The disease management industry, not yet a decade old, is growing up. A movement toward accreditation and industry standards for evaluation and reporting of results is one clear signal that doctors, insurance companies and health maintenance organizations understand the long-term value of disease management programs. More significantly, a consolidation trend already under way is creating stronger, diversified vendors better able to control costs and improve outcomes for a broader scope of medical needs.
This pattern of smart growth bodes well for the future of disease management and for managed care. HMOs, insurers and employers are turning in greater numbers to programs that help patients monitor their treatment, but increasingly they seek "one-stop-shopping" for vendors that can educate and assist patients with a variety of ailments. Part of the impetus is simply controlling the multiple points of contact and sources of paperwork in the managed care bureaucracy. But mergers between niche firms also have the potential for another positive outcome: improved patient care.
The disease management industry dates to the mid-1990s, when healthcare providers recognized that comprehensive services to patients -- from educating them about symptoms to making sure they take medication and attend therapy sessions -- would improve treatment of chronic diseases and prevent relapses. Disease management typically involves not only monitoring compliance with doctors' orders and educating patients about their illnesses or injuries but also encouraging them to take an active role in their own treatment.
A quick look at the numbers helps make the case for disease management as a cost control measure. About 20% of U.S. consumers account for 80% of direct healthcare spending, according to most estimates. A few chronic diseases, such as diabetes and heart disease, generate most of the costs. The results of disease management programs for these conditions have been impressive.
The nation's largest disease management company, American Healthways, says it can reduce the cost of a particular disease population by 12% to 20% in the first year, with savings increasing over the next five years. Insurance giant Cigna Corp., which has more than 700,000 members enrolled in various chronic-care management programs, has reported a 14% cost savings and significant improvement in the well-being of patients with diabetes in such programs.
Industry revenue has grown with demand, to an estimated $1 billion this year from $68 million in 1997. The potential upside is far greater, many specialists believe. Now, the federal government is on the verge of endorsing these results by extending disease management to the largest insurance program, Medicare. Citing the potential for improving the lives of people with chronic illnesses by ensuring they have coordinated care, federal officials last year announced a three-year pilot project for disease management of the chronically ill that includes coverage for prescription drugs.
Combining multiple diseases into a single disease management program produces the greatest healthcare savings. It also makes medical sense, since patients with chronic diseases often have two or more ailments, such as congestive heart failure and diabetes. Today it is not unusual for a disease management company to specialize in as many as a dozen diseases. Large disease management companies are developing programs for high-cost, relatively high-prevalence conditions, such as low-back pain, high-risk pregnancy, arthritis-related conditions, irritable bowel syndrome and depression.
Total population care management, in which companies help manage the care of all members within a particular health plan, is emerging as a new growth area for disease management. Using sophisticated risk modeling programs and personal health information, health plans will be able to identify members who are at risk for particular diseases and then work with their physicians to provide effective interventions to minimize the specific health risk.
As in earlier emerging industries, advances in technology are helping to drive the growth of disease management. "Integrated care management," a new watchword for health plans, relies on new information technology that can integrate data on at-risk populations, including patients who are seeing several doctors for a variety of conditions. The same technology allows vendors to expand their disease management capabilities to larger patient groups and across medical specialties. It can also be used to track patient outcomes and monitor the cost-effectiveness of disease management programs.
The steps toward standards for evaluation of disease management programs and accreditation by outside organizations such as the Joint Commission on Accreditation of Healthcare Organizations and the National Committee for Quality Assurance will contribute to the industry's intelligent growth. Medical entrepreneurs, as always, will create new companies and develop innovations in management of patient care and costs. Startups based on niche services will continue to fuel the industry's growth, meeting the evolving demands of managed care and forging new markets.
But the industry's growth will be sustained only through strategic mergers and acquisitions that ensure the highest quality of care and strict adherence to cost controls. The shakeout will continue with the demand by HMOs for vendors that handle more than one condition. That is a good thing for entrepreneurs and their financial backers, who will supply a steady pipeline of disease management startups in new geographic areas and medical specialties. The evolution of disease management is creating significant business opportunities. But its greatest success will be in helping improve patients' conditions and giving them the tools to live healthier lives.
Ben Dunn is a senior partner at Covington Associates of Boston, which specializes in mergers and acquisitions advisory services to emerging growth and middle-market technology and healthcare firms.