Wellness & Prevention: a key component of a functional and harmonious healthcare system

François Millard FSA, FIA, MAAASeptember 24, 2010

2

Wellness as an essential ingredient to curb trend in a transformed health system: Evidence from South Africa

1

How Vitality works2

The integrated medical home/ wellness home4

Applying the principles in the US corporate environment3

3

Wellness as an essential ingredient to curb trend in a transformed health system: Evidence from South Africa

1

4

South African healthcare has been through a transformation similar to what the US faces

4

South Africa US

No exclusions for pre-existing conditions a aRestrictions on premium rating a aPrescribed minimum benefits a aPenalties for not purchasing insurance X a

Guaranteed access and coverage a a

5

Drivers and Remedies of Medical Costs

Cost

Member

Risk

Member

Treatment

Risk

Cost

Treatment= x x

Drivers

Remedies

LifestyleDisease burden

Wellness & Prevention

TechnologyTreatment protocols

Utilization ManagementBenefit Rules

Supply and demand of medical products and

services

Provider and services contracting. Benefit Rules

Cost sharing mechanisms

Managed Care & Cost shifting

Frequency of Sickness

Utilization of Services

Cost per Servicesx x=

6

Healthcare is riddled with market failure

Und

er c

onsu

mpt

ion

of

prev

entiv

e ca

re Lack of information

Over optimism

Hyperbolic discounting

True efficacy of different health and wellness approaches is not well understood

People tend to overestimate their abilities and health status

Future rewards of a healthy lifestyle are significantly undervalued relative to cost today

Sickness Wellness

Benefits are immediate, price is hidden

Benefits are hidden, price is immediate

7

The Discovery Healthcare Model

Triangle of healthcare utilization

8

Impact of the combined model on long-term medical inflation trend

Discovery Industry

Discovery medical trend vs. Industry (1993 = 100)

0

100

200

300

400

500

600

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

700

9

How Vitality works2

10

Vitality provides a co-ordinated approach to lifestyle modification

Knowledge

Active Care

Integrated network of partners in communities and additional coverage

through local events and devices

Integration of best available lifestyle resources and care networks (e.g.

nutrition, biometrics, smoking, disease specific interventions and coaching)

11

Publication of Vitality cross-sectional studies

11

12

VIP Study 1: impact of Vitality engagement on hospital-related costs

12Source: “Participation in an Incentive-based Wellness Program and health care costs: Results of the Discovery Vitality Insured Persons Study”. Please do not quote without written permission from Discovery or PruHealth.

Risk-adjusted hospital admission costs: engaged vs. not engaged Vitality members

*Categorisation based on diagnosis-related groupers using ICD-10, CPT-4 and local procedural codes

P < 0.001 for all categories (including overall result) except cancer where P < 0.01

*

Not engaged benchmark

30-40% 15-20% 10-15%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

13

P = 0.001 for multiple metabolic conditions, all single conditions are not statistically significant

Risk-adjusted hospital cost for chronic members: engaged vs. not engaged Vitality members

VIP Study 2: Vitality engagement is correlated with lower cost of chronic disease

Beneficiaries with single conditions

Not engaged benchmark

20-30% 8-10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Multiple metabolic conditions

Mental illness Cancer Hypertension Dyslipidaemia

14

Longitudinal Vitality study1

14

Year

% o

f mem

bers

usi

ng

the

gym

ben

efit

21.124.8

27.0

31.1 31.8

1 2 3 4 5

1A retrospective analysis of 304,000 adults over the period 2004 to 2008, covering 33,196,197 member months of data. The analysis was designed to test for:

Significant changes in engagement with fitness-related activities over time Whether these changes were associated with changes in the probability and cost of hospitalization

Evidence of significant changes in cohort fitness engagement over time

13%10%

7%3%

0.80

0.85

0.90

0.95

1.00

0.5 1.0 1.5 2.0

Number of additional gym visits per week from Year 1 to Year 3

(for initial inactive members)

Odd

s ra

tio fo

r ho

spita

lizat

ion

in Y

ears

4 to

5

Longitudinal Vitality study: relationship between increasing activity and the odds

of hospitalization

15

Applying the principles in the US corporate environment3

16

Application to Client’s Population (7,000 employees): Medical Cost

Methodology overview: Numbers shown represents a constant cohort of almost 5,000 employees present within the base period (2007) and 2008 Vitality year. Claims are Age & Gender adjusted.

Costs increase as risk factors increase. Interventions are aimed at keeping the low risk low, and reducing or managing high risks

Base Base Base

Excess Cost

Excess Cost

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

Low Risk Moderate Risk High Risk

Per E

mpl

oyee

Cos

t ($)

Claims Cost by Risk Category2009 Employee Allowed Cost per month - Consistent Cohort

1. Health Maintenance

2. Risk & Cost Management

17

Engagement Client 7,000 employees: Tracking of simple and complex behaviors

The large increase in physical activity is driven by the combination of total

participants and average workouts. The overall results for the 3rd policy year

are especially promising.

Average Workouts per Month(Verified and qualified workouts Only)

6,140

7,136

3,000

4,000

5,000

6,000

7,000

8,000

Policy Year 1 Policy Year 2

Aver

age w

orko

uts

per m

onth

Policy Year Comparison

5,437

8,412

13,864

-2,000 4,000 6,000 8,000

10,000 12,000 14,000 16,000

Policy Year 1 Policy Year 2 Policy Year 3

Aver

age w

orko

uts

per m

onth

First Quarter Comparison

Breakdown by type of activity

18

203

87 7541

0

50

100

150

200

250

High Risk Moved to @Risk Moved to Low Risk

Mem

ber C

ount

2009 Risk Group

Total Cholesterol(Movement of members with High TC identified in the first policy year)

High Risk 2008 2009 Risk Category

24.2

34.2

50.3

-

10.0

20.0

30.0

40.0

50.0

60.0

Remain at High Risk

Moved to @Risk Moved to Low Risk

Aver

age A

ctiv

ities

Per

Mem

ber

2009 Risk Group

Systolic Blood Pressure(Engagement associated with movement of members)

Directional US Vitality experience:Client 7,000 employees.

390

142179

69

0

100

200

300

400

500

High Risk Moved to @Risk Moved to Low Risk

Mem

ber C

ount

2009 Risk Group

Systolic Blood Pressure(Movement of members with High SBP identified in the first policy year)

High Risk 2008 2009 Risk Category

Risk factor prevalence (verified results): employees and spouses (2009 vs. 2008)

29 35

42

-5

10 15 20 25 30 35 40 45

Remain at High Risk

Moved to @Risk Moved to Low RiskAver

age A

ctiv

ities

Per

Mem

ber

2009 Risk Group

Total Cholesterol(Engagement associated with movement of members)

19

The integrated medical home/ wellness home4

20

The integrated Medical Home / Wellness Home:A model for a holistic, integrated healthcare system

21

Fundamental principles of the Medical Home:Commonality to Vitality design

Component Description Vitality

Practice organisation (partnerships)

Partners in the network must be of sufficient scale and sophistication to play a role in the patient’s care co-ordination

Organised wellness network of defined partners helps members navigate the market complexity and lack of co-ordination

Practice organisation (funding)

Model needs to be affordable to ensure broad-based implementation, and requires different reimbursement funding models that allow for staffing, capital investment and scale

Network model removes / reduces financial barriers to engagement through partner channelling and funding structures. Funding model facilitates partnership economics

Health information technology (data and support)

Integrated electronic patient records support decision making and proactive care. Add ‘customer relationship modules’ automatically feeds back to the member with prompts and educational material

Verified and self-reported data used to generate a personalised pathway to health maintenance / improvement on a dynamic basis. CRM model feeds back immediately to the member with education and advice

Health information technology (quality measures)

Central co-ordination role that tracks data from multiple sources and interactions, and uses it for better clinical management

Back-end partner integration that allows for real-time collection of data from all network partners, and which feeds into the members’ dynamic health pathways

Health information technology (evidence-based medicine)

Clinical pathways that ensure that doctors do the right things at the right time

Scientifically-derived, independently verified, clinical pathways at the individual member level

Patient experience Factor patient opinion and experience into the clinical management process

Interactive process of knowledge organisation; ongoing monitoring of survey, online and partner interactions

22

Wellness reduces the cost of chronic illnesses and encourages changing lifestyle behavior1

Engagement keeps people in the healthcare system and therefore encourages a longer-term investment in healthcare2

Engaging consumers to change their behavior has driven down healthcare costs3

This is a key component of a functional and harmonious healthcare system4

Key Observations

23

Wellness & Prevention: a key component of a functional and harmonious healthcare system

François Millard FSA, FIA, MAAASeptember 24, 2010