Objective 3 - Claims and Disease Management

Question 1

Types of care management methods

Answer 1

1. Pre-authorization - requires a provider to obtain approval before performing a service
2. Concurrent review - monitoring a member’s care while the member is still receiving care in a hospital or nursing home
3. Case management - typically involves a health care professional who coordinates the care of a patient with a serious disease or illness (such as stroke, AIDS, or cancer)
4. Demand management - refers to certain passive forms of informational intervention, often provided over the telephone. Includes nurse advice lines and shared decision making.
5. Disease management - focuses on chronic conditions with certain characteristics that make them suitable for clinical intervention (see separate list for these characteristics)
6. Specialty case management - a care manager who has expertise in a particular area coordinates care for patients in that area
7. Population health management - the entire membership of a health plan is evaluated, using statistical tools to identify potential high-cost patients who can benefit from some type of voluntary intervention program
8. Medical Home - this model returns to the physician the responsibility for coordinating all of the patient’s care

Question 2

Characteristics of chronic conditions that make them suitable for disease management programs

Answer 2

1. Once contracted, the disease remains with the patient for the rest of the patient’s life
2. The disease is often manageable with a combination of pharmaceutical therapy and lifestyle change
3. Patients can take responsibility for their own conditions
4. The average annual cost is sufficiently high to warrant spending resources to manage the condition

Question 3

Principles for establishing a patient-centered medical home

Answer 3

1. Personal physician - each patient has a personal physician trained to provide comprehensive care
2. Physician-directed medical practice - consists of a team of individuals taking responsibility for the patient’s ongoing care
3. Whole person orientation - appropriately arranging care with other qualified professionals
4. Care coordinated and integrated across all elements of the health care system and the patient’s community
5. quality and safety - includes patient-centered outcomes, evidence-based medicine, and continuous quality improvement
6. Enhanced access through open scheduling, expanded hours, and E-visits
7. Reimbursement structure to support and encourage this model of care

Question 4

Areas where actuaries can be involved with care management programs

Answer 4

1. The economics of care management programs - help with understanding the relationship between care management program inputs and outputs
2. Risk adjustment and predictive modeling
   a. Predictive modeling is used to identify candidates for intervention programs
   b. Risk adjustment is used to assess outcomes
3. Financial outcomes evaluation - help in achieving comparability between the reference and the intervention population

Question 5

Principles for measuring results of care management programs

Answer 5

1. Reference population - any outcome’s measurement requires a reference population against which to evaluate the statistics of interest
2. Equivalence - the reference population should be equivalent to the intervention population
3. Consistent statistics - the same statistic should be measured in the same way in the reference and intervention populations
4. Appropriate measurement - avoid (if possible) extraneous, irrelevant, or confounding variables
5. Exposure - the exposure group must be clearly defined and all members who meet the definition should be included in the appropriate group
6. Reconcile the results - reconcile the outcomes of a small population with those of the entire health plan (“plausibility analysis”)

Question 6

Issues that affect disease management evaluations for chronic populations

Answer 6

1. Regression to the mean - a high percentage of high-cost patients in one period will not be high cost in the next period, simply because the high-cost event was a one-time event that is not likely to be repeated
2. Identifying patients - due to regression to the mean, it may not be appropriate to use patients’ past data as the comparison group. A common alternative is to use the population approach (uses the entire population).
3. Establishing uniform risk measure for comparability - objective, consistent definitions should be used to identify candidates for the care management program (this will ensure equivalence)
4. Patient selection bias - this results when a study is based on those volunteering for a program
5. Patient drop outs - drop outs may also create a bias (e.g., those feeling better may drop out)
6. General versus specific population - some interventions are performed on an extremely small population, making some methodologies inappropriate for measuring results

Question 7

Considerations when using claims data for evaluating disease management programs

Answer 7

1. Fixed time periods - a one-year time period to be too short for outcomes evaluation
2. Enrollment issues/eligibility - the timeliness of enrollment and disenrollment should be factored into the study
3. Claims run-out - due to claims lag, program results may not be known for up to two years after the program begins
4. Outlier claims - these may distort the study’s results
5. Special problems with claims data - when using claims data to identify chronic members, some members are miscategorized (false positives and false negatives)

Question 8

Risk factors for care management studies

Answer 8

(these should be reported with the study to ensure reproducibility of results)

1. Demographic variables
2. Exclusionary conditions that exclude certain members - such as conditions that imply the member is not a good candidate for care management
3. Exclusionary conditions that exclude certain claims - exclude claims for conditions that disease management does not try to affect (e.g., maternity)
4. Persistency - understand the terms under which a member may enter or leave the group
5. Chronic prevalence and risk classification - chronic prevalence is defined as the percentage of individuals in a population with the condition
6. Severity of illness - severity affects claims cost, and therefore the potential for savings
7. Contactability - this measures whether the manager is able to reach and engage the member
8. Operational issues - such as the number of eligible members; the number of chronic patients identified, contacted, and enrolled; the graduation rates; and the methodologies used

Question 9

Factors complicating the comparison of financial savings for care management programs

Answer 9

1. Different research designs are used by different studies
2. The basis of savings calculations varies (some report an ROI, which is difficult to compare across studies, and many do not provide information on the cost of the program)
3. The timing of the studies distorts numbers, since health care costs increase over time
4. Different studies use different population sizes and durations
5. Many of the published studies focus on clinical, rather than financial, outcomes

Question 10

Principles for designing care management programs

Answer 10

1. The intervention population should be chosen carefully
2. The economics of the program should be analyzed carefully (since interventions can be costly)
3. The objectives of a program should be clearly defined, and the program should be designed to achieve those goals
4. Interventions require the active participation of both providers and patients
5. Financial savings may take a long time to emerge

Question 11

Components of the disease management value chain process

Answer 11

1. Data warehousing - integrate membership and claims data, and identify member conditions
2. Predictive modeling - apply models to determine members to target for interventions
3. Intervention development - develop campaigns to deliver interventions to target populations
4. Outreach and enrollment - contact members and enroll them in the program. Includes follow-up.
5. Member coaching and assessment - including maintaining enrollment and graduating members from the program
6. Outcomes assessment - including clinical, financial, and operational outcomes

Question 12

Role of value chain components in program design and assessment

Answer 12

1. Grouping into the 6 components provides a way to assess the value of the components of DM
2. Helps to identify the cost and benefits of different models for involving the provider in care management, in order to determine which model produces the most favorable outcomes

Question 13

Financial measures for disease management programs

Answer 13

1. Return on investment - this is the most common metric. DM programs typically use Gross ROI.
   a. Net ROI = (gross savings - cost) / cost
   b. Gross ROI = gross savings / cost
2. Total savings - this metric may be more useful, since it represents the dollar savings for the plan
   a. Average savings equals total savings net of program cost, divided by the total population
   b. Marginal savings per chronic member equals the increase in savings (net of costs) due to intervention on the marginal population, divided by the number of members in the marginal population

Question 14

Key metrics in the design of disease management programs

Answer 14

1. The number and risk-intensity of members to be targeted - the number must be large enough to produce savings that offset implementation costs, but not so large that marginal costs exceed marginal savings
2. Types of interventions to be used in the program - such as mail or automated outbound dialing
3. The number of nurses and other staff needed for the program, and program costs
4. The methodology for contacting and enrolling members
5. The rules for integrating the program with the rest of the care management system
6. The timing and numbers of contacts, enrollments, and interventions
7. The predicted behavior of the target population if there were no intervention, and the predicted effectiveness of the intervention at modifying that behavior

Question 15

Components of the Risk Management Economic Model

Answer 15

(these are the factors that contribute to the financial outcomes of the program)

1. Prevalence of different chronic diseases
2. The cost of the chronic disease
3. Payer risk - the most savings for the plan will come when the plan is at financial risk for all of the patient’s costs
4. Targeting and risk - members should be prioritized based on the probability of experiencing the targeted event. Those with the highest risk ranks will be selected for the program
5. Estimated cost of the targeted event
6. Contact rate - the rate at which the company is able to make contact with targeted members
7. Engagement (or enrollment) rate
8. Member re-stratification rates - the initial risk rank of the member will be re-stratified after the nurse interacts with the member and assesses the member’s risk

Question 16

Common chronic diseases addressed by DM programs

Answer 16

1. Ischemic heart disease
2. Heart failure
3. Chronic obstructive pulmonary disease
4. Asthma
5. Diabetes

Question 17

Considerations when evaluating results of disease management studies

Answer 17

1. Has the measurement been performed according to a valid methodology?
2. How has that methodology been applied in practice?
3. Are the results arithmetically correct?

Question 18

Requirements for a care management methodology to be valid

Answer 18

1. Familiarity - the purchaser must be familiar with the methodology, or at least be able to grasp it readily
2. Ease of replication and auditability - the methodology must be documented in sufficient detail for another practitioner to replicate the analysis
3. The results upon applying the methodology must be consistent with the client’s savings expectations, and must be plausible
4. Results should be stable over time and between clients
5. The methodology must be practical (possible to implement it cost-effectively)
6. Inherent validity - lack of obvious bias
7. Scientific rigor
8. Market acceptance - how the method is perceived in the market
9. Application - how the methodology is applied in practice

Question 19

Types of methodologies for estimating care management savings

Answer 19

1. Control group methods - these attempt to match the study subjects with other subjects that are not part of the study (see separate list)
2. Non-control group methods - population methods that do not use control groups (see separate list)
3. Statistical methods - these use purely statistical techniques, rather than constructing an explicit reference population (see separate list)

Question 20

Control group methods for estimating care management savings

Answer 20

1. Randomized - compares equivalent samples drawn randomly from the same population (the preferred method)
2. Geographic - compares equivalent populations in two different locations
3. Temporal - comparing equivalent samples drawn from the same population before and aver the intervention program
4. The product control methodology - compares samples drawn from the same population at the same point in time, but differentiates between members who have different products
5. “Patient as their own control” - patients are used as their own control group
6. Participant vs. nonparticipant studies - the experience of those who voluntarily participate is compared to the experience of those who choose not to participate (has selection bias)

Question 21

Non-control group methods for estimating care management savings

Answer 21

1. Services avoided methods - savings are calculated as the estimated cost of a service requested through pre-authorization minus the actual cost after the intervention
2. Clinical improvement methods - the change in a clinical measure is observed and the resulting improved health and reduced utilization is estimated from outside studies

Question 22

Statistical methods for estimating care management savings

Answer 22

1. Time-series methods - a curve is fit to the data over time and a divergence from this best-fit line can be observed once the intervention is applied
2. Regression discontinuity - a line is fitted to data that relates pre- and post-intervention experience. A dummy variable is used to test whether the intervention produced a change. For example: Y(i) = B(0) + B(1)X(i) + B(2)Z(i) + E(i), where
   X = independent variable (year 1 cost)
   Y = dependent variable (year 2 cost)
   Z = dummy variable for the intervention in question
   B = regression coefficients
   E = random error
   and a significant value for B(2) indicates a statistical difference.
3. Benchmark methods - the values of certain key statistics are compared between the population being managed and some benchmark population

Question 23

Formulas for calculating disease management program savings

Answer 23

Based on the actuarially-adjusted historical control design (a temporal control group method)

1. Savings = [ChrUtil(prior yr) * (1 + trend) - ChrUtil(actual)] * Chronic members * Cost per service, where ChrUtil is the utilization rate per chronic member and the trend rate comes from the non-chronic population of the health plan
2. Savings PMPM = Savings / Member months

Question 24

Conditions that would exclude a member from a DM program

Answer 24

1. End-stage renal disease (ESRD) - this condition is excluded because management of the condition may delay cost, but it cannot ultimately reduce or postpone these costs
2. Transplants - claims are high up to a period shortly after the transplant, at which point the claims are reduced and stabilized
3. HIV, AIDS, mental health - privacy issues make it difficult or impossible for a vendor to receive complete data feeds, or manage the member
4. Members who are institutionalized - these members may not be reachable, or may not benefit from DM interventions
5. Members with catastrophic claims - these members are not manageable by the DM program, and are often subject to management by another program
6. Members who are eligible for other management programs

Question 25

Claim types commonly excluded from disease management program evaluations

Answer 25

1. Trauma and accident
2. Behavioral and substance abuse
3. Malignant neoplasms
4. Maternity and childbirth claims
5. Pharmaceutical drugs

Question 26

Challenges when calculating disease management savings (when using the actuarially-adjusted historical control design)

Answer 26

1. Applying the proper trend rate - the trend of the non-chronic population is typically used because the chronic trends are impacted by the disease management efforts. This non-chronic trend must be adjusted for the average risk of the population.
2. Demonstrating equivalence between the baseline and measurement periods - must account for the change in the mix of new, continuing, and terminating members and any changes in conditions and co-morbidities. This can be done by re-weighting the claim costs that are used in the savings calculations.

Question 27

Ranking of DM measurement methods by the group size needed for a given confidence interval (smallest to largest)

Answer 27

1. Mean + 2 SD truncation
2. $50,000 truncation
3. $100,000 truncation
4. No truncation - population trend
5. No truncation - non-chronic trend

Question 28

Measuring DM effectiveness for small populations

Answer 28

1. For almost any group size, an effective DM program may appear ineffective due to adverse fluctuations.
2. General guidelines:
   a. A 95% confidence interval is widely used in other applications, but a lesser standard may be needed for DM savings estimates, since most groups won’t be large enough to generate 95% confidence
   b. One-sided tests may be appropriate if less concerned about fluctuations showing greater-than-expected savings.
   c. If a program sponsor is willing to use admission-based savings calculations, credibility may be demonstrated at lower group sizes (need to multiply by avg cost / admit for savings estimate)
   d. Truncation can be helpful in limiting variation in the measurement of a DM program
   e. Using the employer non-chronic trend introduces additional variation into the measurement. If possible use external trend or overall health plan trend.
   f. If a DM company is structuring a savings guarantee for a client, the company should be using a one-sided test and should consider requiring high confidence level

Question 29

Use of chronic vs. non-chronic insured member cost trends

Answer 29

1. Many DM savings calculations estimate the chronic trend based on the trend from the non-chronic population. The use of such trends that are not risk-adjusted may introduce bias into the calculations (migration bias as non-chronic members migrate into the chronic class over time).
2. Using the risk-adjusted methodology, the effect of migration bias is offset, and the non-chronic trend may be an appropriate estimate for chronic trend.

Question 30

Checklist of issues and assumptions for conducting or evaluating a DM study

Answer 30

1. Study design - methodology used, reference population, credibility weighting, study time periods
2. Population definitions - how are chronic and excluded members identified, are members required to be requalified through claims each year, how are newly-identified or terminating population members handled, is continuous eligibility required
3. Data - what data will be used and will their be gaps due to privacy concerns, data validation, definition of excluded conditions, claims runout
4. Potential sources of bias - are members re-qualified over time, migration effect, are starting claim costs adjusted to the same basis, selection bias
5. Tests of equivalence - intervention and control populations should be equivalent with respect to risk factors
6. Trend - trend adjustment, trend assumption used
7. Reporting - simple aggregate summary
8. Calculations - is it reasonable