To say that there is a difference of opinion as to the eventual size of the health management (HM) market is an understatement, at least. There have already been two estimates that agreed it would become a $1 trillion market. One [P. Pilzer The Wellness Revolution: How to Make a Fortune in the Next TRILLION DOLLAR Industry New York, NY, John Wiley & Sons 2002] estimated that the “wellness” market would reach $1 trillion size by 2010. The other [T. Haws “The New ‘Healthy Living’ Marketplace” Hospitals & Health Networks Online, Jan 25, 2005] estimated it would take until 2020.

By contrast, the Boston Consulting Group made a far more conservative prediction when it analyzed the market for disease management (DM) services, even as it recognized that these services were expanding to cover ways to prevent, avoid, and generally reduce the incidence and prevalence of disease, as well as managing it after it arises. It gauged the DM market in 2005 at only $1.2 billion, though noting an annual 40% compound growth rate of 40% since 1997. It predicted growth to $1.8 billion in 2008, and concluded that the market would reach maturity at no more than $3-4 billion. [“Realizing the Promise of Disease Management Boston Consulting Group 2006]

These vastly different predictions clearly reflect differences in opinion, but also differences in definition. The $1 trillion estimates considered all consumer-purchased products and services that are aimed at protecting and improving their health, not merely the payer-purchased and internally operated health and disease management (H/DM) programs aimed at controlling costs of sickness care. But even the Boston Consulting Group saw the potential for expansion along a number of dimensions.

In 2005, at least, DM meant little more than identifying those employees, commercial and government insurance “covered lives” that had high risk/reward potential in the immediate run. This meant almost entirely those few with the “favorite five” diseases of asthma, coronary heart disease, congestive heart failure, COPD, and diabetes, which tended to have the highest number of patients times average costs per uncontrolled patient. Even though asthma patients rarely yielded positive return on investment (ROI), they were second only to diabetes in the percentage of payers who were investing in DM for them.

It is conceivable to follow Bayesian logic to choose a best prediction of how large the H/DM market will get. When you know the upper and lower limits of something, but have no reason to prefer any particular point between the two, this logic says to “split the difference” and choose the midway point. This conforms to common sense, and is the point where the potential error is reduced most. But will the market really be $502 billion, the halfway point between $4 billion and $1 Trillion?

Another option occurred to me when I recently read an article reporting that the Milken Institute “think tank” in Santa Monica, California has estimated that the potential savings from healthier living could be $1.1 trillion by 2023. It estimated that a prevention re-orientation toward prevention could avert 40 million cases of seven chronic risks conditions and diseases (cancers, diabetes, heart disease, hypertension, stroke, mental disorders and pulmonary conditions in that year. By both reducing sickness treatment costs for these and achieving the improved productivity enabled thereby, total economic benefits of $1.1 trillion would be achieved. [L. Girion “Healthy Living Could Save U.S. $1 Trillion, Study Finds” Los Angeles Times Oct 3, 2007]

This is not the net improvement, however, since the forecast did not count the costs of prevention, early detection and proactive management of these seven conditions. The authors of the report suggested that the economic gains would “…more than pay for such efforts.” If the two parts of this prediction are correct, or even nearly so, that offers another basis for predicting the size of the market. With $1.1 trillion in economic benefit to be created by providers of H/DM, or whatever the “healthy living” services market ends up being called, the potential market for providers is whatever payors and consumers will pay for such benefits, along with the personal health/life benefits to consumers.

The Milken Institute report argued that reducing obesity to reasonable and achievable levels, by itself, could cut the incidence of new cases by 14.8 million people in 2023, saving $60 billion in treatment costs, and improving economic output by $254 billion. This would yield almost one-third of the predicted potential by itself. It will require a major shift in investment by all payers toward prevention rather than treatment, but it may be the only way the country could afford to enable all its citizens to have basic health insurance.

In general, judging by the most common levels of ROI predicted and promised by H/DM providers, the ROI ratios most popular for them and their clients is around $2.00 to $3.00 to one. Marathon Health, Colchester, Vermont, for example, guarantees a $2.00:1 ROI to its employer clients, while confident that it can deliver $3.00:1, even as much as $6:00:1 if the full benefits including presenteeism as well as absenteeism reduction are counted. (personal e-mail from David Demers of Marathon Health on Oct 2, 2007)

If we take the upper end of the common range, namely $3:00:1 as the ROI ratio that will enable providers to meet payer expectations and requirements, then the resulting H/DM market would become $1.1 trillion divided by 3 = $367 billion, dramatically more than the Boston Consulting Group prediction, though significantly less than the $1 trillion estimates. This market size is independent from the consumer-focused market for fitness centers and equipment, health spas, “boutique medicine” practices that emphasize healthy living, and the wide range of other products and services that consumers might buy on their own. The $1 trillion size may well emerge if this market is combined with what third-party payers, particularly employers might pay for.

The payer side of the market could be bigger, if payers and their H/DM providers agree on a “gainsharing” approach to mutual benefits achieved. If providers could deliver $1.1 trillion in economic benefits to payers, a gainsharing approach might lead to as much as a 50/50 split of such savings, which would mean $550 billion market. But that would only happen if H/DM providers and their clients stick with a gainsharing model, rather than either moving toward traditional charges and payments.

Of course, if the free market and competitive pressures among different H/DM providers works, and the natural wishes of third-party payers to minimize their investments while maximizing their returns forces ROI ratios above $3.00:1, perhaps to as much as $6.00:1, for example, the market size would be only $183 billion, and perhaps even lower, depending on what turn out to be the most cost-effective/efficient approaches to H/DM that are developed and adopted. But any of these alternative sizes could certainly be realized in the next 16 years if providers get good enough at their job, in both delivering and enabling clients to measure full economic impacts.