Of Actuaries, Consumerism, Care Management and the Patient Centered Medical Home

"But we're saving money!" said the Disease Management Care Blog.

"I don't really care" said the company actuary.

That pretty much summed things up years ago when the DMCB was arguing the merits of expanding the care management programs. The good news is that the DMCB stopped talking, listened and got educated.

It learned that actuaries assess past patterns of health care utilization to project future patterns, much like looking in a rear view mirror to drive a car forward. Knowing that the previous years' rate of hospitalizations is "X%," that physician offices visit rates are "Y%" and that other rates for other forms of utilization are "Z%" etc., actuaries, knowing the cost for each unit of service, can then project the cost of future services. Since care management is an additional cost, that "hard" number is simply added into next year's budget. It's all added up and voila! the cost of providing insurance was known. Our customers never liked it because rates kept going up. Our State Department of Insurance - and their actuaries - required it because they knew rates had to go up.

Even though the DMCB could demonstrate that a $70,000 per year case manager could save (depending on the condition) $100 to $700 PMPM, the actuary only saw spiraling cost inflation with higher rates of utilization. Just because a segment of the overall book of business may have cost less, it was calculated that the costs for all persons with diabetes and heart failure would continue to rise and that the nurses were an additional cost center of $70K per FTE.

Case closed.

That was the logic then and is still believed by naysayers today. So, how has care née disease management survived years of actuarial skepticism?

One answer may lie in this J.D. Power press release. Human Resource directors, managers and owners that have responsibility for buying commercial health insurance are unhappy with the industry's ability to service accounts, design new products, resolve coverage problems and manage costs. However, the most important determining factor in overall satisfaction is "employee plan experience."

In reading the press release, the the DMCB can't tell what makes up "employee plan experience," but it has a pretty good idea that a large part includes wellness, prevention and care management. So, in addition to "patient engagement," and "self care" and "risk reduction" and "behavior change," care management's secret sauce consists of personalized outreach and creating special relationships with patients. It's called talking to your customers.

Which offers two lessons and a warning:

1. Service Recovery: This is one of the reasons why disease management, now called care management, wellness and prevention, has done so well in the self and fully insured commercial insurance settings. If JD Powers' press release is to be believed, insurers are relying on their care management programs to partially make up for their perennial inability to execute well on other parts of the business. That doesn't mean there isn't growing evidence that the actuaries can be wrong and that care management also saves money. This is cake and eating it too.

2. Medical Loss Ratio: Given the actuaries' biases and an in-house perception that disease management was a customer service function, it's no surprise that disease and care management programs were placed in the administrative cost column and not the MLR. The care management industry always thought it was a clinical function, but with the widespread perception that health insurer administrative costs are too high (and that the MLR is too low), the industry is working hard at getting their costs reassigned.

And the warning?

While my colleagues who are promoting the Patient Centered Medical Home (PCMH) are fixated on its ability to increase quality, reduce costs, rescue primary care, minimize variation, reverse the Federal deficit and banish all hunger in America, it may turn out that a key success factor will be none of those things. Rather, the long term staying power of the PCMH may hinge on its ability to enhance the health care experience for patients. GroupHealth understands that (here at the 30 sec mark) and so does Blue Cross Blue Shield of Michigan (here). If the actuaries get skeptical and consumers don't notice a palpable change, the PCMH may go the way of dermatologists who remember which end of the stethoscope goes in the ears, the dodo bird and good taste in a Lady GaGa music video.

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