compensation for a particular device correctly reflect in the reimbursement of the health care professional

of getting that device up and running or installed or educating the

patient? In particular, with tele-medicine, training of individuals,

you give a senior a computer-based, internet-based device in the

home, that requires training and installation. As an example, how

is that going to work into the 21st century reimbursement scheme?

Senator CRAIG. Good points. Thank you very much. Matthew,

you have talked about an unpublished study in Hawaii, 17 percent

reduction in health care spending over a 10-month period. Based

on what you know now, do you think those results are sustainable?

Mr. MICHELA. Those results are absolutely sustainable. We have

multiple years of experience in the commercial marketplace working with health plans, and our typical contractual relationships

start at a minimum of 3 years, and are typically five, and we even

have 10-year agreements with health plans that require sustained

clinical and financial improvement every successive year of that

agreement, and we have internal studies and some studies that are

published and to be published that demonstrate how that is measured and how that is accomplished.

So the answer to the question is, yes, it is sustainable. Additionally, with our programs, which is very important in the commercial

marketplace, we produce results, both clinical and financial results,

in the first year of operation, which has historically been a problem

in this industry in the sense that you have an infrastructure investment that you need to buildup, plus getting out and establishing relationships in many ways with the physician community

takes time to do. But we have been able to demonstrate that that

is achievable in all of our programs here.

The other thing I guess I would add is we have also demonstrated to our satisfaction and to our customer satisfactions with

some studies that when you remove the interventions that you are

providing in disease management, presuming you are applying

them correctly, those cost savings do return.

So as you are effecting behavior change, which ultimately is improving health, which ultimately reduces cost, if you stop applying

those interventions, then it returns back to the trend that it would

have been previously.

Senator CRAIG. Good. Good. If you have seen one disease management program, you have seen one disease management program. Now that is a comment I heard recently and I guess the implication is that there are many ways to deliver disease management services and many different results.

You have mentioned that program design, method of delivery,

and outcomes can be different with different programs. What contracting arrangements seem to have the best results from your experience?

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Mr. MICHELA. I think the comment that if you have seen one,

you have seen one is absolutely correct, which is why we advocate

and challenge everyone to become accredited by external third parties so that that can be obvious on where those differences are to

everyone.

But specifically to your question, disease management achieves

its best success when it interacts with patients in a variety of settings and interacts both with patients and physicians. When you

talk about contracting for disease management services, what we

would maintain is the best way to do that is to contract for outcomes, not for the process itself. Be less concerned about how many

pieces of mail or reminder cards a person gets and be far more concerned with what actually is achieved on a clinical basis and what

actually is achieved on a financial basis, and that is the umbrella

under which you can balance both costs and quality.

Additionally, we would maintain that you need to contract for a

total population with an identified disease condition. Do not attempt to identify a condition such as diabetes and then apply interventions to only 1 or 2 percent of that disease condition population,

because you will over time encounter what had in the previous testimony this morning been discussed about regression to the mean.

On a population-based approach, what you do is you start to prevent folks from becoming more chronic over time before they would

have otherwise been identified in only the sickest of the sick category here. That is a fundamental part of success of the long-term

viability of these programs is to engage as many people as possible

in a variety of ways.

The third is to support the patient, not the disease. Manage all

of the co-morbidities and conditions that that patient occurs or may

have in the first place, because they do develop certainly over time

multiple conditions that need to be managed, and one of the problems in the industry historically has been with an approach that

will manage only the impacts of a cardiovascular problem on a patient and not recognize that that may be caused by conditions with

diabetes or over time develop into COPD, as an example.

The third in the contracting approach and how we work in the

commercial market is to balance a risk-reward relationship, not to

just pay for services on a fee-for-service unit cost basis, but provide

incentives that if targets are met, clinical and financial targets are

met and exceeded, that there may be opportunity for bonuses and

other incentives that continue to drive the industry to achieve beyond the targets that are accomplished within a specific contract.

Senator CRAIG. Thank you very much. To all of you, thank you.

We appreciate your testimony and the record that is being built

here. This is the first of I suspect a good number of hearings this

committee will hold over the next few years as we develop a record

on this, as other, well, as some of demonstration programs in CMS

mature and evidence comes from those. Clearly, as we debate and

deal with Medicare reform and prescription drug programs, this

kind of information or policy development is going to be, I suspect,

very important in cost management and quality of delivery over the

next number of years.

Thank you all very much. With that, the committee will stand

adjourned.

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Mr. MICHELA. Thank you.

[Whereupon, at 10:58 a.m., the committee was adjourned.]

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