1. The Power of Clinical Strategies to Reduce Costs: The Unexploited Opportunity for States as Healthcare Purchasers Bruce Amundson, MD President Community Health Innovations, Inc.

2. 2 There are two components of population-based initiatives: (1) wellness and prevention efforts aimed at healthie2r lifestyles and reduced costs over the long-term, and, (2) clinical approaches to deal more effectively with the current disease burdens of the population. This latter effort can reduce costs over a shorter term, and will be the focus of my remarks. The central argument: The greatest opportunity to reduce health costs is to change the way we provide care to the sickest, most complex and most costly segment of the population. There is wide-spread consensus on this perspective among clinical leaders nationally. Why is this and how can it be accomplished?

3. 3 Health Costs for any Insured Population % Insured Pop. % of Expenditures 1970 1980 1990 Top 5% 50 55 54 Top 10% 66 70 68 Top 30% 88 90 88

4. 4 The Clinical and Financial Profile of this 10% Financial: depending on whether the insured group is made up of Medicaid, Medicare or commercially-insured individuals, the cost ranges from $30,000 to $150,000 per enrollee per year! (For commercial groups the typical cost range is $35,000-45,000 per person.) Clinical: These individuals have complex health profiles, usually representing one or more serious medical problems, accompanied by behavioral issues (often depression), and commonly in a framework of serious family problems. This is particularly the case with Medicaid populations. YET: 15 years into heath “reform” we are not dealing differently, in a population-wide manner, with this 10%, than we were before.

5. 5 Bridging the Knowledge-Implementation Gap There is a huge gap between what we know how to do, what is being carried out in some places, and what is actually going on with these complex enrollees in most state-sponsored health plans. For example, many Medicaid programs have focused on “Primary Care Case Management” efforts where Primary Care Physicians are given extra reimbursement to coordinate the care of patients. While a first step, the clinical complexity of many/most Medicaid enrollees makes this role unrealistic. It is a relatively weak “care management” strategy compared with strategies such as: 1. Multidisciplinary healthcare teams composed of nurse case managers, mental health professionals, social workers and health educators. Working with primary care physicians, they are able to ensure all health problems are simultaneously and comprehensively addressed by bringing the broad range of necessary clinical skills to the work with highly complex people and problems. 2. Case management: nurses trained in the role of helping individuals get the support and assistance needed to address their health problems and navigate the non-systems. 3. Disease management: programs to assist patients in better managing specific diseases. 4. Integration of medical clinicians with behavioral clinicians, in the same locations. This assures optimal and equal attention to physical and mental health problems, with much better results. This is the opposite of “carve-outs” which fragment care and have less impact on cost containment.

6. 6 Sample Results from Better Care Mgmt. Utilization of a Multidisciplinary Team with Medicaid Pts. (per 1,000 enrollees per year): 1993 vs 1995 Pre-Care Mgmt Data Post-Care Mgmt Data In-pt. Admits 201 97 In-pt. Days 817 212 ER Visits 859 311 The work of the health teams was focused on the sickest 10% of enrollees as determined by health risk assessments upon their entry into the health plan.

7. 7 Sample Results (con’t.) Healthcare Team impact on hospital utilization by 65 complex patients, 2003, Maine 6 months before 6 months team management after team mgmt Hosp. admits 39 15 Hosp. days 137 54 ER visits 26 21

8. 8 State Policy Options 1.Purchasing strategy: require that contracting insurers develop specific, state-of-the-art care management services such as those discussed above. 2. Further, require that these services be decentralized into communities where the state has enrollment levels that are large enough to justify the clinical programs. This is in contrast to the approach of many insurers currently where clinical staff (case managers, etc.) are housed centrally in the urban offices of the insurers. Experience has made it clear that, to be effective, the clinicians need to be in the communities where both the enrollees and their physicians reside.

9. 9 State Policy Options (con’t.) 3.State purchasing programs (Medicaid; state employees) could directly work to establish care management services in communities across the state, where ensured population sizes warrant. These clinicians could then work with health plans and/or physicians in the networks that care for state- sponsored enrollees. Each of these potential initiatives is designed to expand the capacity and sophistication for care management to improve care and reduce costs for the most costly enrollees

10. 10 Observations and Summing Up 1.Most states are a decade behind in implementing contemporary clinical care systems for the populations for whom they purchase services. 2.States as purchasers have an immense potential to leverage change and a severe need to modernize care systems to deal with the massive cost issue for state governments. 3.Ensuring the presence of more state-of-the-art care management systems would be highly relevant for: Medicaid families, special populations with complex health needs (DD, disabled, etc.), nursing home and potential nursing home occupants, and state employees. The opportunities to reduce costs are huge. 4.Policy makers should support and empower their health program administrators to innovate and lead in the development of initiatives that can both improve care and reduce costs (an attractive mix, since the improved care is what reduces costs.)