Raising further questions about the financial value of disease management, PacifiCare Health Systems plans to terminate a Medicare demonstration project for heart-failure care almost a year early amid mounting costs.
The health insurer, which was acquired by UnitedHealth Group last month, informed the CMS that it will end its HeartPartners disease-management demonstration on Feb. 28 instead of at year-end, as originally agreed upon.
PacifiCare-the nation's largest Medicare HMO-launched the federally sponsored demonstration in January 2004 to help the CMS determine whether closely managing the care of seniors with congestive heart failure could improve outcomes, reduce hospitalizations and cut costs among beneficiaries in the Medicare fee-for-service program.
But according to the CMS, with PacifiCare's fees factored in, HeartPartners has actually cost Medicare more than traditional care.
"From a financial perspective, the program has not generated Medicare savings as anticipated," said Linda Magno, director of the Medicare demonstrations group at the CMS, adding that PacifiCare has borne all the financial risk. "We can't force a company to continue with a program if their ability to support that program changes or their financial picture changes."
Under its original three-year contract with the CMS, Cypress, Calif.-based PacifiCare guaranteed a minimum net reduction in Medicare expenditures because of its services. That means the insurer will be required to return a portion of its fees to cover any costs incurred by Medicare above "budget neutral" through Feb. 28. How much that will be won't be known until later this year, after all claims have been received and processed, Magno said.
The program's early halt casts further doubt over disease management's ability to reduce medical costs, particularly among the older and sicker Medicare population. The economic value of such programs was thrown into question in October 2004, when the Congressional Budget Office released a report concluding there was "insufficient evidence" to prove disease management could actually save money. Hospitals, too, have been experiencing mixed success with efforts to run disease-management programs for insurers (Nov. 28, 2005, p. 6).
"Proponents often claim that disease-management programs not only improve quality but also pay for themselves by decreasing the use of acute-care services enough to offset the costs of the additional screening, monitoring and education services," stated the CBO report, which analyzed 57 studies of disease-management programs. Unfortunately, "Improving health outcomes and mitigating healthcare costs do not necessarily go hand in hand."
Since then, disease-management vendors have been scrambling to build a better business case for their programs, largely at the urging of employers (Aug. 8, 2005, p. 26).
Last week, for example, the Disease Management Association of America announced plans to establish an industrywide standard for measuring financial and clinical outcomes. The not-for-profit trade group said it will work with several public and private standards-setting organizations to develop a uniform measurement methodology, which it expects to unveil in early December.
"Our experience shows disease management works, but lack of agreement on how to measure that success has hampered our ability to convince skeptics," said association Executive Director Tracey Moorhead, adding that the new measurement tools will help "erase any doubt that disease management benefits patients and payers alike."
Meanwhile, PacifiCare's decision to pull the plug comes just as the CMS is kicking off a far broader-and more financially stringent-pilot project aimed at testing how disease management could improve quality and contain costs among the nation's 40 million fee-for-service Medicare beneficiaries. Under the three-year Medicare Health Support Program, launched in August 2005, vendors and insurers in eight regions will manage about 160,000 seniors with diabetes or congestive heart failure. Each company has guaranteed a 5% savings to Medicare net of their fees.
CMS officials, however, say they aren't reading anything into HeartPartners' early demise. "The two programs are so very different in their designs that we're not drawing any direct conclusions or comparisons at this time," said Barbara Hoffman, director of chronic-care improvement programs at the CMS.
The CMS was mandated under the federal Benefits Improvement and Protection Act of 2000 to study the effects of disease-management programs on some of the nation's costliest chronic conditions. Congestive heart failure, a progressive condition in which the heart loses pumping power, affects just 14% of Medicare beneficiaries but accounts for a full 44% of the federal program's annual expenditures, according to the CMS.
HeartPartners was modeled after a disease-management program that PacifiCare has offered its Medicare HMO members with much success since 2001.
The program has provided daily home-monitoring of participants' weight and symptoms, nurse follow-ups and low-cost prescription-drug coverage to keep patients' conditions in check.
PacifiCare spokesman Tyler Mason would say only that HeartPartners was stymied by a lack of interest among patients. Under its contract with the CMS, PacifiCare has received monthly payments of up to $525 for every senior enrolled in the program.
The insurer originally expected to collect $300 million in reimbursements over the three years; lagging enrollment has left the company woefully short of those projections.
According to Mason, HeartPartners currently has about 3,750 enrollees, or just 25% of the 15,000 beneficiaries originally expected to participate. The company has served 8,500 members over the life of the program, Magno said.
"After a considerable amount of energy on our part, the interest just isn't there," Mason said, adding that the program's early termination has nothing to do with PacifiCare's new ownership.
Mason declined to specify how much money PacifiCare has lost on the program other than to say the figure isn't "anything substantial."
Indeed, HeartPartners is just a drop in the proverbial bucket for UnitedHealth, which expects to post operating profits of $7 billion on $70 billion in revenue this year and to enjoy up to $250 million in annual savings, thanks to its $9.2 billion purchase of PacifiCare (July 11, 2005, p. 8).
But news of HeartPartners' pending demise came as a blow to two companies, QMed and Alere Medical, that have handled various disease-management functions for the program since its inception.
Eatontown, N.J-based QMed, which provided decision support to HeartPartners' participating physicians, said the program's early halt will slash its 2006 revenue by $3.5 million, or roughly 18%.
Loss of the HeartPartners program will shave 8% to 10% off Reno, Nev.-based Alere's annual revenue, said President and Chief Executive Officer Ronald Geraty.
Alere, which became PacifiCare's exclusive disease-management vendor in June 2005, provided the electronic home-monitoring systems for the program. "We certainly believe in the project and are very disappointed that we're not seeing it through to completion," Geraty said.
Still, much could be learned from HeartPartners' two-year stint. Magno said the CMS has hired an outside firm to evaluate the results of the program "to see what changed, what worked or didn't work, and if (savings were generated) among specific subsets of beneficiaries."
Those subsets could include heart-failure patients who also had diabetes or coronary artery disease or beneficiaries who received certain forms of outreach over other forms. Results of the evaluation will be contained in at least one of two reports that the CMS will submit to Congress in coming months, Magno said.
HeartPartners isn't the first disease-management program to fall short of financial expectations.
According to a randomized clinical trial conducted by the University of Texas Health Science Center at San Antonio from 1999 to 2003, patients with heart failure who took part in a disease-management program lived an average of 76 days longer but saw no reduction in hospitalizations, office visits, procedures or pharmacy spending.
Another study, which analyzed outcomes for Kaiser Permanente's four disease-management programs from 1999 to 2002, also found substantial quality improvement but no cost savings. Both studies were published in November 2004.