The Business Case for Diabetes Disease Management

Diabetes is a tough disease to tackle. A case-study discussion led by HBS professor Nancy Beaulieu asked why it is so complex for business and society, and what might be done to curb its incidence.
by Martha Lagace

What should business people in particular know about the pros and cons of attempts to treat and control diabetes—or indeed other chronic diseases?

That was the focus of a lively case-study discussion among some fifty participants led by HBS professor Nancy Beaulieu at the 2003 Alumni Healthcare Conference on November 7.

Beaulieu's research focuses on many aspects of healthcare—including contracting, quality competition in managed care, and human capital management and performance measurement. At the session, she prodded her alumni "students" in classic HBS case-study fashion to analyze the complexities of disease management and check all avenues for potential business opportunities. The participants, almost all of them health professionals, sorted through the risks and benefits of disease management for patients, employers, health plans, doctors and nurses, and society.

In the end, participants agreed that while disease management is a thorny concept involving all these many constituencies, it might in some instances leave room for business potential in the form of a carve-out. A carve-out, as defined in the paper "The Business Case for Diabetes Disease Management" that Beaulieu co-wrote to launch the discussion, works like this:

"In a carve-out arrangement, a private disease management vendor typically takes on full risk for the care of patients with specific diseases like diabetes. The health plan typically identifies its diabetic patients, and then the vendor is placed financially at risk for the costs of patient medical care and is responsible for coordinating all aspects of care for those patients. The vendor is often also involved with other chronically ill patients of the same health plan—for example, those with asthma or hypertension."

Why Diabetes Is A Good Case

But first, diabetes. Beaulieu chose diabetes as a context in which to spark discussion on organizational and financial systems for several reasons, she said. It is a very prevalent disease: as Beaulieu and co-authors David Cutler and Katherine Ho noted in their study, it is the seventh leading cause of death in the U.S. Its economic burden is also high, since it is linked to other afflictions such as heart and renal disease and blindness.

And, she added, one of the most important aspects of this disease is that the medical profession already knows how to treat it. "We have the medical knowledge to do it. And it's not being done. Just under one-half of identified diabetics in this country don't have their blood sugar under control," she said.

Diabetes manifests as Type I or Type II and, as one participant pointed out, the most appropriate care involves some tailoring. But in general, it is well recognized that diabetes can lead to long-term complications and short- and long-term costs. As Beaulieu and her co-authors learned, diabetics may make up between 3 and 10 percent of a typical health plan's membership. It typically costs about $1,000 a year to treat a newly diagnosed diabetic patient; obviously, the numbers go up if a diabetic suffers serious complications.

Healthcare providers have attempted a number of disease management strategies over the last ten years or so. The diabetes programs have varied, but all are linked by the idea that patients can and should become educated about their disease and be proactive in taking care of their health. According to Beaulieu and her co-authors, disease management is focused on prevention and control, not acute care. "The aim is to improve the coordination of care and to reduce the number of hospitalizations and severe complications among diabetic patients," they wrote.

Disease management, then, can take several approaches. The simplest is probably for the healthcare provider to offer a monitoring system for patients who have already been diagnosed as diabetics, sending out e-mail or making phone calls to remind patients of test and checkup dates. Another route is to offer a combined monitoring, tracking, and alert system. This method automatically lets the healthcare provider know if patients skip their tests or if a more intensive treatment seemed warranted by the latest test results. A third approach—less common—is to create a coordinated "virtual team" around the patient, by sharing lab data, insurance claims data, and pharmacy data in an attempt to enhance overall care.

Another part of diabetes disease management programs aims not at current diabetics but at identifying members of the health plan who seem at particularly high risk of developing the disease within the next couple of years. This kind of program is harder for health plans to implement, according to Beaulieu and her co-authors, because it requires data collection and analysis tools, since potential diabetics are identified on the basis of pharmacy and lab data as well as questionnaires and surveys. Not many organizations have ventured into this element of disease management.

In their case-study discussion, participants at the conference mulled over the strategies of HealthPartners, an independent nonprofit that is one of three health maintenance organizations (HMOs) in the Minneapolis market. HealthPartners has an enrollment of about 675,000 people, and its network consists of approximately 3,700 primary care physicians and 4,500 specialists, according to Beaulieu and her co-authors. In the 1990s, it began a program with two elements similar to those outlined above: one to focus on plan members who already had diabetes, and another to focus on members at risk of developing diabetes.

Analyzing HealthPartners, Beaulieu and her co-authors found that such programs could lose money in the first one to three years and so would not break even in a three-year time period. Allowing an eight- to twelve-year period, however, would be more realistic for a break even, they suggested.

Treating A Silent Killer

Participants in the case study said that as a "silent killer" diabetes requires behavioral and lifestyle changes that are difficult for many patients to commit to, even patients with the best intentions. Privacy was another concern: Would employees be "penalized" if they were recognized as patients? Or would sick people flock to employers who offered a too-generous plan? Since long-term effects of the disease are measured in decades, it is complicated to figure out a business case for diabetes, said one alumnus. Participants said that since many people with diabetes have multiple diseases, as business people they did not know whether it would be better economically to treat such a chronic disease on "one system" or just focus on the individual elements of diabetes.

Some participants suggested that Medicare and society might have more of a stake in diabetes disease management than employers. Medicare usually foots the bill for end-stage renal disease, one result of untreated diabetes. An economic case would be difficult to make to employers and health plans, some said: If employee turnover was high, then it would be difficult to economically justify such a time-dependent proposal as diabetes disease management. On the other hand, workplace productivity savings could be the key. According to another alumnus, any outlay "is petty change" to employers compared to the savings of keeping healthy people.

Though wide-ranging, the discussion was underscored by the fact that the growth in incidence of diabetes is a public health crisis that needs urgent attention. However flawed, early programs that attempt to manage the disease may at least get more people thinking about serious solutions for their businesses and communities.

About the Author

Martha Lagace is senior editor of Working Knowledge.