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How much do managed care organizations spend on disease management programs and what are typical ROIs? A few concrete examples would be helpful.
The Pace Group:
Expenditures for disease management programs vary widely. Some plans spend nothing, while other plans spend millions of dollars per year.
The science of measuring return on investment (ROI) for disease management programs is complicated and constantly evolving. Disease management programs vary significantly in terms of how they are defined, structured, staffed, and implemented.
A true ROI is contingent upon numerous variables, none of which are constant from one health plan to another, or even from one disease management program to another. When assessing the ROI associated with disease management programs, health plans are in the unenviable position of having to estimate what would have occurred, from an outcomes perspective, had there been no disease management program at all - a difficult, if not impossible, task.
For reasons cited above, the concept of a typical ROI for disease management programs is illusive at best, and concrete examples are hard to come by.
As a rule of thumb, however, high-quality disease management programs can reasonably be expected to generate a return on investment ranging from 2:1 - 5:1.
In reality, disease management programs are often viewed by health plans as a cost of doing business and are implemented for reasons other than an attractive ROI. Such reasons might include, for example, market demand, compliance with NCQA, and a genuine desire to improve patient satisfaction, quality of life, and health outcomes.
What constitutes an acceptable ROI for a disease management program will vary among health plans and depend upon numerous factors, including motives, opportunity costs, risk tolerance, profit position, and the population being served, e.g., Medicare, Medicaid, Commercial.
Before calculating ROI, health plans should clearly define the disease management program in question and obtain credible baseline measurements to facilitate subsequent comparisons. Health plans must also clearly identify the direct and indirect costs related to staffing, overhead, information systems, and program management. Controlling for other, more nebulous, factors is equally important, including case mix, disease prevalence, and regression toward the mean.
Disease management, as an organized approach to health care, is relatively young. As it becomes more mature and sophisticated, so too will the mechanism used to measure its cost-effectiveness.
For more information, please contact: The Pace Group Inc., 12160 Abrams Road, Suite 409, Dallas, TX 75243; (972) 437-5611; (800) 422-5611.
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