An Apple a Day--on the Boss

With health costs running a fever, employers and insurers are turning to disease management

Five years ago, when Patricia Leckey learned she had diabetes, she was reluctant to test her blood sugar regularly because it cost too much. But her employer, the City of Asheville, N.C., had just set up a program to pay for her tests and even her diabetes medication. So Leckey, today the city's accounting services manager, signed up and now tests herself twice a day. She also gets regular exams and advice--not from a physician, but from a specially trained local pharmacist. The new system has worked well and Leckey has never had a diabetes-related emergency.

Asheville has come out ahead, too. It pays $22 a month for diabetes medicine and test equipment. But Leckey sees her doctor only three times a year instead of monthly. Overall, the city spends just $4,651 annually on health claims for diabetic employees, vs. $6,127 before the program started. Absenteeism among diabetics has been slashed from 12 days a year to fewer than 6.

The last time double-digit annual health-care cost increases hit the U.S. a decade ago, employers jumped on health-maintenance organizations as the solution. Now the managed care revolution has run its course, and medical inflation has come roaring back.

So what's the latest big idea for reining in runaway medical costs? Disease management programs like Ashville's, which are a sophisticated version of old-style preventative medicine. Rather than rationing services through managed care, employers throw lots of early medical attention at chronically ill workers like Leckey, who absorb about 60% of all health dollars.

Their hope is that vigorous prevention will stave off hospitalizations and other expensive care, bringing big savings down the road. Boosters argue that far greater savings will come from reducing absenteeism and increasing productivity.

Desperate companies are rushing to try the new approach to cope with crushing cost hikes amid a sluggish economy. The number of employers installing disease management programs has doubled since 1997, to 19% of large corporations, and will likely approach 30% next year, according to Hewitt Associates Inc. benefits consultant Camille Haltom (chart).

Insurers such as Aetna Inc. (AET ) and UnitedHealth Group Inc. (UNH ) are ramping up disease management programs to meet the demand, while smaller firms are popping up to provide the expertise and staffing required. CorSolutions Medical Inc., a Buffalo Grove (Ill.)-based firm, has enrolled 300,000 patients in plans it runs for insurers such as Blue Cross of Michigan, up from just 12,000 five years ago. "The growth in these programs has been exponential in the last two years," says Watson Wyatt Worldwide senior consultant Bruce Kelley.

Still, for all the enthusiasm, it's by no means clear that the logic of disease management will pan out. Programs like Asheville's require large up-front spending, both on the extra care and on the incentives the plans use to entice employees to participate. But there are no large-scale national studies showing that employers that embrace the concept save more than they spend. "We are not able to prove [that the idea saves money], but we believe it does," says Bruce E. Bradley, director of health-plan strategy at General Motors Corp.'s Health Care Initiatives, which launched a major program in 1996.

Today's efforts go far beyond the wellness fairs and free cholesterol screenings that first cropped up in the 1990s. Now, companies identify people who suffer from chronic diseases such as diabetes, asthma, or back pain, give them loads of information about their illnesses, and offer intensive guidance and treatment to get the problem under control. The programs--which are all voluntary--then regularly monitor the patient's health status, using methods ranging from real-time wireless devices to claims databases.

For example, Pitney Bowes Inc. (PBI ) began a limited program in 1995 but rolled out a more comprehensive version last October that focuses on a broad range of chronic diseases. One early participant, postal-meter repairman Ian Williams, signed on last year after he discovered he had diabetes. Now he gets regular calls from a company nurse who administers his blood tests and makes sure he takes the right medication. "They call me to see how I'm doing," says a grateful Williams, who also still sees his regular doctor. "The nurses worked with me all the way."

GM has gone even further, setting up an asthma program for an entire county in Indiana where it had several factories and still insures 15,000 people. In 1999, the auto maker found that asthmatics in Madison County visited the hospital far more often than others. Through the new program, 500 people are taking classes in how to manage their disease and take their medications. And they're developing care plans with their doctors. The price tag is $140 per patient. But their emergency room visits have been slashed by 40%, and hospital admissions have dropped by 15%, saving money for GM and the community.

Technology is a key new tool. Sophisticated software allows insurance companies to identify patients who are having trouble managing their symptoms. Claims data can tell an insurer that an asthmatic is using the wrong inhaler or that a congestive heart failure patient is making many trips to the emergency room. A nurse or other staffer then contacts the patient to suggest changes in their care.

Many programs rely on financial incentives to encourage cooperation. Hughes Electronics gives workers $250 in preventative care for doing a risk assessment and cuts annual premiums by $200 for those participating in its program. Blue Ridge Paper Products Inc. in Canton, N.C., gives workers cash awards of up to $250 for meeting health-care goals.

Disease management isn't likely to trigger the patient backlash that managed care did, but it's not without controversy. Doctors worry that they will be cut out of the health-care loop. Consumers worry about privacy. Even some health plans fret that a disease-by-disease approach risks giving short shrift to patients with multiple problems. Still, as employers scramble aboard the disease-management bandwagon, more workers can expect a call reminding them to take their pills.

By Howard Gleckman and John Carey in Washington

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