Rickie Lockhart talks with Dr. Kristen Robinson at Kaiser offices. A CalPERS study is attemping to document financial benefits of disease management. Sacramento Bee/Randall Benton

Taking stock of good health

CalPERS study may prove managing disease pays off

By Lisa Rapaport -- Bee Staff Writer
Published 2:15 a.m. PDT Sunday, June 15, 2003

Fighting dust mites may one day save Rickie Lockhart's life. The insects breed unseen in her mattress, pillows and carpets, making it harder for her to breathe -- and they could trigger an asthma attack that kills her.

Lockhart, a clerk at the Department of Motor Vehicles in Sacramento, has always known those bugs were lurking beneath her sheets. Just as she's known a special mattress cover could keep the mites at bay.

But she didn't do anything about it until two years ago when a class for asthma patients at Kaiser Permanente convinced her to buy new bedding.

Though dust mites are only one small variable in the vast calculus of controlling asthma, this is just the sort of story her health insurer -- the nearly 1.3 million-member California Public Employees' Retirement System -- wants to hear.

CalPERS is betting millions that it can improve workers' health and save money on insurance premiums by tracking down every chronically ill patient and doing everything possible to keep them from getting sicker.

CalPERS is hardly the first purchaser of employee health benefits to try disease management. But it may well be the first to prove preventive health programs save money.

Until now, employers all over the country have taken it on faith that disease management is good business. Studies abound showing how disease, be it asthma or diabetes or congestive heart failure, can be slowed or even stopped in its tracks by the right regimen of preventive medicine. Some studies also suggest that hospitalizations and emergency room visits can be averted.

But nobody has been doing disease management long enough to thoroughly prove its return on investment. And even the biggest employers don't necessarily have enough patients with any given disease to prove the savings from managing that health condition.

Spurred by every educated guess in the health industry that suggests preventive programs should save money, Cal-PERS has made disease management the centerpiece of its dramatically revamped health program for 2004.

To be sure, CalPERS health executive Loren Suter expressed both hope and a healthy skepticism about its prospects of saving money.

"With disease management, clearly there are two issues," Suter said. "Clearly one is improving the quality of life for our employees, and the other is a longer-term benefit of controlling our costs."

To start, CalPERS will require its health maintenance organizations to offer programs for asthma, diabetes, cardiovascular disease and depression. Then, the pension fund will tie health plans' profit margins to their ability to treat and track members in disease-management programs, requiring data that proves these patients got healthier.

"If it ends up breaking even, that's a significant benefit for folks," Suter said. "I certainly wouldn't want to portray this as a cost-saving measure."

That's because the math is hard to check.

Take Ricki Lockhart's mattress pads. They retail for about $100 apiece, while a trip to the emergency room for an acute asthma attack can cost 10 or even 100 times as much.

Though Kaiser has plenty of proof that all its classes, phone calls, letters and regular checkups keep its members healthier, the HMO that has been doing disease management longer than anyone else still can't show that its efforts save money.

For example, Kaiser knows its adult asthma patients between 1997 and 2000 became 21 percent less reliant on inhalers prescribed for attacks because they became 12 percent more likely to use the anti-inflammatory drugs that keep breathing passages from closing up.

Over the last two years of that study, the number of days Kaiser's asthma patients missed work or school because of illness declined 5 percent. And from 1999 to 2001, there was a 35 percent dip in the number of emergency room visits for adult asthma patients.

"Our whole approach is, down the road, it will pay dividends," said Richard Harr, who heads Kaiser's disease management program in the Sacramento area.

Numbers like Kaiser's were enough to sell disease management to General Motors, the only purchaser besides the federal government that buys employee benefits for more people than Cal-PERS.

Like CalPERS, GM tends to keep its workers and their families in its health program for life, said Timothy McDonald, a GM manager of corporate health programs. That gives the auto giant plenty of time to wait for a return on its health investment.

Among patients with chronic disease, GM focuses its energy on the less-critical cases.

"I look at this low-acuity group as being the farm team for the high-acuity group that has the most trouble and costs the most money," McDonald said. "If we do our job right, that low-acuity group never reaches the big leagues."

GM makes its HMOs report back each year on the quality of care patients received, then gives employees discounts on their monthly out-of-pocket premiums if they enroll in one of the highest-quality HMOs.

In medical terms, the results are clear. The less-critical patients are healthier than before, and they make fewer trips to the hospital. And the discounted premiums for higher-quality HMOs have encouraged GM workers to switch health plans.

In financial terms, however, success is not yet clear.

"We think we are on pretty solid economic ground with the path we have taken," McDonald said. "The trouble is, there are so many patients who are not going to be hospitalized in any given year, so it takes several consecutive years before you can even think about saying a disease-management program saved money by keeping people out of the hospital."

At the University of California, another large employer that seized on disease management early, officials say they believe the programs are working, although they base that on intuition.

UC requires HMOs to deliver on promised enrollment targets for disease-management programs. If they fall short, HMOs pay UC a penalty.

For all its effort to manage chronic diseases, UC still lacks GM's confidence that the health benefits are proven.

"At this point the HMOs have given us proof that they have programs for disease management, but not proof that it (a program) actually improves health," said Michele French, UC executive director of health benefits and policy.

To provide that proof, CalPERS will spend $12 million on a new data warehouse to track every doctor visit, hospitalization and prescription. Over time, those details should answer the million-dollar question of whether disease management saves money.

In addition, CalPERS has pared its roster of statewide HMOs to two from more than a dozen a few years ago, hoping its increased membership in Kaiser and Blue Shield will get CalPERS better services and custom-made disease management programs.

Blue Shield, promised a three-year contract by CalPERS, has launched a separate business unit to deal just with that account and has started crafting custom health programs for CalPERS -- by far its biggest client.

For years, Blue Shield has offered chronic-health programs for its members, targeting asthma and diabetes first and then gradually adding others.

Two new programs in the works to manage arthritis and end-of-life care for terminally ill patients are being tailored to CalPERS' requirements. In addition, Blue Shield is hiring more nurses to make regular phone calls to sick Cal-PERS patients and to track their progress caring for themselves at home.

"While we are doing these things to improve care for all our members, the clear impetus for us is the CalPERS contract," said Paul Markovich, Blue Shield's account manager for CalPERS.

In its effort to spur HMOS to prove disease management works, Cal-PERS may ultimately reshape the way HMO patients nationwide receive ongoing medical care.

The pressure for proof is mounting because health costs are on the rise, said Camille Halton, a health care consultant with Hewitt and Associates.

"Employers have had very sharp increases in their health insurance premiums the past couple of years, and they are now looking for the next best thing in managing care," said Halton.

As that search continues, CalPERS is counting on being able to take disease management to the bank, one patient at a time.

Laurie Pugh, the nurse who taught Lockhart's asthma class, can say without a doubt that it was good for Lockhart's health.

Lockhart went to the class for help switching from an old-school asthma drug to a newer one with fewer side effects. She left class using her inhaler more effectively. She also left resolved to tear up the 30-year-old carpets in her south Sacramento home.

And she left with a form to order that mattress cover, which prevents mites from escaping her mattress to exacerbate her dust allergies and her asthma.

"A brand-new mattress that weighs 100 pounds will double its weight over 10 years due to dust mites," Pugh tells her students. "Any patient who thinks dust might be a trigger for asthma can benefit from a pad."

But how do you compare the cost of the mattress pad to the price tag for a hospital visit that never happened?

"Employers are sold on the idea of disease management as the right thing do do," said Peter Lee, president of the Pacific Business Group on Health, a coalition of firms that buy insurance. "But they have held a magnifying glass to their health programs and they have not seen any proof. We're all hoping Cal-PERS can answer the money question."

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	Rickie Lockhart holds an inhaler she uses to control her asthma. A class she took through Kaiser Permanente taught her techniques for helping her better manage her condition. Sacramento Bee/Randall Benton

	Rickie Lockhart fills her prescription at Kaiser. CalPERS wants to show that management of chronic conditions such as Lockhart's asthma saves money for HMOs, too. Sacramento Bee/Randall Benton

	Source: Blue Shield of California Sacramento Bee/Olivia Nguyen

	Source: Employee Benefits Research Institute Sacramento Bee/Val B. Mina