mckesson payor solutions conference presentation of case management, 2004

Blue Cross Blue Shield of Louisiana – MMRD October 2004Blue Cross Blue Shield of Louisiana – MMRD October 2004

PM-O5Assessing the Economic Impact of Case

Management on Diabetics in a Commercially Insured Population

Felix J. Bradbury, RN, MHA, ScD*, CHEFelix J. Bradbury, RN, MHA, ScD*, CHE

Blue Cross Blue Shield of LouisianaBlue Cross Blue Shield of Louisiana

20042004


AGENDA Background and IntroductionBackground and Introduction A Few Definitions…A Few Definitions… The BCBSLA PopulationThe BCBSLA Population What is the ROI for the Various Departments

within Medical Management? What is the cost-benefit of case management What is the cost-benefit of case management

activities for diabetic members?activities for diabetic members? How can we model the cost-benefit for the long-How can we model the cost-benefit for the long-

term savings associated with case management term savings associated with case management activities?activities?


The Three Questions

We’re Working to Answer::Q1: What is the ROI for the various Q1: What is the ROI for the various

departments within Medical Management?departments within Medical Management?Q2: What s the cost-benefit of case Q2: What s the cost-benefit of case

management activities for diabetic management activities for diabetic members over the short-term period of a members over the short-term period of a single year?single year?

Q3: How can we model the cost-benefit for Q3: How can we model the cost-benefit for the long-term savings associated with the long-term savings associated with case management activities? case management activities?


A Few Definitions… Cost-benefit analysis: An economic evaluation method for Cost-benefit analysis: An economic evaluation method for

determining whether or not an intervention or program is worth determining whether or not an intervention or program is worth doing. The basic approach is to measure all relevant costs and doing. The basic approach is to measure all relevant costs and benefits and determine the ratio between the two. In cost-benefit benefits and determine the ratio between the two. In cost-benefit analysis, both costs and benefits are expressed in terms of dollars.analysis, both costs and benefits are expressed in terms of dollars.

Cost-effectiveness analysis: An economic evaluation method in Cost-effectiveness analysis: An economic evaluation method in which costs are expressed in terms of dollars but benefits, or which costs are expressed in terms of dollars but benefits, or consequences, are generally expressed in non-dollar terms, i.e., consequences, are generally expressed in non-dollar terms, i.e., QALYS, life-years gained per dollar spent, reduction in ALOS/dollar QALYS, life-years gained per dollar spent, reduction in ALOS/dollar spent, etcspent, etc

Cost-minimization analysis: An economic evaluation method in Cost-minimization analysis: An economic evaluation method in which the goal is a search for the least-costly alternative that yields which the goal is a search for the least-costly alternative that yields equivalent – or better – results when compared to all other equivalent – or better – results when compared to all other alternatives.alternatives.

BCBSLA Population(Q1-2004 Membership)

• -Commercially insured population• -No Medicare primary• -No Medicaid members• -Large individual underwritten book of

business• -Significant number of small self funded

accounts• -277,324 members – MBA members - are

excluded from analysis because they did not fall within the control of care management and case management programs for one or more of the following reasons:

• they do not reside in Louisiana, • are over 65 and receive their healthcare

benefits through Medicare Part A and B,• hold a policy with very limited benefits, i.e.,

dental only, or life-insurance only benefits.

Q1 2004

Care Management

Mbrs MBA Mbrs

Jan-04 623,503 860,140Feb-04 625,248 861,912Mar-04 627,700 865,976

Q1 2004 Avg. 625,484 862,676Est. Q1 Member

Months 7,505,804 10,352,112


QUESTION 1:What is the ROI for the Various

Departments within Medical Management?

Summary of Medical ManagementCost Savings, 2003

MEDICAL MANAGEMENT COST-SAVINGS SUMMARY: CY January-December, 2003Savings are based on Allowed Dollars from the 2003 Provider Reimbursement Grids. MBA Savings are based on charged and not allowed dollars.

SOURCE Mbr Months**** COST-SAVINGS PMPM

SAVINGSPMPM Costs (w/o

MMRD)

PMPM Costs (w/ MMRD -

Inlcudes DSS, PM, and Analytic support)

Est. ROI - CY 2003 (Includes MMRD expense and

adjustment for Chardged dollars in MBA)

CLINICAL AUTHS (OP UM) 7,611,956 4,426,510.26$ 0.58$ 0.04$ 0.06$ 9.87CASE MANAGEMENT 7,611,956 2,573,305.94$ 0.34$ 0.12$ 0.15$ 2.25

INPT CARE MANAGEMENT (IP UM) 7,611,956 6,484,401.01$ 0.85$ 0.09$ 0.11$ 7.43Transplants (BCBS-A)***** 7,611,956 1,188,364.00$ 0.16$ 0.01$ 0.01$ 27.32

MBA:Preexisting + Retro Review 10,073,510 7,876,927.81$ 0.78$ 0.03$ 0.05$ 7.97Pharmacy (other than PBM)* 7,611,956 299,241.84$ 0.04$ 0.06$ 0.07$ 0.57

HQM: Medical Policies** 7,611,956 1,200,000.00$ 0.16$ 0.11$ 0.12$ 1.30GRAND TOTAL (or Avg. as appropriate) 8,432,474 24,048,750.85$ 2.91$ 0.45$ 0.57$ 5.35

Medical management cost-savings are generated via a combination of the following activities: (Note that cost savings due to non-certified days and changes in level of care (LOC) are based on per diem reimbursement. Case rates and DRG rates are not included in the current cost savings methodology.)

-Changes in level of care, i.e., acute day to sub-acute day using M&R criteria and directly attributable to care management activities.

-Non-certified care, i.e., denied days or services because of lack of medical necessity or pre-existing condition. Any admission day this was subsequently denied. Non-certification days may be applied to acute care, rehabilitation, SNF, LTAC, home health or hospice rates

-Medical policy review, i.e., denial based on experimental or investigational procedures, or therapeutics.

-Pharmacy benefit management, i.e., increasing generic utilization relative to brand utilization and leveraging pharmacy tiers.

Examples of Cost Savings fromLOC Changes or Non-Certified Care

in Per Diem Facilities

Cost-savings are calculated by subtracting the median value for a lower level of care from the median value for a higher level of care. For example, the median allowed amount for a SNF day is $500/day; the median allowed amount for an acute day is $1,592.50. The difference between $1,592.50 and $500 is the cost savings. In this example, the cost savings for this change in level-of-care is $1,092.50 per change in level-of-care. All cost-saving estimates are based on the median allowed dollars. Median values across levels-of-care were used to generate estimated reimbursement amounts; median values were used in lieu of averages because the former is less susceptible to the influences of outlier values.

DescriptionNon-Certified vs.

LOC (NC vs. LOC)Median Est. Cost-

Savings CommentAcute Non-certified NC 1,592.50$

Acute to Rehab LOC 892.50$ The median reimbursement is the same for subacute and for rehab.

Acute to Subacute LOC 892.50$ The median reimbursement is the same for subacute and for rehab.

Acute to SNF LOC 1,092.50$ Acute to LTAC LOC 492.50$ Acute to HHA LOC 1,342.50$ Assumes 5-visit HHA minimum

Rehab to SNF LOC 200.00$ Subacute Non-certified NC 700.00$

Rehab Non-certified NC 700.00$ SNF Non-certified NC 500.00$

50% Delay in Service - 796.25$ ICU to Subacute LOC 573.24$


Medical Management Cost-Savings Model Assumptions

Model reflects cost-savings which are the direct result of Model reflects cost-savings which are the direct result of activities conducted by medical management staff. activities conducted by medical management staff.

All financial calculations are hard-dollar estimates. All financial calculations are hard-dollar estimates. Cost-savings estimates are based on the median Cost-savings estimates are based on the median

allowed amounts across all products and lines of allowed amounts across all products and lines of businessbusiness

Because the number of actual days a member will be in Because the number of actual days a member will be in the hospital is not known until the member has actually the hospital is not known until the member has actually incurred the days, it is impossible to estimate all of the incurred the days, it is impossible to estimate all of the days saved. days saved.

One day per member per non-certification of level-of-One day per member per non-certification of level-of-care change is assumed. This results in conservative care change is assumed. This results in conservative cost-savings estimates.cost-savings estimates.


QUESTION 2:What is the Cost-Benefit of Case Management

Activities for Diabetic Members Over the Short-term Period of a Single Year?


What are We Attempting to Demonstrate?

Does the incremental cost-benefit Does the incremental cost-benefit associated with case management mean associated with case management mean it’s a program worth doing?it’s a program worth doing?

Short-term savings <= 1 yearShort-term savings <= 1 yearLong-term savings > 1 yearLong-term savings > 1 year


The Impact ofDiabetes in Louisiana

According to the Louisiana State Office of Public (OPH), According to the Louisiana State Office of Public (OPH), diabetes affects an estimated 7.6 percent of Louisiana’s diabetes affects an estimated 7.6 percent of Louisiana’s 4,496,334 citizens – over 301,254 people as of 2003. 4,496,334 citizens – over 301,254 people as of 2003. OPH also estimates the direct and indirect costs of OPH also estimates the direct and indirect costs of diabetes in Louisiana - considered a conservative estimate diabetes in Louisiana - considered a conservative estimate given that approximately one third of all diabetics are given that approximately one third of all diabetics are undiagnosed - to be over $2.2 billion as of 1997. undiagnosed - to be over $2.2 billion as of 1997. Unfortunately, these costs extend well beyond the Unfortunately, these costs extend well beyond the enormous economic burden. In 2000, Louisiana had the enormous economic burden. In 2000, Louisiana had the highest death rate in the nation due to diabetes with a highest death rate in the nation due to diabetes with a mortality rate of 42.2 per 100,000 population. The Centers mortality rate of 42.2 per 100,000 population. The Centers for Disease Control and Prevention (CDC) ranks diabetes for Disease Control and Prevention (CDC) ranks diabetes as the primary cause of blindness in adults aged 20 to 74 as the primary cause of blindness in adults aged 20 to 74 as well as the most common cause of non-traumatic as well as the most common cause of non-traumatic amputations and end stage renal disease. amputations and end stage renal disease.


Diabetes and Case Management in a Commercially-Insured population

Diabetes imposes a significant economic burden to Louisiana residents. Diabetes imposes a significant economic burden to Louisiana residents. There are approximately 19,783 diagnosed diabetics out of a population of 625,484 There are approximately 19,783 diagnosed diabetics out of a population of 625,484

managed members – this is approximately 3.2 percent of the BCBSLA managed managed members – this is approximately 3.2 percent of the BCBSLA managed membership as of the first quarter of 2004. membership as of the first quarter of 2004.

Of these 19,783 diabetics, an average census of approximately 80 diabetics are Of these 19,783 diabetics, an average census of approximately 80 diabetics are actively enrolled in diabetes case management programs on a monthly basis with a actively enrolled in diabetes case management programs on a monthly basis with a enrollment period of 60 to 90 days; this average includes both newly diagnosed and enrollment period of 60 to 90 days; this average includes both newly diagnosed and previously enrolled diabetics. previously enrolled diabetics.

The average annual per capita cost for diabetic members across all lines of business The average annual per capita cost for diabetic members across all lines of business for 2003 was ~ $10,798.97, sd = $28,391.01. This cost includes all inpatient, for 2003 was ~ $10,798.97, sd = $28,391.01. This cost includes all inpatient, outpatient, professional and pharmacy costs.outpatient, professional and pharmacy costs.

The annualized costs for case managed diabetics is $26,178.53,The annualized costs for case managed diabetics is $26,178.53,sd = $54,377.93.sd = $54,377.93.

The annualized costs for diabetics not enrolled in case management $9,741.553,The annualized costs for diabetics not enrolled in case management $9,741.553,sd = $25,319.6sd = $25,319.6

The incremental difference between members enrolled and not enrolled is The incremental difference between members enrolled and not enrolled is $9,741.553 - $26,178.53 = -$16,436.96, sd = $39,848.$9,741.553 - $26,178.53 = -$16,436.96, sd = $39,848.

N = 1,920 members for the two year study period in question. N = 1,920 members for the two year study period in question.

Note: Historical costs are simply annualized costs and represent the sum of all allowed medical and pharmacy costs for a member observed during the 12-month period. These allowed costs are computed as the total allowed PMPM cost multiplied by 12.


The Basic Methodologies for Looking at Short-Term and Long-Term Savings

Retrospective (case-control) study design used Retrospective (case-control) study design used for short-term (time<=1 year) savings.for short-term (time<=1 year) savings. Administrative claims cost data are used to compare Administrative claims cost data are used to compare

the health care costs associated with two groups of the health care costs associated with two groups of diabetics:diabetics:

Diabetics enrolled in case management (Cases), andDiabetics enrolled in case management (Cases), and Diabetics not enrolled in case managementDiabetics not enrolled in case management

Markov cohort simulation model for long-term Markov cohort simulation model for long-term savings (time>1 year) with input from claims savings (time>1 year) with input from claims data, predictive model, and literature reviews.data, predictive model, and literature reviews.

The Basic Model

Adjust for Age,Sex, Enrollment

& BenefitDifferences

Lower Average AllowedDollar Claims

Costs?

EntireBCBSLA

Population

All MembersType II & IIDiabetes &

Co-morbidities

Hi-Risk DiabeteicsIdentified via

Predictive Model &Other Sources

CMEnrolled

NOTCM

Enrolled

ContactedFor CM Program

Participation

PopulationInputs

Case ManagementInterventions

Savings?


The Retrospective (Case-Control) Study Design

MonthsMonths

Timeline:1 2 3 4 5 6….//……….……24 Today

Cases: 0 X 0 X 0 X 0 X 0 X 0 X Today

………………………………………………………………

Controls:0 0 0 0 0 0 0 0 0 0 0 0 0 0 Today

Notes: The “0s” represent observations on the dependent variable, in this case the average allowed costs for diabetic members each month within each of the two groups, and the “Xs” represent interventions from case management. The dotted lines indicate the study participants are not randomly selected but are assigned to either case group or a control group depending on whether or not they elected to participate in a case management program, i.e., the members are self-selecting. Self-selection may be controlled for using the Heckman approach to self-selection bias, i.e., the Heckman two-step consistent estimator for modeling with censored data.


Why a Retrospective Study Design?

The advantages of case-control studies include the The advantages of case-control studies include the following attributes:following attributes:

Relatively quick and inexpensive as compared to cohort study Relatively quick and inexpensive as compared to cohort study designs.designs.

Generally support causality by establishing associations between Generally support causality by establishing associations between dependent and independent variablesdependent and independent variables

Historical data are often available from either administrative Historical data are often available from either administrative databases or clinical records so secondary analyses are easily databases or clinical records so secondary analyses are easily performed without having to obtain more information from the performed without having to obtain more information from the cases or controls. cases or controls.

The sample size requirements needed to test hypotheses of The sample size requirements needed to test hypotheses of association are generally smaller than the sample sizes need for association are generally smaller than the sample sizes need for

more robust designs such as cross-sectional and cohort more robust designs such as cross-sectional and cohort designs.designs.


Study Design, Continued Cases are defined as plan members diagnosed with Cases are defined as plan members diagnosed with

either Type I or Type II diabetes – with or without either Type I or Type II diabetes – with or without comorbid conditions - and who have been actively comorbid conditions - and who have been actively enrolled in the plan’s case management program for enrolled in the plan’s case management program for diabetes at any point between January 1, 2002 and diabetes at any point between January 1, 2002 and December 31, 2003. December 31, 2003.

The control group consists of plan members – with or The control group consists of plan members – with or without comorbid conditions - diagnosed with Type I or without comorbid conditions - diagnosed with Type I or Type II diabetes and who did not participate in the plan’s Type II diabetes and who did not participate in the plan’s case management program for diabetes during the same case management program for diabetes during the same calendar year. Reasons for non-participation include:calendar year. Reasons for non-participation include: Unable to contact member because of incorrect contact Unable to contact member because of incorrect contact

information or member movedinformation or member moved Member declined to enrollMember declined to enroll


The CRMS Data ICD-9-CM codes in the 2500-2500.x code range, This definition includes Type I ICD-9-CM codes in the 2500-2500.x code range, This definition includes Type I

and Type II diabetes as well as any co-morbid conditions that may associated and Type II diabetes as well as any co-morbid conditions that may associated with diabetes. with diabetes.

ETGs:ETGs: Insulin dependent diabetes, w/o comorbidityInsulin dependent diabetes, w/o comorbidity Insulin dependent diabetes, with comorbidityInsulin dependent diabetes, with comorbidity Non-insulin dependent diabetes, w/o comorbidityNon-insulin dependent diabetes, w/o comorbidity Non-insulin dependent diabetes, with comorbidityNon-insulin dependent diabetes, with comorbidity

Comorbidities: ICD-9 CM codes for the most common comorbid conditions Comorbidities: ICD-9 CM codes for the most common comorbid conditions associated with diabetes were included in the analysis and include:associated with diabetes were included in the analysis and include:

cardiovascular disease,cardiovascular disease, hypertension,hypertension, septicemia, septicemia, bacteremia, bacteremia, hyperosmolarity, hyperosmolarity, nephropathy,nephropathy, neuropathy, andneuropathy, and retinopathy. retinopathy.

Note: BCBSLA Case Management interventional processes for diabetes do Note: BCBSLA Case Management interventional processes for diabetes do not distinguish between Type I and Type II diabetics so no distinction is made not distinguish between Type I and Type II diabetics so no distinction is made in the analysis. Comorbidities were identified via peer reviewed research in the analysis. Comorbidities were identified via peer reviewed research literature.literature.


An Example of the Data

Total Allowed dollars

Case/Control Status (1=Case,

0=Control)Case Management

Severity Age Sex

Enrolled in PBM DM Program

No. Comorbid Conditions

Total Mbr Months

Case Mgmnt Mbr Months Company Product LOB SES Proxy

(Based on clams incurred and paid in CY 2003-

2004)(1=Cases, 0=

Controls)

Moderate-High Case Management Program

(1,2)

(In Years. Excludes Medicare primary) (1=M, 0=F) 1=Y, 0=N

Count of Conditions other than Diabetes

Total Months Enrolled with

BCBS

Total Months in Diabetes Case Management

Program(0=HMOLA, 1=

BCBSLA)

(0=HMO HMO, 1=HMO, 2=PPO, 3=POS,

4=Individual, 5=HMO PPO)

(Coded as a value between 1 and 21 see Appendix C)

Medstat Median household data based on

Zip codes

13,140$ 1 2 54 0 0 4 22 11 0 5 14 $ 28,049

15,895$ 0 1 20 0 0 2 10 2 1 3 20 $ 21,371

25,937$ 1 2 48 0 1 4 15 11 1 0 9 $ 43,406

20,380$ 0 2 41 0 1 3 18 12 0 1 8 $ 36,233

8,051$ 0 2 54 0 0 4 22 3 1 1 5 $ 40,143

31,314$ 0 2 47 1 0 1 9 8 0 0 5 $ 15,236

3,972$ 0 1 30 0 1 0 5 6 0 0 2 $ 12,273

14,315$ 1 2 41 0 0 3 6 10 0 5 4 $ 43,902

3,088$ 0 1 40 0 1 5 11 9 1 5 17 $ 37,837

46,175$ 1 1 23 0 0 3 3 10 1 3 19 $ 12,657

17,661$ 1 1 20 0 0 3 4 12 0 4 6 $ 42,329

17,347$ 0 1 32 0 1 4 22 11 1 1 5 $ 28,489

27,034$ 1 2 64 1 0 4 7 6 0 3 16 $ 12,066

5,672$ 0 2 24 0 0 5 10 3 0 1 2 $ 17,638

44,454$ 1 1 47 1 1 1 15 8 0 2 5 $ 35,861

33,889$ 0 2 44 1 0 2 6 4 0 4 19 $ 21,710

7,620$ 1 2 42 1 0 3 13 10 0 2 2 $ 40,224

30,976$ 1 2 62 1 0 0 10 1 1 1 7 $ 28,011

46,669$ 0 2 50 1 1 4 4 5 1 1 17 $ 36,305

38,564$ 0 2 32 1 0 4 2 5 0 1 9 $ 30,525

42,989$ 0 2 41 1 1 0 12 8 1 1 7 $ 43,402

21,412$ 0 2 28 0 1 1 1 1 0 1 5 $ 24,850

20,234$ 1 2 50 1 1 5 18 8 0 5 18 $ 35,674

42,621$ 1 1 21 0 1 1 12 1 0 0 2 $ 20,470

21,389$ 1 1 29 0 0 5 19 6 1 0 5 $ 37,340

28,721$ 0 2 49 1 1 1 11 4 1 0 17 $ 31,637

38,444$ 1 2 44 1 0 3 1 11 0 4 16 $ 23,135

30,129$ 0 1 61 0 1 2 10 12 1 0 20 $ 27,168

47,393$ 0 1 25 0 0 0 10 10 1 2 2 $ 24,913


What Do We Hope to See?

0

500

1000

1500

Est

imat

ed S

avin

gs in

Dol

lars

2.62

.83

3.23

.4R

R S

core

0 5 10 15Time Period (Months)

Baseline Score Observed_RR_Score

Savings

Source: Blue Cross Blue Shield of Louisiana, MMRD, 2003

N=2,500 active members from January 1-December 31, 2003Hypothetical ROI Analysis for High-Risk Members

The Math ModelTotal Allowed Annual Cost = CM Status BCBCSLA Months Enrolled Months in CM Z Company + Z Product Z LOB

0 1 2 3 1 4 5 6 7 2 8 3 9 4

CM Status* CM Status * CMStatus* 10 5 11 6 12 7

B B Age B Sex B Z B B B SES B B B

B Z Age B Z Sex B Z

* CM Status* Age * Sex * Months in CM CMStatus * Age * Sex * Product13 8 15 10

CM Status* Age*Sex*Months in CM*LOB CM Status * Age * Sex * Product * LOB * Months in CM+16 11 17 12

Age Sex B Z B Z

B Z B Z

Using ordinary least squares regression models to compare the total allowed dollars per year between the cases (enrolled) and controls (not enrolled) after adjusting for:

• Age (excludes Medicare primary)

• Sex

• Number of comorbid conditions

• Differences in benefits design

• Length of time enrolled as BCBSLA member

• Enrolled or not enrolled in case management

• Case management severity (moderate high)

• SES – using zip code data

• Self-selection bias


Summary Statistics forCM Enrolled vs. Not EnrolledClaims paid or incurred between August 2003 and July 2004

Members enrolled in CM at any time during study period

Enrolled variable | N mean sd cvEnrolled variable | N mean sd cv----------------------+-----------------------------------------------------------+-------------------------------------N Hx Cost| 15399.00 N Hx Cost| 15399.00 9741.559741.55 25319.60 2.60 25319.60 2.60----------------------+-----------------------------------------------------------+-------------------------------------Y Hx Cost| 1058.00 Y Hx Cost| 1058.00 26178.5326178.53 54377.93 2.08 54377.93 2.08----------------------+-----------------------------------------------------------+-------------------------------------Total Hx Cost| 16457.00 Total Hx Cost| 16457.00 10798.2710798.27 28391.01 2.63 28391.01 2.63------------------------------------------------------------------------------------------------------------------------

Hx costs are annualized costs and represent the sum of all medical and pharmacy costs for a member observed during the 12-month period. These costs are computed as the total allowed PMPM cost multiplied by 12. Data are age-sex adjusted using OLS regression. The CV is coefficient of variation and is calculated as the standard deviation divided by the mean and is another measure of variation.


Incremental Savings?• Using CRMS data, the incremental difference between the allowed paid

claims for diabetics enrolled in case management vs. diabetics not enrolled case management is:

$9,741.55 - $26,178.53= -$16,436.98/year/enrolled diabetic.

• Diabetic members enrolled in case management appear to have significantly greater costs of health services including primary care and specialty care services after adjusting for age, sex, months enrolled and benefits design.

• Why?Why?• Increased volume of PCP and specialist visitsIncreased volume of PCP and specialist visits• Increased complianceIncreased compliance• Increased use of meds and other treatment regimensIncreased use of meds and other treatment regimens

• Is there a long-term payoff?Is there a long-term payoff?


Conclusions Diabetic members in case management programs Diabetic members in case management programs

appear to be consuming greater healthcare resources appear to be consuming greater healthcare resources in the short-term than members not enrolled in case in the short-term than members not enrolled in case management programs. What conclusions can we management programs. What conclusions can we draw from this?draw from this?

Nothing yet – it is hoped that the greater short-term Nothing yet – it is hoped that the greater short-term consumption will result in long-term savings, and improved consumption will result in long-term savings, and improved quality of life, for case management enrolled members quality of life, for case management enrolled members through:through:

Reduced inpatient hospital admitsReduced inpatient hospital admits Reduced ER utilizationReduced ER utilization Reduced incidence and prevalence of ESRDReduced incidence and prevalence of ESRD


QUESTION 3:

How Can We Model the Cost-Benefit of the Long-term Savings Associated with

Case Management Activities?


Markov Modeling and Cost Savings

Markov analysis is a technique that deals with probabilities of future Markov analysis is a technique that deals with probabilities of future occurrences by analyzing presently known or estimated occurrences by analyzing presently known or estimated probabilities. probabilities.

Well-regarded as a method for evaluating long-term cost-benefit Well-regarded as a method for evaluating long-term cost-benefit when long-term data are limited or nonexistent.when long-term data are limited or nonexistent.

Markov models are useful when the decision problem involves risk Markov models are useful when the decision problem involves risk over time, and when events may happen more than once. There over time, and when events may happen more than once. There are four assumptions to the Markov process:are four assumptions to the Markov process: There is a limited or finite number of possible statesThere is a limited or finite number of possible states The probability of changing states remains the same over time The probability of changing states remains the same over time

(stationary vs. non-stationary Markov models)(stationary vs. non-stationary Markov models) We can reasonably predict any future state from the previous We can reasonably predict any future state from the previous

state and the matrix of transition probabilities.state and the matrix of transition probabilities. The size and the makeup of the system – for example the The size and the makeup of the system – for example the

proportion of diabetics- does not change during the analysis.proportion of diabetics- does not change during the analysis.

Markov Transition State Modelsfor Diabetics Enrolled and Not Enrolled in

Case Management Programs

WELL

Low riskDiabetes

CostsDEAD

Omitted Omitted

Omitted

0.00Mod. riskDiabetes

Costs

Hi-riskDiabetes

Costs

MARKOV MODEL FORMEMBERS IN CARE MANAGEMENT

0.7

0.05

0.05

0.30

0.55

0.10

0.025

0.05

0.25

0.6750.15

WELL

Low riskDiabetes

CostsDEAD

Omitted Omitted

Omitted

0.00Mod. riskDiabetes

Costs

Hi-riskDiabetes

Costs

MARKOV MODEL FORMEMBERS NOT ENROLLED

IN CARE MANAGEMENT

0.75

0.04

0.00

0.35

0.54

0.00

0.00

0.00

0.28

0.720.20

Setting Up the Markov Model(Cohort Simulation model)

CM Enrolled Low RiskModerate

Risk High Risk Dead TOTAL NOT CM Enrolled Low RiskModerate

Risk High Risk Dead TOTAL

Low Risk 0.700 0.150 0.100 0.050 1.000 Low Risk 0.750 0.200 0.010 0.040 1.000

Moderate Risk 0.050 0.550 0.300 0.100 1.000 Moderate Risk 0.000 0.540 0.350 0.110 1.000

High Risk 0.025 0.050 0.250 0.675 1.000 High Risk 0.000 0.000 0.280 0.720 1.000

Dead 0.000 0.000 0.000 1.000 1.000 Dead 0.000 0.000 0.000 1.000 1.000

TOTAL 0.775 0.750 0.650 1.825 4.000 TOTAL 0.750 0.740 0.640 1.870 4.000

Payoff Payoff

RR Score Range

Mean HbA1c Allowed $/Yr

RR Score Range

Mean HbA1c Allowed $/Yr

Low (1Q) 1.1-3.9 7.0-9.4 $ 1,880 Low (1Q) 1.1-3.9 7.0-9.4 $ 2,284 Moderate (2Q) 4.0-8.9 9.5-11.9 $ 3,940 Moderate (2Q) 4.0-8.9 9.5-11.9 $ 8,714

High (3Q) >9.0 >12.0 $ 8,515 High (3Q) >9.0 >12.0 $ 23,290

DIABETICS NOT ENROLLED IN CASE MANAGEMENT

To

From

Risk is defined by RR, allowed dollars and HbA1c

From

To

Risk is defined by RR, allowed dollars and HbA1c

CASE MANAGEMENT ENROLLED DIABETICS

Payoff refers to the difference in the allowed amounts between the case management enrolled and not enrolled. This difference is the cost-savings or losses.


The Markov Model - Continued


Diabetic Case Management Program Long-Term Costs Savings Per Diabetic/Per Markov Cycle - January 2004-March 2009

(Source: CRMS software and data, and TreeAge 4.0 software)

$-

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000Ja

n-04

Mar

-04

May

-04

Jul-0

4

Sep

-04

Nov

-04

Jan-

05

Mar

-05

May

-05

Jul-0

5

Sep

-05

Nov

-05

Jan-

06

Mar

-06

May

-06

Jul-0

6

Sep

-06

Nov

-06

Jan-

07

Mar

-07

May

-07

Jul-0

7

Sep

-07

Nov

-07

Jan-

08

Mar

-08

May

-08

Jul-0

8

Sep

-08

Nov

-08

Jan-

09

Mar

-09

Month-Year

Est

imat

ed A

llo

wed

Do

llar

s/C

ycle

/Mem

ber

CM Not Enrolled CM Enrolled Savings

This Markov model output assumes a monthly savings cycle for case management activity and a half-cycle correction factor for a five year time horizon. The savings are estimated at $5,268.82/year/enrolled diabetic assuming a five year horizon and a nominal discount rate of 3%/year.

Savings


QUESTION & ANSWER SESSION


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