Despite some recent events that hint at uncertaintyperhaps even bad newsfor disease-management programs, industry experts insist the segment is strong and its future is healthy.
That response came last week after Healthways, a disease-management company based in Nashville, cut its fiscal 2008 earnings outlook to a range of $1.50 to $1.55 per diluted share from its original estimate of $1.77 to $1.86 per share. Separately, a report from FBR Capital Markets Corp. noted that diagnostic company Inverness Medical Innovations has seen its shares plummet 30% since the Waltham, Mass.-based company announced its bid to acquire disease-management company Matria Healthcare for $1.18 billion in late January. And in February, disease-management players complained after the CMS said it would suspend the second phase of a three-year pilot project in which participants tested chronic-care alternatives on selected fee-for-service Medicare beneficiaries until a full evaluation of the first phase has been completed in 2011 or 2012 (Feb. 18, p. 17).
But Ryan Daniels, an analyst with William Blair & Co., said none of these is cause for alarm in a segment that continues to attract interest. There is certainly a very large unmet need to improve our healthcare system with chronic-care and disease management, so I dont think demand is going to be dying any time soon, Daniels said, adding that there has been interest not just in Matria, along with disease-management vendors ParadigmHealth, which Inverness acquired for $230 million in December 2007, and Alere Medical, which Inverness bought for about $302 million in November. And Boston-based Health Dialogs largest shareholderthe British United Provident Association, an insurance and healthcare services provider in Londonsaid in December it would buy the company for $775 million.
As for Healthways, the company attributed the revised forecast to slower-than-projected enrollment in a new program with one large health plan customer as well as the recent indication that two previously anticipated contracts will not materialize during the fiscal year, according to a company news release. Daniels also cited the companys news that it has signed 219 contracts so far this fiscal year with an annualized revenue stream of more than $90 million.
We continue to sell a significant amount of disease-management work, said Robert Stone, executive vice president and chief strategy officer at Healthways and a company co-founder.
Gordon Norman, the chief science officer at Alere Medical, said there should be more and better evidence in this segment, and the industry should make that a priority, even if a companys clients have not demanded it. Policymakers, and, to a certain extent, academics, dont feel that the value proposition has been demonstrated beyond a shadow of a doubt, said Norman, who is the chairman-elect of DMAA: The Care Continuum Alliance, which represents this industry. Buyers and users of disease-management services are accepting more of a preponderance of evidence, if you will.