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The Name of the Game in PHM is Variability: Part 3 - Assessment

by Scott MacStravic

The sheer number of dimensions of the PHM challenge that are to be measured partly determines the relative difficulty, uncertainty, and costs involved, but the types of dimensions makes an even greater difference. One fairly common practice, however, is to count only the numbers of health risks, chronic conditions, or impairment causes, and link the number of such “factors” to the amounts of sickness care, disability and workers compensation (‘direct”) costs, and productivity or performance impairment (“indirect”) costs, for each individual in the population. This greatly simplifies the measurement challenge, but it may also mislead it.

The difficulty with assessing the specific factors of concern in PHM is that it is normally only possible to identify the overall direct and indirect costs that apply to each individual, together with the presence/absence or degree of the separate factors for each. This means that there is no basis for determining how much each individual factor contributes to the total costs for each, nor predicting how much might be saved through a particular PHM intervention addressing each. In practice, PHM interventions are customized to individuals, at least by what is usually one particular factor affecting each, though potentially for a number of such factors simultaneously, depending on the types of interventions available.

There are four common approaches to gauging individuals’ and populations’ risk/reward levels in terms of costs and economic gains: 1) past claims analysis, 2) health risk assessments); 3) biometric screenings; and 4) “psychographic” surveys. Champions for each tend to think theirs is the best approach, though there is likely to be added value in each of them that is not available in the others. The trouble is, however, that adding more methods adds to costs for insurers and employers, and to participating employees as well, which can directly threaten payers’ return on investment (ROI) by increasing the cost denominator. It can also indirectly threaten ROI by making participation either lower in numbers of people involved, reducing the economic gains achieved, or more expensive to achieve by requiring incentives to be paid, which will affect both numerator and denominator.

Claims analysis is often easiest, because the data already exist, in insurance plans or the employers’ own operational data. This will only apply to direct costs, unless the employer has a P4P system that involves already measuring employee productivity or performance in a way that can be applied to gauging their health-related impairment. Otherwise, only direct costs will be gauged by using existing data, and this will greatly understate the size of the problem and extent of economic benefit for employers, regardless of how much they pay their employees. The degree of understatement will be directly related to the amount of average compensation, with or without team/peer effect or value-based multipliers.

Claims analysis also carries with it the greatest risk of overestimating potential and actual economic gains. This is particularly true when individuals with high/outlier levels of sickness care expense in the baseline year will greatly influence the estimate of potential. Since such individuals are more likely to have lower costs in the following year, thanks to what is called “regression to the mean” than to have the same or higher costs in the next year, a major portion of the potential savings in the assessment, as well as the actual savings in the evaluation, will not be linked to the PHM intervention, but to unrelated “natural” causes.

There are half a dozen validated measures for employee productivity, which should also be fairly good estimates for performance, though I know of none validated for this added dimension of employee value. The book — R. Kessler & P. Stang (Eds), “Health & Work Productivity “, U. Chicago Press 2006 — offers the best compilation of these methods that I know of, and any one might be chosen for PHM use with some confidence. The trouble is that different methods tend to produce different results. Moreover, where comparisons have been made between employees’ self-reported impairment and objectively measured output, it has been found that employees often overstate their degree of impairment. So whichever method is used, there should be sound data available for converting employee reports into most probable reality.

In practice, many PHM suppliers use psychographic measures, along with, or even instead of the others. A few rely totally on individual’s self-reported perceptions and attitudes to predict their future costs, and the same may be used to predict their impairment. This can be inexpensive, where the survey is administered online, for example, and responses are automatically analyzed by computers. But the proof of all such assessments will be in the degree to which they lead to positive ROI based upon them. No merely “scientific” superiority should overcome pragmatic advantages.

Most suppliers who use employee surveys, whether health risk assessments or productivity/impairment questionnaires, can and usually do combine these with psychographic questions to gauge things such as employee motivation, commitment to change, confidence and self-efficacy in self-governance, for example. Answers to such questions, combined with the costs linked to each, can be used to identify and target the most promising individuals for inclusion in PHM interventions. Or they may be used to determine risk/reward segments, whose members will be assigned different levels of intensity and cost for the interventions they get.

There are equally wide variations on how identified risks are defined. “Depression”, for example, may be defined as a diagnosis, with only a small portion of the population identified as having a diagnosed “disease”, or as a “disorder” where a far larger portion is affected, or as an “emotional state” where an even larger portion would be identified as having it. It may even be defined as a general catchall covering all emotional problems and “down” feelings, including anxiety and stress, making it likely to affect the majority of the population.

The variety across internal PHM programs, as well as outsource suppliers, in the methods they employ to assess the baseline situation, which are typically repeated in the evaluation process, add greatly to the overall variability across the large numbers of options available to employers and insurers. We can hope that in the future, there will be improved identification of which are truly the “best practices” in PHM, though there is likely to be constant experimentation with new methods that will compete with even those proven best in the past.




The Name of the Game in PHM is Variability: Part 2 - Economic Impact

by Scott MacStravic

The first basic split among PHM clients in terms of which dimensions of economic impact will be used in assessing problems and evaluating gains is that between commercial and government insurers on the one hand, and employers on the other.  Insurers focus mainly, though not exclusively, on reductions in sickness care costs as the economic gains they are after, with many true “health” care costs part of the PHM intervention.  They may also look at member/beneficiary health status and satisfaction with their PHM experience, as well as the duration of their “membership” in specific insurance plans.

Employers tend to look at a far greater number of dimensions, though these include the same ones that insurers look at, since they pay for such insurance, or if self-insured, pay the costs directly.  But in addition to sickness care costs, employers worry about workers compensation and short- plus long-term disability (STD and LTD) insurance or direct costs as well.  These may be as great as are insured sickness care costs, with some employees, though they are normally far less overall.

The really large economic benefits sought in PHM by employers tend to be that derived from reductions in absences and both productivity and performance impairment while at work (“presenteeism”).  Economic losses from lost productivity/performance has been measured at levels two to five times as great as the sickness care costs associated with the many health-related problems that cause impairment.  Moreover, employers may achieve economic gains through “positive presenteeism”, the potential that healthy and happy employees will contribute significantly more economic value than is “normal”, not merely “impaired” levels.

While productivity, per se, is the more frequently included dimension, compared to performance, there have been a few cases where specific benefits of improved performance have been addressed by employers.  These include employee impact on customer satisfaction and loyalty, word-of-mouth impact on new business, and similar revenue-related benefits, in addition to labor cost reductions.  And many employers have examined improvements in employee retention as adding value in the balanced scorecard dimension of “organizational knowledge” as well as reducing costs of replacing employees who leave.

The determination of which dimensions to include affects the complexity and costs of the PHM effort, whenever measuring these dimensions requires going beyond information already being collected as part of normal operations.  This is less often the case for insurers, since claims data is frequently all they look at, though if they also consider member health status, satisfaction, and retention, for example, special efforts and added expense may arise in collecting such information.

With employers, complexity and costs of measuring dimensions of the PHM problem and progress in its solution are likely to be significantly greater than for insurers (though insurers may have to address these when they provide PHM services for their employer clients).  Measuring workers compensation and disability expenditures is normally routine, already being tracked overall, though there may be added effort used in analyzing collected data so that it serves better to guide and evaluate the PHM effort, itself.

The biggest challenges will be in gauging productivity and especially performance impairment levels and their reduction, i.e. the economic benefits of improving either or both.  While productivity is susceptible to both objective measurement in some cases, and validated estimates via surveys that collect employees’ and sometimes team supervisors’ perceptions of output, performance includes multiple dimensions of its own.

Of course, some dimensions of performance, such as customer satisfaction, retention, market share, new business revenue, etc. are likely to be routinely measured.  But they are normally measured on an overall or market/segment-specific basis, rather than linked to individual or segments of employees, except for sales results linked to specific sales staff members.  Customer satisfaction may be linked to the specific employees known to have served them, where this is likely to be the same individual or team over time, but market share and new business increases may have to be credited more widely, perhaps to the PHM effort overall.

There are probably a half dozen commonly used methods for estimating productivity based on employee self-reported data.  These may directly ask employees to recall how many hours of lost productivity they have had in a recent period, perhaps a week, two weeks or a month, where their memory may be reliable.  Or it may ask for an estimate of the percentage of their full potential they have been able to deliver, considering their health and any problems identified, that may affect their output.

Similar surveys may be used to gauge the levels of performance employees have been able to deliver, since both absence and presenteeism will likely affect performance as much as they do productivity. And the impairment found in individuals may be “multiplied” by their estimated “team/peer impact”, which has been measured at between 1.25 and 1.35 times the impact of the individual’s absence on average. [“Multiplier Effect: The Financial Consequences of Worker Absences” Knowledge@Wharton Dec 14, 2005 (knowledge.wharton.upenn.edu)]

The economic impact of absent or impaired employees may also be based on the economic value of employees in terms of their overall contribution to the employers’ performance.  When employees are paid on a “pay-for-performance” basis, their performance will naturally be measured, though it may prove difficult to determine the extent to which any individual is impaired by their health problems, as opposed to other non-health-related limitations.  Fortunately, once performance improvements have been linked to PHM interventions, the measured performance may be more easily translated into economic benefit.

By far the most common approach currently used in evaluating the economic impact of employees’ health-related impairment is to multiply their degree of impairment times their annual compensation levels.  This means the different employees will have different costs of lost productivity, whenever they have different levels of compensation.  It also fails to take into account any team/peer impact or the likelihood that employees are worth more than they are paid.  One study, for example, found employees worth an average of 3.28 times their annual compensation, though the median was only 1.92 times. [P. Strassman “How Much Is an Employee Worth?”,  Jan 14, 2006]

While insurers have relatively few and commonly used dimensions when measuring their PHM problem/challenge and the results of their PHM investments, employers have far more complex and potentially costly choices.  Fortunately, employers can use the same relatively simple and inexpensive-to-measure dimensions as do insurers, and when they go beyond those, they should also be gaining many times the cost of doing so in the added value they discover across the full range of benefits in having a healthier/happier workforce.




The Name of the Game in PHM Is Variability: Part 1 - Introduction

by Scott MacStravic

Population Health Management (PHM) has become a major market for insurers, governments, and employers to invest in – and for a wide range of organizations, from traditional healthcare providers to specialized PHM suppliers to insurers to deliver to that market.  The numbers of suppliers keeps growing as the number of payer clients does also. The market is beginning to look like the early stages of many new markets, from automobiles to radios to TV sets, cell phones, and electronic gadgets in general – it offers a vast number of options to purchasers, including the “do-it-yourself” (DIY) alternative to purchasing PHM.

Many traditional healthcare organizations (HCOs), from physician practices to hospitals to integrated health systems (IHSs) have entered this market, as DIY providers to their own workforces, or as competitors in marketing PHM services to payers, mainly to employers.  They may do so in order to support their sickness care services marketing strategy by creating and sustaining stronger and more lasting relationships with employers as influencers of both insurance plan decisions on provider networks, and employees’ choices of providers.  Or they may see the PHM market as one they would rather join than merely suffer its sought-after effects in reducing sickness care use and expenditures and thereby their sickness care revenue.

Employers have been involved in a “toe-in-the-water” approach to PHM since the 1970s at least.  Many began with some kind of DIY “worksite wellness” program for their employees, and a growing number are offering onsite medical clinics that engage in PHM along with traditional sickness care.  But most appear to be outsourcing the PHM function to specialized suppliers or HCOs, since there are so many complications in their knowing about their individual employees’ health problems — and most have no great competence in PHM.

Insurers have often been influenced by their own interests or their employer clients’ demands to become PHM DIY suppliers, as well as insurers, to employers, at least.  Both Aetna and CIGNA, for example, offer PHM services to employers other than those to which they provide health insurance plans.  Since insurers can gain substantial experience, and with large populations, by delivering PHM services to their own insured populations, they can gain both the competence and track record needed to become viable suppliers in the overall market, as well as capable DIY providers for their own health plan members.

Specialized PHM suppliers have been in the PHM market, as operators of worksite medical care clinics for employers, or suppliers of PHM services for commercial and government insurers, for a few decades.  There has been a significant movement toward merger and acquisition among such suppliers, resulting in consolidation of their numbers, but many new ones keep entering the market, so the overall numbers of suppliers is still huge.  And while some have captured large market shares, there appears to be no single supplier who could be called dominant.

One of the reasons for this is the vast degree of variability among PHM suppliers, due to both their large numbers and the fact that there is nothing close to agreement on what are the “best practices”, the most cost-effective approaches to PHM in any one of its essential elements.  These elements include:

  1. Determination of what dimensions of economic impact will be included in the PHM planning, management, and evaluation
  2. Assessment of the PHM current state of these dimensions in whatever population (insured plan members, employees, dependents, retirees) is to be involved
  3. Targeting of which individuals shall be sought as participants in either standardized or differentiated PHM approaches to particular problems, risks, or potential gains are to be addressed
  4. Recruiting targeted individuals and segments to become active, engaged, and enthusiastic participants
  5. Sustaining participants throughout the PHM intervention program, at least long enough to achieve some desired effects, if not to the end of a limited intervention, or on a continuous basis if there is no intended end.
  6. Carrying out the intervention process on those participating, using a wide range of interaction and communications technologies and methods
  7. Evaluating the effects of interventions over whichever time frame(s) clients wish

Not only are there vastly different approaches to each of these elements being used by different PHM suppliers, but clients may engage different suppliers for two or more of such elements, including doing one or more themselves, or at least sharing the responsibility with outsource suppliers.  As a consequence of the numbers of and variations among suppliers, the overall PHM market contains far more variation than is true for almost any other example in the business-to-business (B2B) or business to consumer (B2C) markets.

In subsequent postings, I will describe and discuss the seven separable elements in PHM that are subject to such variations.  The combination of this number of basic elements, and the variability in how they are carried out by different suppliers, even within the same supplier for different clients, is what makes the PHM market so replete with variability.




Honesty in Advertising of Health Products and Services

by Scott MacStravic

Honesty is required by law in advertising of medical treatments and pharmaceuticals, though both are subject to some “overenthusiastic” promotion by physicians and drug companies, alike.  On the other hand, there have been even more cases of overenthusiastic promotion by manufacturers of vitamins and food supplements, as well as providers of “alternative medicine” services whose methods have not been subject to scientific proof of safety and effectiveness before being advertised.

The regulation of treatments and products used in sickness care has long been a major effort in the interest of protecting patients from unscrupulous manufacturers, retailers, and providers who can easily take advantage of patients desperate for something that works, or those who rely too much on emotional vs. rational bases for making decisions about the care and providers they seek.  There are certainly a large number of complementary and alternative medicine treatments that have solid evidence behind them.  But in some ways, this makes it easier for unscrupulous sellers to make the case that their offering will work, by citing other examples where medicine has been wrong in concluding that previous CAM therapies were worthless.

The growing popularity of health management, of persons and populations (both deserving to be labeled “PHM”) has opened up a large new market for CAM therapies.   Where CAM providers have achieved greater credibility among their patients for their approaches, and even greater success in terms of bang for the buck, thanks to their holistic approach to patient care, or their ability to enlist more enthusiastic collaboration among patients, they may be significantly more successful than are traditional physicians, at least in terms of benefits vs. costs.

Achieving a greater benefit/cost ratio is sure to make CAM providers more popular among payers, whether governments, commercial insurers, or employers.  A growing number of insurers, for example, are offering, and employers as well as consumers selecting, lower-priced coverage plans that involve more use of CAM providers for health management of sickness care services.  The generally lower prices they charge for their services, and lower overhead/operating costs for their practices, make CAM providers more likely to be able to compete on costs, at least.

The challenge in PHM is to promote honesty in advertising by its providers, whoever they are – specialty organizations that focus on PHM, traditional providers, or CAM alternatives – about what kind of results they are getting for what kinds of costs.  If honesty in advertising were enforced in PHM, then unscrupulous or simply ineffective providers would be severely limited in their ability to attract payer clients, or even consumers, whether they pay out of their own pocket, or have a third party doing so.

There would be a significant number of current PHM providers who would probably be forced out of business if there were forced honesty in advertising, or even if there were the kind of comparative testing and reporting of outcomes and providers as is increasingly true with sickness care.  Commercial insurance plans are already talking about developing and rating the performance of physician practices in terms of managing the health and costs of patients with chronic diseases.  It would be relatively simple to do the same for practices engaged in protecting and improving their patients’ health, such as the MDVIP retainer medicine practices, now numbering over 200 in the US.

If honesty in advertising were required across the board in PHM as well as in sickness care, there would naturally be the same two effects as already noted with publication of comparative quality in sickness care.  The lower-performing providers would strive and many succeed in improving their performance to make themselves more competitive with their higher-performing rivals.  Or they would be forced out of business, as more consumers and payers would be able to “Buy Right” in PHM, as well as sickness care.

It will take a major improvement in the numbers of payer clients forcing and financing rigorous evaluation of the actual performance that PHM providers achieve.  This will have to be done on a set of comparable outcome dimensions, rather than only those that individual PHM providers choose to measure or report.  And there would have to be the kinds of rigorous analysis of the different results that different PHM providers get as has already been done in sickness care, and even in disease management D(M), though for the wrong reason.

Instead of rigorous scientific analysis of a number of different PHM providers and methods, there should be equally rigorous analysis of individual PHM providers’ results across their entire book of business.  And instead of pursuing a ludicrous and futile answer to the general question of whether PHM works, as has characterized reviews in DM, these analyses should aim to develop comparable performance data on competing PHM providers to identify which do the job best.

This will speed up the ability of PHM sponsors and buyers to identify and selectively prefer those PHM providers who have been shown, in objective, accurate, and rigorous ways, to deliver the best outcomes.  Ideally, these “best outcomes” should include both economic effects on payers, and personal health/life quality for those persons and populations that participate and invest their own time and effort, as well as their money in many cases, to achieve these outcomes.

The same amount of money already wasted on answering the unanswerable general question of whether it works could go a long way toward identifying which PHM methods work best.  The general question is unanswerable because PHM, as is true for DM, is simply not one “treatment” that can be examined across different populations and problems to find out if it works.  PHM and DM are a wide range of significantly different approaches, with highly varying costs and intensity, being applied to highly variable sets of problems and populations.  The individual programs that do work should be the focus of analysis, not the collection of diverse programs, where some do and some don’t, virtually guaranteeing the almost always equivocal and uncertain results of studies addressing the general question.

Armed with comparative, rigorous, reliable and valid data on the performance of competing PHM methods and providers, the entire discipline and market of PHM could become dramatically more effective and efficient, and in a far faster time than is possible without such an effort.  When the results of publishing such data are combined with regulated, honest advertising, PHM would have its best chance of succeeding, for its providers, its payers, and the populations that should be benefiting from such success.




Consumer Options in Managing their Own Health

by Scott MacStravic

The major emphasis in “consumer-directed healthcare” proposals for reforming consumers’ healthcare behavior – turning them into prudent and well-informed purchasers of sickness care when needed.  This would be in sharp contrast to the pattern of purchase behaviors where someone else is responsible for paying, and consumers feel entitled to as much care as they feel like getting, at least if they are insured well enough to cover the costs.

But there is an equal and potentially more valuable effect that may arise from shifting more costs, responsibility and information to consumers with respect to sickness care costs.  They may begin to seek, on their own, ways to manage their own health so as to reduce their risk of and thereby expenses for sickness care.  Already, employers, commercial insurers and government insurance programs have enrolled millions of people in free-to-participants health management (HM) programs, in any one or a mix of: general health and wellness promotion, risk behavior or condition prevention and correction, and chronic disease management.

While the costs of payor-sponsored HM programs tend to be lower than what consumers could purchase as individuals, this is not always the case, particularly when payors don’t get involved until consumers are patients with complex and expensive chronic diseases or multiple co-morbidities, where costs of disease management can run to over $5,000 a year per participant.  Consumers have access to a wide range of differently-priced options if they wish to take charge themselves, and are willing to pay out-of-pocket for that right.

Concierge Physician Practices

“Boutique”, “concierge”, “retainer”, “membership” or “patient-paid” practices were started primarily to offer premium access, availability, amenities, and advocacy relative to sickness care when they were introduced just over a decade ago.  But most of the later-introduced examples were started, or have chosen to include major proactive HM services along with sickness care, and a few specialize entirely in HM, offering no sickness care.

These practices charge as little as $50 a month, and as much as $100,000 a year, though most are in the $1,000-2,000 range.  The MDVIP practices, numbering over 150 in 16 states cite the fact that “VIP” means “value in prevention”, not merely “very important patient”.  And they have proven the value to payors, as well as patients, in their services, with dramatic reductions in hospital inpatient care utilization and expense among their patients, compared to average Medicare patients, and members in the best managed care plans. (www.mdvip.com)

Cash-Only Practices

Some physicians have offered health management services on a patient-paid fee for service basis, rather than annual retainers.  These are typically “opt–out” practices where physicians chose to reduce their overhead to a minimum by not dealing with insurance, though they normally provide the paperwork necessary for their patients to seek reimbursement for their payments from insurers.  I recall an early adopter of this approach was a practice called “HMNo” in Denver, though it has since changed its name and become a retainer practice.

At the “Beyond Care” practice in Branford, Connecticut, the physician offers packaged HM programs related to wellness, fitness, stress management, nutrition, diabetes/metabolic syndrome, etc. and lasting from three to six months.  These programs were offered at prices between $1800 and $2800 when I first encountered them, though a recent visit to the practices website found no prices mentioned. (www.beyondcare.net)  The Tempus Clinic in Los Gatos, California offers a wide range of HM programs, including its health club memberships, that were once priced at between $10,000 and $30,000, though a recent visit to its website also found no prices mentioned. (www.tempusclinic.com)

Retail Medical Clinics

The majority of these convenient, low-cost, nurse-practitioner-staffed clinics focus almost exclusively on routine sickness care, at convenient locations, affordable prices, and easily accessible hours.  But at least some have added significant proactive HM services to their offerings, in addition to the usual array of physicals and immunizations.  These are the RediClinic locations, of which there are seven in five states in the South.  These offer a “StayWell” set of services to complement their “GetWell” treatments.

These include extensive health risk screening packages, ranging in price from $39 to $89, as well as traditional physicals.  And the clinics also offer a four-visit “Stop Smoking for GoodSM” program priced at $128.  And they have recently added a variety of “Cholesterol Challenge” programs at some locations, ranging from $49 to $89 in price.  They also offer a “Heart Health” program at prices of $79 or $129. (www.rediclinic.com)

Low-End Options

HM programs that rely mainly on automated analysis of health risks and automated online communications, or website self-service can afford to charge highly affordable prices per participant for payor-sponsored population-focused HM programs.  The same options are available for individual consumers, as well.  Three physician practices in Colorado offer a fitness/weight management program called Physicians Fitness Coach, through incentaHEALTH, in Denver.  It includes physicians, along with e-mail communications, and is priced at only $19.95 per month.

Another Colorado practice, Family Physicians of Western Colorado was able to apply the Chronic Care Model of disease management for its diabetes patients at an additional cost to the practice of only $104 per patient per year.  It lost money in this effort, because it could only get one health plan to pay for this program, and that plan covered only a minority of its patients. [P. Mohler & N. Mohler “Improving Chronic Illness Care in a Private Practice” Family Practice Management 12:10 Nov/Dec 2005 50-56]  But had it chosen to offer it to self-paying patients, this would easily have represented an affordable option for most patients.

With growing numbers of consumers choosing, or being offered no other choice but high-deductible health plans, these self-paid options are becoming increasingly attractive to many of them.  Even the higher-end practices such as the MDVIP examples are attracting middle-income patients, some of whom find their annual retainer is a bargain compared to the deductibles and co-payment costs of their insurance plan.  And many such plans permit employees to use their health spending accounts to pay for the retainer.

With other options available at prices as low as $20 per month, the number of consumers who could afford to pay for their own, particularly if they lack insurance coverage, is sure to increase.  Whether the number who choose such programs will also increase is another question, however.  Many will no doubt prefer to try personal HM on their own, without help.  But most such efforts have failed, and in the long run, affordable self-paid options may become widely popular.




An interview with Kenneth Mayes of Bumrungrad

by Vijay Goel

Consumer-focused Care spoke with Kenneth Mayes, Marketing Director for Bumrungrad International, a leading player in medical travel/ medical tourism in Southeast Asia, as a world class, JCAHO accredited (the American hospital accrediting organization) facility.

The interview took place at the World Health Care Congress and a podcast and a transcript (available on consumerfocused care) lay out the conversation below.

(Due to Technical difficulties, please access the podcast on medical tourism at Bumrungrad here–WMA format, 4.5MB)