FIVE CRITICAL OBSERVATIONS ABOUT DISEASE MANAGEMENT ASSEMBLING

FIVE CRITICAL OBSERVATIONS ABOUT DISEASE MANAGEMENT ASSEMBLING

Vince Kuraitis JD, MBA and Harry Leider MD, MBA

"Build or buy?" is one of the most fundamental questions faced by any organization. A few years ago, it was unclear how this question should be answered in relation to chronic disease programs. The question is raised by a wide range of organizations involved in chronic disease management (DM) -- including delivery systems, physicians, health plans, and DM support or outsourcing companies.

A third option -- assembling -- is making sense to an increasing number of organizations. Assembling is somewhere between building and buying. Assembling involves buying or building program COMPONENTS, but tailoring the components and integrating them to suit the unique needs of your organization. Examples of DM program components include clinical guidelines, a medical call center, web based education or tracking, program staff, information technology (hardware and software), remote biometric monitoring, and others.

We offer five critical observations about make/buy/assemble options:

1) The jury is in -- building is too complex.
2) The jury is in -- buying is a viable option for specialized, high impact conditions.
3) The jury is still out - will buying expand beyond specialized, high impact conditions?
4) Assembling is growing. Assembling is becoming viewed as a core competency by a growing number of organizations.
5) Assembling will continue to grow. Multiple trends fuel the growth of assembling.

1) THE JURY IS IN -- BUILDING IS TOO COMPLEX.
The jury is in -- the build approach is too complex, and we don't expect to see any major players begin experimenting with this approach. Some delivery systems and health plans have attempted to build their own comprehensive chronic disease management programs. (Those that are showing success have been at it for the better part of a decade.) While there are a few examples of organizations with staying power (Kaiser, Group Health of Puget Sound), there are many more examples of those that have dropped out of the race (e.g., University of Pennsylvania Health System, Oxford Health Plan). Most recently, Aetna abandoned its build approach, seemingly driven more by a need to improve it financial performance than due to a systematic review of clinical operations.

The best reasons favoring building relate to maintaining control over transactions with patients and physicians and to capturing value. Over time, it's become apparent that these advantages are more theoretical than real. It's also becoming clear that NO ONE organization can develop all the specialized DM expertise. Lessons learned: building is time consuming, financially draining, and requires great organizational tolerance for trial and error.

2) THE JURY IS IN -- BUYING IS A VIABLE OPTION FOR SPECIALIZED, HIGH IMPACT CONDITIONS.
The jury is also back with a PARTIAL verdict about the buy alternative. The buy alternative makes sense for specialized, high impact diseases. It's not clear whether buying will expand beyond these conditions. The buy alternative makes most sense under the following circumstances:

LOW PREVALENCE, HIGH COST CONDITIONS (CHF, COPD, end-stage renal disease, rare conditions such as lupus, etc.)

COST CONTROL is the primary goal (i.e., prevention of emergency room visits and/or hospital admissions)

The contracting organization (e.g., health plan, delivery system) is FINANCIALLY AT-RISK

ECONOMIES OF SCALE are not available to one organization. For example, economies of scale might not be achievable for small or medium sized health plans, or for many highly specialized clinical conditions.

Buying has a number of advantages - its fast (programs can be up and running in months), it avoids capital expenditures, it avoids hiring new staff, and it provides access to very specialized DM expertise.

3) THE JURY IS STILL OUT - WILL BUYING EXPAND BEYOND SPECIALIZED, HIGH IMPACT CONDITIONS?
A question that's still open is whether buying will be seen as a long-term solution or as an entree to acquiring internal expertise, i.e., a foot in the door to the complex world of chronic disease management.

To say that buying is a "viable" alternative doesn't necessarily mean that it's the best alternative. Many organizations are choosing to assemble even for specialized, high impact clinical conditions.

Buying is a particularly attractive alternative when an organization is starting chronic care management from scratch. A growing number of organizations view buying as a way to get started quickly and develop their own in-house expertise over time.

4) ASSEMBLING IS GROWING. ASSEMBLING IS BECOMING VIEWED AS A CORE COMPETENCY BY A GROWING NUMBER OF ORGANIZATIONS.
Assembling is becoming the modern version of building. Health plans and delivery systems are being compelled to consider managing chronic disease as a core competency of the organization.

Assembling is increasingly viewed as a core competency to create and capture value -- both financially and clinically.

What's the case for considering assembling as a core competency?

To maintain more direct control and consistency over relationships with customers (patients and physicians)
To avoid distermediation by third party administrators (TPA's), defined contribution plans, and others
To please employers that are increasingly interested in proactive medical management
To capture value -- avoiding giving away too much value to outsourcing companies
To avoid commoditization -- avoiding undifferentiated offerings that are purchased solely based on lowest price

5) ASSEMBLING WILL CONTINUE TO GROW. MULTIPLE TRENDS FUEL THE GROWTH OF ASSEMBLING
We predict that a growing proportion of health care organizations will be taking the assemble route. Many trends fuel the growth of assembling: First, QUALITY is becoming more important as a
DIFFERENTIATOR. During the past decade, patients have had difficulties evaluating health care quality and purchasers have been primarily concerned with cost issues.

Today, health care consumerism is becoming more prevalent. Numerous national quality initiatives supported by employers are under way. Demonstrable quality is becoming more important to patients and health care purchasers. This creates incentives and expectations for health plans and delivery systems to create superior offerings, e.g. by offering better care for chronic conditions.

Second, SHIFTING DEMOGRAPHICS change health care strategy. In the past some health care organizations strategized TO attract the healthiest patients and NOT TO cater to higher cost patients with chronic conditions. This strategy has just about run its course -- baby boomers have gotten older.

As baby boomers age it becomes difficult to rationalize avoiding enrolling high cost patients or NOT proactively managing their care. The thinking becomes "if we can no longer avoid treating or enrolling high cost patients, we better get good at managing their care." Aging of the population INCREASINGLY compels health plans and delivery systems to consider managing chronic disease as a core competency.

Third, assembling better AVOIDS LOCK-IN AND MINIMIZES SWITCHING COSTS. Can you pick the best DM vendor today? Probably. However, how confident are you that today you can pick who will be the best vendor 3 years from now? In plain old English, assembling avoids risks and costs associated with putting too many eggs in one basket. Assembling allows organizations the option to switch individual DM components as it becomes apparent that better and/or cheaper alternatives become available.

Fourth, assembling promises better INTEGRATION of DM into local health care delivery. While DM outsourcing companies have been able to deliver on the value proposition of SPECIALIZATION (e.g., world class clinical guidelines), they are still working at optimizing the value proposition of INTEGRATION. For example, physician apathy/resistance to DM is a sign of less than optimal integration into local care delivery. Highmark Blue Cross Blue Shield is an example of an organization taking an assemble approach, with one goal being improved physician relations. While the jury is still out on this issue, too, we observe that many DM outsourcing companies are being asked to unbundle their offerings into components.

Fifth, pharmaceutical COMPANIES and others are GIVING AWAY COMPONENTS of the assemble solution. Should you create or buy patient education materials, clinical guidelines, and patient management software when some vendors will provide these offerings as value-added extras to their core products or services? (Caution - beware of strings attached.) Finally, many organizations ALREADY HAVE SOME OF THE COMPONENTS. Examples of DM components are listed in the second paragraph. The task now focuses on INTEGRATING various components. Assembling DM components is more than just a tactic. It's a mindset, a philosophy, a strategy. Many organizations are preparing for this long journey and taking the first steps.