Outsourcing

OutsourcingDisease Management’s Magic Bullet

Alfred LewisDisease Management Purchasing Consortium, Boston, Massachusetts, USA

ContentsSummary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231. The Meaning of Outsourcing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 262. When to Outsource . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

2.1 Severity of Disease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 262.2 Availability of Tools and Expertise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 272.3 Marketing Advantages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 272.4 Health Plan Organisation, Culture and Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . 282.5 Availability of Programmes Offering Guaranteed Savings . . . . . . . . . . . . . . . . . . . . 28

3. What to Look for in An Outsource Vendor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 303.1 How is Medical Policy Made? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 303.2 How Have Protocols Been Developed? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 303.3 What Is the Knowledge Base for Each Disease? . . . . . . . . . . . . . . . . . . . . . . . . . . 303.4 What Support is Offered for Baseline Development? . . . . . . . . . . . . . . . . . . . . . . . 303.5 How Are Patients Identified? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 313.6 How Are Providers Educated? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 313.7 How Are Patients Enrolled? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 313.8 Are Individual Care Plans Used? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

4. Impediments to Successful Outsourcing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324.1 Poor Vendor Selection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324.2 Inability to Mine One’s Own Data to Determine the Size of the Opportunity . . . . . . . . . . 324.3 Bad Pricing or Unaligned Incentives, Internally or Externally . . . . . . . . . . . . . . . . . . . 324.4 Naïve Contracting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 334.5 Inability to Interest Patients or Providers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 334.6 Failure to Understand the Concept Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

5. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Summary Health plans have generally elected to build their own disease managementprogrammes using their own resources. In addition to the widespread beliefamong health plans that their mission includes active management of chronicallyill members despite their lack of background in that area, the ‘build’ trend hasbeen fuelled by a lack of high quality vendor-supplied (‘outsource’) programmesand by a failure to understand or believe the inherent value proposition of thebetter vendors. The better vendors guarantee improvements in cost, quality andmember satisfaction – all at no budgeted expense to the health plan.

This article explores outsource alternatives to the conventional ‘build’ ap-proach and identifies that a variety of factors make outsource programmes muchmore compelling choices for most health plans than internal programmes, partic-

PRIMER Dis Manage Health Outcomes 1998 Jan; 3 (1): 23-341173-8790/98/0001-0023/$06.00/0

© Adis International Limited. All rights reserved.

ularly in the rarer and more serious disease categories. However, the clear lessonof Accordant Health Services (based in Greensboro, North Carolina, USA) andothers is that for the more expensive, complex diseases requiring multiple inter-ventions at the provider and patient level, the expertise available through out-sourcing provides the better solution, as measured by cost savings, qualityimprovement and especially ease of implementation.

In a famous scene from the movie Raiders of theLost Ark, Indiana Jones confronts a villain bran-dishing a scimitar. The villain demonstrates his ex-pertise with the scimitar rather convincingly byslashing at the air, showing off his moves, invitinga challenge. Indiana takes out a gun and shoots him.

Indiana Jones’ victory in that scene, more thanany amount of analysis, captures the essence ofoutsourcing as a solution to health plans’ diseasemanagement problems compared with buildingyour own programmes (the approach representedby the man with the scimitar): it is easier, faster,and requires much less training. It may lack ele-gance, but, unless you aim very badly, the resultsare essentially guaranteed. At the same time, out-sourcing seems so easy that, just as Indiana Jonesviolated the unwritten law of movie swordplay bydrawing his gun, you almost feel guilty that you arenot doing your job the hard way, the way it is‘sup-posed’ to be done.

By measuring the results themselves, not byhow much pain was incurred to produce them,there is simply no comparison between the power-ful financial, quality and timeliness outcomes ofoutsourcing vs the typical programme built inter-nally by a health plan.

Outsourced programmes often guarantee sav-ings of 20% or more, inclusive of fees, without anyup-front payments. In contrast, ‘built’ programmesrequire significant budgets. According to a surveydone by the Disease Management Congress,[1] lessthan 25% of health plans believe they save 20% ormore with ‘built’ programmes.

With the notable exception of diabetes, out-sourced programmes begin saving money withoutquestion within 120 days for most disease catego-ries. End-stage renal disease savings can begin in

as few as 45 days.[2] The same Disease Manage-ment Congress survey showed an average intervalbefore savings are realised to be approximately 18months for home-grown programmes.[3]

Outsourced programmes often financially guar-antee 3 outcomes measures:• process outcomes (did the compliance rate go

up?);• health status outcomes (did emergency room

visits decline? Did self-reported health assess-ment scores improve?); and

• member satisfaction.While many home-grown programmes do achieve

outcomes improvement, it is a rare health planwhich can quantify, let alone guarantee to its em-ployers (who, in the US, represent most of the pri-vate-sector purchasers of health plan services) anyimpact in a statistically sound way.

At the same time as self-developed programmesare foundering, the disease management industryin the US is enjoying tremendous growth: the num-ber of outsourced contracts announced in DiseaseManagement News in 1997 increased 4-fold over1996, while several disease management compa-nies raised additional venture capital at share prices2 to 4 times year-earlier levels [unpublished infor-mation].

This information may be a revelation to manyUS health plans, who were persuaded by the firstwave of outsourcing opportunities (first generationpharmaceutical company sponsored programmes)that outside vendor programmes, however compel-ling they sounded, came with too many formularyconstraints.[4] By turning away from vendors backthen, they subsequently missed the vast improve-ment in outsourced disease management valuepropositions, from both independents and pharma-

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© Adis International Limited. All rights reserved. Dis Manage Health Outcomes 1998 Jan; 3 (1)

ceutical sponsored programmes, which has takenplace in the last 2 years. An example of this ‘newwave’ of outsourced disease management valuepropositions is the ‘rare disease management’ in-tervention of Accordant Heath Services, whichwill be discussed in this article to illustrate this vastimprovement.

Accordant Health Services is based in Greens-boro, North Carolina, USA and is a leading diseasemanagement vendor which specialises in the cate-gory of rare diseases. A list of those 18 diseases,along with their US prevalence, is provided in table1. It is Accordant’s belief that the contracting anddisease management implementation process for ahealth plan is essentially a fixed cost per company,with very little additional cost per disease. There-fore, while other companies may specialise in oneor two or a handful of those diseases (haemophiliabeing a popular choice), Accordant can provide 18times the impact at very little incremental expense.

A profile of Accordant’s interventions are providedin section 3.

In disease management, the word ‘intervention’can loosely be defined as that set of products, ser-vices, education, expert resources and data offeredto the patient, patient’s family/caregiver and/orprovider in order to reduce the likelihood of acuteexacerbations and complications and/or to im-prove the baseline health status of the memberoverall. While the word ‘intervention’ is also usedin medicine generally, the difference between adisease management intervention and a genericmedical intervention is one of duration, follow-through, ongoing assistance and reporting. A med-ical intervention might be a one-time procedure orcourse of therapy, whereas a disease managementintervention can last a lifetime, with multiple pointsof contact and mid-course corrections along theway. Accordant’s interventions clearly fit the lattercategory and its disease management model is

Table I. 18 disease management modules developed by Accordant across 4 areas of specialty medicine (neurology, haematology,pulmonology and rheumatology). Additional chronic disease models beyond those listed are being developed

ICD-9 Disease Prevalence Prevalenceper million

Cost permember($US)

Total cost in amillion people($US)

272.7 Gaucher disease 1 : 40 000 25 90 000 2 340 000277.0, 277.00, 277.01 Cystic fibrosis 1 : 11 000 90 35 000 3 150 000277.6 Genetic emphysema 1 : 40 000 25 65 000 1 690 000282.4 Beta thalassemia 1 : 40 000 25 15 000 390 000282.6-282.69 Sickle cell anaemia 1 : 40 000 25 15 000 390 000286.0 & 286.1 Haemophilia (factor VIII, IX) 1 : 13 000 77 70 000 5 460 000332 & 332.0 Parkinson’s diseasea 1 : 1500 666 10 000 6 600 000335.20 ALS 6 : 100 000 60 25 000 1 500 000340 Multiple sclerosis 1 : 2000 500 15 000 7 500 000357.0 Acute infectious polyneuritis 8 : 100 000 80 30 000 2 400 000358, 358.0, 358.1 Myaesthenia gravis 1 : 20 000 50 40 000 2 000 000710.0 Systemic lupus 1 : 4000 250 15 000 7 500 000

Erythematosus 15 000 1 080 000710.1 Systemic sclerosis 1 : 14 000 71710.3 Dermatomyositis 6-8 : 100 000 60-80 22 000 2 200 000710.4 Polymyositis 10 : 1 000 000 10 7 000 3 500 000No ICD-9 code Inclusion body myositis 1-8 : 1 000 000 1-8714 through 714.81 Rheumatoid arthritisa 1 : 2000 500a Severely affected subset.Abbreviations: ALS = amyotrophic lateral sclerosis; ICD-9 = International Classification of Diseases (9th edition).

Outsourcing: Disease Management’s Magic Bullet 25


more comprehensive than what a physician or otherprovider can offer on their own.

1. The Meaning of Outsourcing

A health plan outsources a programme if it‘carves out’ responsibility for the medical and/orfinancial outcomes incurred by its members af-flicted with a particular disease. This single sen-tence has several implications.

Responsibility for medical outcomes may becarved out despite the fact that medical care itselfis not carved out through a specialty network orother means. For instance, if a health plan were topromise a reduction in heart attacks by mailingmembers aspirins (acetylsalicylic acid), that is adisease management programme because a com-pany is taking responsibility for a set of outcomes.

Likewise, such a programme, if it guarantees adollar reduction in cost through its intervention, isa financial carve out for heart attacks. At the riskof adding an element of confusion, such a pro-gramme, like Accordant’s, is sometimes referred toas a ‘carve in’ because financial outcomes arecarved out while the network of providers is undis-turbed. Most programmes today fit this model offinancial responsibility (or responsibility for someproxy for financial outcomes, such as event avoid-ance) without a medical network. Judging fromtheir revised offerings, most vendors have learnedthat 90% of the outcomes improvement can beachieved with 10% of the angst by working withina health plan’s existing network as opposed to de-veloping their own. Hence, the typical diseasemanagement programme is best described as acarve in. As Accordant’s literature states: ‘the goalis to enhance rather than disrupt the existing pa-tient-provider relationship’.

Whether carve out or carve in, the definitionemphatically excludes the classic old-style phar-maceutical company programme in which thepharmaceutical company offers to support a healthplan’s own efforts with materials, interactive voiceresponse systems, data analysis, etc. No financialor medical responsibility of any type is being takenin those circumstances. To be fair to the pharma-

ceutical industry, a number of pharmaceutical com-panies have themselves evolved from support-onlyprogrammes into more completely configured dis-ease management offerings equally as comprehen-sive and cost effective as the better independentprogrammes.

2. When to Outsource

Outsourcing is not always the answer any morethan building programmes internally is always theanswer. Five factors can be used to distinguish be-tween those disease categories and health plan cir-cumstances which should lead to a ‘buy’ decisionand those which should lead to a ‘build’ decision:• severity of disease• availability of tools and expertise• marketing advantages• health plan organisation, culture and budget• availability of programmes which guarantee im-

pact.

2.1 Severity of Disease

With the encouragement of regulatory and ac-creditation bodies, health plans often consider ittheir mission to provide health status enhancementbenefits to their members. The better plans arequite good at providing an ersatz, privatised, publichealth service. They make sure members are im-munised, screened for common risk factors and na-scent diseases, and offered health club benefits etc.Yet the typical health plan, however effectively itprovides these services for the 95 to 98% of mem-bers who have nothing seriously wrong with them,could not manage the health of the 2 to 5% of theirmembers who are seriously and chronically ill thanMcDonalds, perhaps the most efficient servicecompany in the world, could serve fine French cui-sine.

While disease management programmes whichlook like typical day-to-day operations can be suc-cessfully built by most health plans, those whichrequire a set of skills not normally found within ahealth plan are better served through outsourcingto an expert vendor. For example, the more com-plex diseases require specialised home care. This

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would not be from nurses (who would normally beassociated with home care, i.e. those who see awide variety of patients in post-acute home settingsto administer intravenous injections or provideother services on a per visit fee basis), but ratherfrom those whose backgrounds provide a greaterunderstanding of the disease and hence greater im-pact than a typical home care nurse could offerbecause they have been trained not just in interven-tions but also in the disease itself and in providinga continuity of care not seen in home care compa-nies, which includes many phone contacts and lon-gitudinal reporting.

Accordant scours each local market in which itoperates looking for the right contracted home carenurses, which it then trains in disease management.In contrast, health plans generally exited the homecare business years ago, believing the service couldbe provided more efficiently by outsiders. Havingreached that conclusion for generalised post-acutehome care based on their own lack of efficiency,there is certainly no reason why they would do bet-ter trying to provide highly specialised home careservices.

2.2 Availability of Tools and Expertise

The more widespread the expertise and toolsavailable for patient management in a particularcategory, the easier it is to build a programme. Forinstance, health plans often build their own pre-natal care programmes, using readily availablescripts to help their call-centre nurses triage preg-nant members to identify those needing the mostattention. The experience base in pregnancy man-agement is built on close to 4 000 000 US pregnan-cies every year.

Rare diseases, by definition, lack that experi-ence base and hence expertise and tools are muchharder to find. For instance, haemophilia is one ofAccordant’s more prevalent disease categories, butthe nationwide experience base for haemophilia isbuilt on only 20 000 patients.

In the case of rare diseases, a health plan couldquite literally spend more time just trying to assem-ble the requisite tools itself (assembling the tools

being a small piece of the overall disease manage-ment programme) than it would spend creating anentire programme through an outsource to Accord-ant.

2.3 Marketing Advantages

This category of issues is important to considerbut does not lend itself to an easy answer. Rather,the ‘answer’ varies according to market segment.

Large, sophisticated employers often have con-sulting firms to assist them in evaluating a healthplan’s claims independently. They should be ableto distinguish what is known in the industry as a‘check-off’ programme (one that is designed tomeet the minimum requirements of disease man-agement, allowing a regulator or customer to check-off ‘yes’ for programme existence) from a true dis-ease management programme. In general, thelarger employers recognise the higher quality ofoutsourced programmes from specific sourceswhich, like Accordant and about a dozen others(out of 70 or so programmes), have developed abrand identity. For large employers, disease man-agement is growing in importance because they in-creasingly see the value of such programmes inreducing absenteeism and short term disability ex-pense, not to mention employee morale and reten-tion.[5]

The less than 5000-employee market segmentrarely distinguishes among programmes. For them,the programme’s existence is reason enough tocredit the health plan with doing disease manage-ment.[5] A health plan targeting this audience shouldprobably stick to maternal health and asthma, bothhigh visibility health issues among most employ-ers. It hardly matters whether those programmesare home-grown or outsourced.

Health plans targeting the small group (2 to 20covered lives) market should probably avoid anymention of disease management, in order to pre-vent adverse selection. In the aggregate, familybusinesses in which diabetes or haemophilia run inthe family would be unprofitable, regardless ofhow effectively those diseases are managed. There



are simply not enough other lives to offset the fewadversely selected ones.

If Humana Health Plans (Louisville, Kentucky,USA) is any indication, health plans which origi-nally shied away from marketing disease manage-ment to the Medicare market because of fear ofadverse selection now see these programmes as amajor marketing advantage generally, because theyshow potential enrollees that they are indeedgeared towards the over 65 year age group market.Humana is generally acknowledged as the leaderin disease management[6] and it is now incorporat-ing these programmes in its marketing to the over65 year age group.

In the US, like large employers, states are be-coming increasingly sophisticated buyers of dis-ease management programmes. Florida, for exam-ple, is attempting to source disease managementprogrammes for haemophilia, asthma and diabe-tes.[7] They are also using a major consulting firmspecifically to help them distinguish high qualityoutsourced programmes from others. Health plansin that state may find it difficult to compete effec-tively for Medicaid contracts without good pro-grammes in those categories.

2.4 Health Plan Organisation, Cultureand Budget

Many health plan medical directors are givendirectives similar to: ‘you have to institute a dis-ease management programme, and you have to doit within your existing budget.’[8]

Faced with such a budget constraint, a medicaldirector has 3 options.• Contact a pharmaceutical company to get some

off-the-shelf materials to send to patients and/orproviders instructing them in proper use of spe-cific medications provided by that company ina particular disease category.

• Build a programme internally which meets min-imum ‘check-off’ criteria, but which is not wellresourced enough to truly make an impact on apopulation.

• Outsource on the basis of guaranteed savings,with no up-front fees.

In general, health plans which face this con-straint are nonstaff models and/or for-profit enti-ties. The better US programmes built internally byhealth plans are found at Puget Sound, HarvardCommunity Health Plan, and other nonprofit staffmodels. Those plans came into existence with mis-sions which specifically called for initiatives likethis, and those missions (plus the nonprofit statusof the plans) create a culture quite conducive to‘building’ disease management efforts. However,the vast majority of US plans are for-profit, oftenpublicly held entities, and must report results quar-terly, a situation none too compatible with makingsignificant expense investments in disease man-agement.

As a potential solution to this particular budget-ary dilemma, Accordant, for example, providesservices on a guaranteed savings basis. Guaranteedsavings contracting makes it possible to undertakea fully configured disease management programmewithout any budget requirement whatsoever, anobservation explored more fully in the next sec-tion.

2.5 Availability of Programmes OfferingGuaranteed Savings

Accordant is 1 of many disease managementvendors which offer their programmes on a guar-anteed savings (or guaranteed no-loss) basis (tableII). An entire disease management strategy, cover-ing multiple diseases, can be built around theseprogrammes without any budget. They work as fol-lows:

1. A health plan calculates its spending per caseover a recent 12-month period.

2. The vendor offers to reduce that amount, inclu-sive of their fees, by a certain percentage in subsequentyears. For example’s sake, assume 10% – meaningthat a health plan which spent $US10 000 000 ina category last year can be assured of spending$US9 000 000 this year.

3. The health plan advances the vendor a ‘fullrecourse progress payment’ which is a certainamount every month to cover the vendor’s costs ofdoing business. It is an advance, not a fee, because

28 Lewis


no portion of that progress payment is earned untilclaims are reconciled (usually within 4 to 6 monthsfollowing every 6-month period) and comparedwith the baseline. The comparison to the baseline,described in number 4 below, determines the ven-dor’s earnings, and reflects how cost effectivelythe vendor did the job. The progress payment is notfactored into the comparison.

4. At that point, if the sum of claims plus theprogress payments equals $US9 000 000, no fur-ther exchanges of money take place. The vendorhas earned only its progress payments, which arenow taken as expenses by the health plan as a med-ical claim. If the sum exceeds $US9 000 000, thevendor must make up the difference back to thehealth plan. If the sum is less than $US9 000 000,the health plan writes a cheque to the vendor. Partof guaranteeing 10% off is that, unless specified

otherwise, any savings greater than 10% accrues tothe vendor.

5. As mentioned at the beginning of the article,there is usually also another financial guarantee forachieving certain process outcomes, health statusoutcomes and member satisfaction. Those indica-tors are used to adjust final payments.

6. The previous 5 steps are repeated in sub-sequent periods, often with an adjustment for othercost reduction initiatives underway at the healthplan, to avoid crediting the vendor for improve-ments which would have happened anyway.

Therefore, in disease categories in which con-tracts are offered which guarantee savings, qualityand member satisfaction, e.g. rare diseases, end-stagerenal disease, congestive heart failure and neonato-logy, there must be a very compelling reason notto at least consider the outsource option. The nextsection offers a list of likely impediments to out-

Table II. US vendors offering guaranteed savings in outsourced medical management

Category Vendor Headquarters Guaranteed?a

Asthma/COPD AirLogix Dallas, Texas YesAsthma Vivra Specialty Partners San Mateo, California YesAsthma Integrated Therapeutics Group Kenilworth, New Jersey YesCancer City of Hope Duarte, California YesCancer Accountable Oncology Reston, Virginia YesCHF Cardiac Solutions Buffalo Grove, Illinois No (classes III and IV only)CHF CardioContinuum Rockville, Maryland YesCHF Stuart Disease Management Services Wilmington, Delaware No (classes III and IV only)CHF Vivra Specialty Partners San Mateo, California No (classes III and IV only)Compliance Medicine on Time Baltimore, Maryland Yes (guarantee on all members

taking 6 or more maintenancemedications)

Diabetes Diabetes Treatment Centers ofAmerica

Nashville, Tennessee Yes (over a 5-year contract)

ESRD Renal Management Services Deerfield, Illinois YesESRD Renaissance Healthcare Boulder, Colorado YesHospitalist services Jacobson Management Services

OrganisationSan Antonio, Texas Yes

Maternal health HMC Inc. Richmond, Virginia Yes (on populations withpre-existing 9% or higher NICUadmit rates)

Neonatology Paidos Health Management Services Deerfield, Illinois YesRare diseases Accordant Health Services Greensboro, North Carolina Yesa Savings guaranteed on full population of members with the disease in question.Abbreviations: CHF = congestive heart failure; COPD = chronic obstructive pulmonary disease; ESRD = end-stage renal disease.



sourcing, but no impediment would appear taxingenough to overcome the advantages.

3. What to Look for in AnOutsource Vendor

Accordant Health Services is a good example inoutsourcing both because its disease managementintervention includes the full range of services de-sired in a vendor, and also because it alone servesthe rare disease category, thus protecting this arti-cle from the criticism that only 1 vendor was se-lected above equally worthy competitors.

The following is a checklist of attributes tosearch for in a disease management programme,together with sample answers form Accordant andothers.

3.1 How is Medical Policy Made?

The majority of disease management vendorshave a medical director. Medical directors areprobably not needed in disease categories likeasthma, where protocols are well accepted in the-ory and the challenge is getting that theory intopractice. On the other extreme, disease categoriessuch as those serviced by Accordant require muchmore medical direction. Accordant, for instance,maintains an expert panel in each disease categorycomprised of subspecialists in that disease whichmay include a nationally recognised authority inthat particular disease.

3.2 How Have Protocols Been Developed?

While protocol development is not an area ofconcern in most categories, it is noteworthy in dis-ease categories such as Accordant’s which have noaccepted standard of treatment other than the pro-tocols developed specifically for and by Accordant.Therefore, the simple act of protocol developmentrepresents a huge leap forward in treatment. Othercategories in which a buyer should demand home-grown protocols are end-stage renal disease andneonatology.

3.3 What Is the Knowledge Basefor Each Disease?

It is critical to know a great deal about eachdisease managed. To support the ongoing diseasemanagement activities of Accordant, the patient,and the patient’s physician(s), Accordant has com-piled profiles on each disease:• aetiology• comorbidities• exacerbations• early warning signs of exacerbations• diagnostic tools• patient monitoring concerns.

Although it would be expected that this knowl-edge base would be known certainly to the physi-cian and probably to the patient unless newly di-agnosed, this is not generally the case. In fact,something as fundamental in multiple sclerosis asbeing able to recognise the early symptoms of uri-nary tract infections (a frequent complication) isknown to very few patients and not many moreproviders.

Like the better independents, pharmaceuticalcompany sponsored programmes generally tendto be rich in knowledge, whereas home care com-panies often sponsor disease management pro-grammes knowing very little about the disease(s)in question other than home care protocols.

3.4 What Support is Offered forBaseline Development?

Fully configured vendors, such as Accordant,expend considerable effort helping a health plan‘find’ its costs for the afflicted population, in orderto establish baselines from which improvementsmay be measured. Once again, this critical compo-nent of disease management is generally ignoredaltogether by health plans undertaking their ownprogrammes, and is often underresourced by ven-dors. Once again, home care company sponsoredprogrammes often lack data analysis capability al-together, and often cite unreliable and artificiallyhigh national averages as baselines.

30 Lewis


3.5 How Are Patients Identified?

Accordant has developed algorithms, based onspecific correlates of drug, diagnosis, procedureand specialist codes, to query claims data in orderto identify the health plan’s members who have thediseases in question. As a result of this level ofspecificity, the entire population with these dis-eases can be identified. In contrast, most home-grown programmes and the majority of vendorprogrammes identify only last year’s high utilisers,and intervene only with them. Statistically, it isvery easy to show improvements in such a cohortwithout actually changing the overall health statusof the population of members with a disease be-cause last year’s highest utilisers are seldom thesame as this year’s highest utilisers. This is a sta-tistical phenomenon known as regression to themean. The lesson for buyers is to consider onlythose programmes which take full population-based financial carve out responsibility.

3.6 How Are Providers Educated?

While it is possible to do disease managementwithout the cooperation of the patient’s physician,it is preferable to obtain that cooperation, if notactive support. A patient is far more likely to com-ply with his or her doctor than with a case managercold-calling from the health plan. Once patients areidentified from claims data, Accordant repre-sentatives write, call and/or visit providers to edu-cate them on programme components. Many ven-dors only write, and those letters are likely to bedisregarded. This is another area in which pharma-ceutical companies (and even home care compa-nies) excel because they are already resourced tocall upon physicians and they have less difficultyin gaining access (at the other end of the spectrum)than demand management companies.

3.7 How Are Patients Enrolled?

This question is tied very closely to the questionof risk-bearing. Programmes which bear risk forthe population are much more likely to attempt to

enrol everybody than companies which bear riskonly for participants.

In general, companies such as Accordant whichtake outcomes responsibility for the entire patientpopulation with the diseases in question, use theprovider and health plan channels as well as theirown resources to enrol patients in the programme.They use multiple approaches for the specific rea-son that they cannot just walk away from patientsthey fail to enrol (as most disease management pro-grammes do). They are still responsible for im-proving outcomes even in uncooperative patients.Such patients form the mother lode of opportunityfor disease management programmes because pre-vious noncooperation or noncompliance generallyresults in higher avoidable emergency room andinpatient claims costs.

3.8 Are Individual Care Plans Used?

Like other high intensity programmes (meaningunlike programmes run by most demand manage-ment and pharmaceutical benefit managementcompanies, whose programmes generally meet aneed for breadth of coverage rather than intensityof patient management), Accordant has an individ-ual care plan for each member, which its diseasemanagers use and update with every interaction.Included in the care plan are assessments of diseaseseverity, functional status, patient knowledge,compliance, treatment complications and othervariables.

The C-Map forms the basis for inbound (usuallyurgent) and outbound (usually scheduled) tele-phonic and, where indicated, in-person interven-tions which themselves comprise the true core ofAccordant’s disease management programme. Anexample of such an intervention is provided in thecase study below.

Patient Example: Accordant Case Study‘Tina’ is an Accordant patient who was diag-

nosed with multiple sclerosis in January of 1986.At the time of her enrolment in Accordant’s pro-gramme, Tina was receiving injections of inter-feron-β-1b (‘Betaseron’) every other day. The mul-tiple sclerosis had affected her optic nerve, so she



was unable to give herself the injections. Her healthplan arranged for home visits from a registerednurse. The cost for the visit to administer the injec-tion was $US70.00. The yearly cost for this treat-ment totalled $US12 775 (excluding the cost of themedication).

The frequent injections made Tina feel unwell.She was also having difficulty balancing whenstanding. Her Accordant nurse had concerns aboutTina’s balance and her continually feeling unwell.She called Tina’s primary physician and neurolo-gist to discuss the situation. The healthcare teamdecided to switch Tina’s medication from interferon-β-1b to interferon-β-1a (‘Avonex’), which requiresonly weekly injections. The annual cost for the in-terferon-β-1a, is $US3640 (excluding the cost of themedication). The nurse also arranged for a physicaltherapy assessment and a home health aide to cometwice a week. Tina was fitted with a walker and isnow a lot more stable.

The interventions applied by the Accordantnurse improved Tina’s quality of life by helping herfeel better and coordinating the necessary servicesto improve her balance and helping to avoid a fallor exacerbation. Switching Tina to another equallyefficacious drug improved the clinical outcomesand reduced the number of home health visits from182 to 52 per year. The intervention relating tomedication represented an annual saving of $US9135(excluding the medication cost) in registered nursevisits for the health plan.

4. Impediments toSuccessful Outsourcing

Despite all of the advantages, it is still possibleto fail at outsourcing. Experience has shown that,if an outsource delivers no measurable results, itwill be for 1 of 6 reasons:• poor vendor selection• inability to mine one’s own data to determine the

size of the opportunity• bad pricing or unaligned incentives• naïve contracting• inability to find or interest patients or providers• failure to understand the concept generally.

4.1 Poor Vendor Selection

Small health plans may not be aware of the ex-istence of the most qualified vendors, because inthis industry, the pharmaceutical sponsored pro-grammes generally have much greater marketingbudgets and awareness than the independents. Asa result, very few health plans engage in an all-vendor request for proposal (RFP) process likelyto identify the best vendors and creates competitionamong them.

4.2 Inability to Mine One’s Own Data toDetermine the Size of the Opportunity

Although near perfect claims data is not a pre-condition for a health plan to outsource, someamount of retrospective claims analysis is neces-sary to determine a baseline cost per patient and toidentify patients on paper. Health plans which havevery old claims processing systems, inexperiencedanalysts or many different systems as a result ofmergers will probably not be able to undertake dis-ease management outsourcing on a guaranteed sav-ings basis.

In this case, select disease categories in whichvendors also possess a data analysis capability. Forexample, Accordant has the capability in rare dis-eases and Diabetes Treatment Centers of Americahave the capability in diabetes.

4.3 Bad Pricing or Unaligned Incentives,Internally or Externally

In maternal health, one popular contractingmethodology is to pay on a per baby basis. Thisgives the vendor a terrific incentive to knock ondoors to find pregnant members, but gives them noincentive at all to work with those members.

In one well publicised congestive heart failureexample, internal misalignment of incentives at thehealth plan was the problem.[8] The disease man-agement budget came out of case management,while days saved were not credited back to casemanagement. As a result, the disease managementcompany was called in only for the most difficultcases, usually after the disease had become unnec-

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essarily severe or debilitating. When that diseasemanagement company wanted to spend extra timeor make more visits, they needed precertificationfrom case management, a time consuming and ad-versarial process.[8] The solution is to contract forshared or guaranteed savings, as the companies intable II do.

4.4 Naïve Contracting

There are many statistical fallacies in diseasemanagement which can create a misleading chasmbetween reported savings and actual savings unlessa vendor takes risk on the full population of mem-bers with the disease(s) in question, as Accordantand a handful of others do. While the more experi-enced vendors such as Accordant avoid most if notall sources of statistical bias, proposals from othervendors often contain 4 common fallacies:• Measuring savings on participants only rather

than the population as a whole.• No matter what the programme is, participants

will do better than nonparticipants specificallybecause they are motivated. Therefore, some ifnot all of the ‘savings’ in participant-only pro-grammes are illusory.

• Some vendors will say: ‘give us your most dif-ficult, highest utilising patients’. But last year’shigh utilisers are not often this year’s highutilisers. Once again, their claims cost will de-cline regardless of the programme.

• Some programmes will reserve the right to ex-clude patients who don’t comply. But those areprecisely the patients who need the extra atten-tion the most. Taking their results out of savingscalculations would be like excluding crashesdue to mechanical failure from airline safetystatistics on the grounds that nothing could bedone about mechanical failure once the planewas airborne.

4.5 Inability to Interest Patients or Providers

Some vendors make the mistake of assumingthat, just because their programme is good, patientsand providers will want to enrol. Nothing could befurther from the truth. Providers fear loss of con-

trol, while many patients naturally distrust thehealth plan’s motivations. When negotiating andcontracting with vendors, understand and fine-tunetheir marketing strategy in order to gain assurancethat the programme will be well received. This isless of an issue in situations where the vendor istaking a risk on the entire population, because non-participation is then the vendor’s problem. How-ever, a health plan has an interest in the acceptanceof its programmes in the medical and patient com-munity. Therefore, contracting on a population ba-sis should not be an excuse for walking away fromthe implementation in the field.

4.6 Failure to Understand theConcept Generally

There is no shortage of misunderstandings aboutthe guaranteed savings methodology. For instance,people often ask: ‘what if someone has two or morediseases?’ The answer to this is that the better pro-grammes take full responsibility for comorbiditymanagement. Therefore, any given member shouldbe in 1 programme only. Another example of mis-understanding is: ‘we want to do this for our largestaccount’ or ‘we want to offer this to Medicare mem-bers’. These comments reveal a bias left over fromfee paying days in which limited resources dictatedrestricting benefits to certain groups. However,disease management requires just the opposite,i.e. the largest number of participants possible toget the greatest amount of savings.

5. Conclusion

Outsourcing is not quite as simple as the IndianaJones analogy would imply. Evaluating and select-ing vendors, contracting and claims analysis dorequire some effort and expertise, but nowhere nearas much as building a programme from scratch. Evenso, outsourcing is not always the answer as a trulycomprehensive disease management strategy willinclude both types of programmes, matched to theappropriate diseases using the criteria discussedabove.



References1. The disease management strategic research study and resource

guide. Boston (MA): The Disease Management Congress incooperation with Migliara/Kaplan Associates, 1996 Sep 14-16: 14

2. Renaissance offers ‘sign and save program. Dis Manage News1997 10 Jul: 5

3. The disease management strategic research study and resourceguide. Boston (MA): The Disease Management Congress incooperation with Migliara/Kaplan Associates, 1996 Sep 14-16: 16

4. Weiner J, Harvey N, Quilty M, et al. Unleashing the profit po-tential of disease management: profile of leading strategiesand strategists. Boston (MA): Decision Resources Inc., 1997Apr 9

5. Albertson D. Is the disease management ship coming in? Em-ployee Benefit News 1997 Nov: 29

6. Vendors lead voters in CSC-DMN survey. Dis Manage News1997 Jan 10: 1

7. Florida Medicaid to seek DM vendors. Dis Manage News 1997Nov 25: 1

8. Quilty M, Lewis A. Three case studies in congestive heartfailure disease management. Med Interface 1997: 29-33

About the Author: Alfred Lewis is Executive Director ofthe Disease Management Purchasing Consortium. TheConsortium assists health plans with disease managementoutsourcing, and provides a data and information reposi-tory to all organisations interested in disease management.Correspondence and reprints: Alfred Lewis, ExecutiveDirector, Disease Management Purchasing Consortium,1037 Chestnut Street, Newton, MA 02164, USA.E-mail: [email protected]

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Outsourcing