Academic journal article The McKinsey Quarterly

A New Model for Disease Management

Academic journal article The McKinsey Quarterly

A New Model for Disease Management

Article excerpt

So far, excessively high costs have torpedoed most plans for managing diseases overtime. But emerging technologies could change all that.

However miraculous an outcome any surgical or other heroic intervention may achieve, doctor and patient alike would surely agree that the better alternative is always prevention. So would insurers: they know that effective disease management--efforts to help chronically ill patients follow a treatment plan and to spot problems early--could save them enormous amounts of money every year. Specialists estimate, for example, that more than half of all hospital admissions and sick days linked to asthma and about half of the major complications linked to diabetes (such as amputations, blindness, and stroke) could be avoided with better monitoring and care. One German study showed that medical costs for a diabetic who didn't suffer complications came to around [euro]2,000 ($1,760) a year, while annual medical costs when complications developed exceeded [euro]5,000.

Disease-management plans are nothing new, though to date most have failed because they were too costly. But emerging technologies that support the patient-management process could change all that. A full program can help coordinate care, encourage patients to follow their treatment plans, and provide warning as soon as problems develop. Germany is likely to be a test bed, since its government plans to compensate insurers for more of the cost of running such programs. Its experience will be keenly watched (see sidebar "Testing models in Germany," on the next page).

How it works

Many groups could benefit from effective disease-management programs. Patients would have a better chance of avoiding complications arising from their conditions and of leading healthier lives. Doctors and other health care practitioners would be able to supplement the personalized care they give with a program that offered their patients education, more frequent contact, and general encouragement. Pension and retirement plans could see fewer of their participants choosing early retirement.

Still greater savings would accrue to insurers and, in some cases, to national health plans. Case studies and models show that disease-management programs combining a smart mix of technology and operational excellence would let insurers reap net savings of 10 to 30 percent for specific patient groups (Exhibit 1). This estimate means that in Germany, for example, where annual claims linked to diabetes come to about [euro]13 billion, the participation of only 10 percent of the country's diabetics in disease-management programs could cut these claims by more than [euro]100 million a year in the medium term. McKinsey analysis suggests that the value of the overall reductions in German medical claims could be as high as [euro]350 million.

It is for this reason that insurers will probably be willing to bear a substantial part of the cost of setting up disease-management programs. These insurers could do so by offering such programs themselves, by contracting with third-party providers, or perhaps even by reimbursing policyholders who join programs with which they have no connection. Large insurers in particular might well consider launching their own disease-management efforts in order to accumulate expertise in the field and to retain for themselves all of the eventual savings. However, such companies must surely recognize that establishing successful programs will take time as well as a significant investment in know-how and infrastructure. The wisest strategy for insurers is therefore probably to select the best candidates for such programs but to outsource their implementation to other companies.

Disease-management programs aren't meant to replace a personal physician's care; rather, they supplement it by acting as an intermediary among patients, physicians, hospitals, and other health care providers. With some conditions, the keys to success are the close, day-to-day monitoring and the rapid reaction to troubling signs that the programs make possible. …

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