States report big savings with care management

According to a November 2008 report from Washington, DC-based Health Management Associates, targeted, highly customized interventions for people with chronic diseases can be an effective tool for reducing hospital readmissions.

The report, Chronic Disease Management: Evidence of Predictable Savings, highlights recent efforts in the Indiana and North Carolina Medicaid programs to implement targeted care management programs and reduce inappropriate utilization. Indiana's Care Select program was created in November 2007 to provide care management services to high-risk people via medical homes. The Community Care of North Carolina (CCNC) care management program was launched in 1998, with primary care physicians, local hospitals, local health departments, and the Department of Social Services identifying high-risk people with chronic diseases.

When age-adjusted Medicaid claims data were used to compare enrollees in the regular primary care case management program (the control group) with those getting enhanced care management via the CCNC program's provider networks, annual cost savings in asthma were $294,000 in the first year, $1.4 million in the second year, and $1.58 million in the third year. There were 23% fewer hospital admissions in the first year. Children had 34% fewer ED visits and 42.5% fewer asthma-related ED visits.

Here are some key findings in the report:

• Return on investment (ROI) for congestive heart failure (CHF) ranges from 4.8 cents to 32.7 cents per dollar invested. Care management for high-risk pregnancies yields reductions in neonatal intensive care unit use ranging from 37% to 62%.

• Among targeted CHF populations, the decline in hospital admissions ranges from 21% to 48%. For asthma/chronic obstructive pulmonary disease patients, the decline in hospital admissions or readmissions ranges from 11% to 60%.

Iowa's Medicaid program "prides itself on being an effective and prudent purchaser of health care services," says Jennifer Vermeer, director of Iowa Medicaid Enterprise. She says her program has accomplished this with these initiatives:

• The development and implementation of utilization management programs for medical and pharmacy services, including prior authorization and care management programs.

• Care management services provided for members with chronic conditions, including congestive heart failure, diabetes, and asthma.

"Evaluation of care management programs find a reduction in hospitalizations and inappropriate utilization of services, resulting in substantial savings of inpatient charges due to reduced health care utilization," says Ms. Vermeer. "A high percentage of program participants indicated satisfaction with the program."

Iowa Medicaid monitors health care spending by tracking costs over a five-year period and analyzing diagnosis codes, procedure codes, provider types, service units, and total expenditures.

"This data capture trends in service delivery, which are used to identify and implement cost containment and quality improvement initiative," says Ms. Vermeer.

According to Cheryl Roberts, deputy director of the Department of Medical Assistance Services (DMAS), "Management of asthma medication is a key factor for preventing asthma-related hospitalizations." Audited data from Virginia's Medicaid managed care organizations show that more than 90% of members with asthma adhere to important medication management guidelines.

Through a partnership with a disease management program, DMAS contracts with Richmond, VA-based Health Management Corp. to provide condition management resources to eligible Virginians with chronic diseases, such as asthma, diabetes, chronic obstructive pulmonary disease, congestive heart failure, and coronary artery disease.

"When these conditions are managed effectively through a person-centered approach, it leads to improved use of disease management services and reductions in the use of preventable emergency high-cost services," says Ms. Roberts. "This program has demonstrated a 2-to-1 savings."

Be ready to make decision on how you'll invest in HIT

Due to a much-anticipated infusion of federal investment in health information technology (HIT), state Medicaid programs could possibly be getting a push forward for initiatives such as electronic medical records (EMRs) and electronic prescribing.

"The interest in this, because of the fact that so many people are now in Medicaid and also SCHIP programs, has really started to peak," according to Anthony Rodgers, director of the state of Arizona Medicaid/SCHIP programs, known as the Arizona Health Care Cost Containment System (AHCCCS). Mr. Rodgers is chair of the National Association of State Medicaid Directors Multi-State Collaboration for Medicaid Transformation.

"There is recognition that e-records, e-prescribing, and the ability to exchange information among different health care providers would have great impact in reducing costs in Medicaid," says Mr. Rodgers.

Two years ago, Congress appropriated $150 million to state Medicaid agencies for various "transformation" projects. A number of states used the money to move forward with HIT initiatives, including e-prescribing, the development and deployment of electronic health records, and decision support applications to help with clinical decision making, as well as fraud and abuse detection.

However, the evidence of resulting cost savings is just starting to accumulate. "The initial projects will probably start to show return on investment in about a year," says Mr. Rodgers. "Most of the projects are just now getting implemented and becoming operational."

He says this is the reason the Multi-State Collaboration was created—so that other states can learn from Arizona's experiences and move forward more rapidly.

For example, Arizona is using its Medicaid Transformation Grant to develop and implement a web-based health information exchange to give all Medicaid providers instant access to patients' health information at the point of service. Arizona received a total of $11.7 million in federal funds to develop the Arizona Medical Information Exchange.

As part of an initial proof of concept, the Arizona Medical Information Exchange project team is evaluating the cost savings seen by about 60 providers who now can get access to health information, such as discharge summaries from hospitals, patient medication lists, and laboratory information.

"We have had a lot of positive feedback from providers, who say they were never before able to get this information in a timely manner," says Mr. Rodgers. "This is really making it possible for them to improve patient safety, quality of care, and reduce cost. We don't have a large enough group of users to have a huge cost savings with our current rollout. But it will give us the justification for scaling it up to a much broader group of users in the future."

Medicaid directors are key

"I believe that to develop a 21st century Medicaid health care system, you have to have Medicaid leadership that understands how to develop and deploy health information technology within the Medicaid program," says Mr. Rodgers. "That is a leadership skill that is required if you are going to bring your program into the 21st century."

With budget cuts, states are clearly in less of a financial position to aggressively move forward with a statewide HIT initiative. But, the Obama administration has said that investing in HIT is a high priority as part of an economic stimulus package.

"We are hoping that the federal government will provide states with additional funding to move forward with these kinds of initiatives," says Mr. Rodgers. "The federal government realizes that as a partner in Medicaid, they would benefit from any savings, too, if states achieve widespread adoption of electronic health records."

"I think the federal government is in a better position right now to fund these initiatives. Down the road as our economy turns around, states will be in a better position to then pick up the operational and maintenance costs of these HIT projects," says Mr. Rodgers.

There are some "front-runner" states, including Arizona, Alabama, California, New York, Georgia, Vermont, West Virginia, Texas, and Tennessee, which have aggressively moved forward with HIT for their Medicaid programs, but by and large, most states are taking a "wait-and-see" approach. "I think there are a number of states that are waiting to see what we are able to achieve and how we do it, before they will be comfortable making a commitment to HIT," says Mr. Rodgers. "And that's not unusual in Medicaid. We look to front-runner states to test out things before everybody else jumps in. But I do hear a lot of interest from states about moving forward with their own HIT initiatives. The biggest problem remains how to finance it."

Evaluate before moving forward

Simply because something is the "latest-and-greatest" technology, doesn't mean it is the most cost-effective solution for a specific Medicaid program. State Medicaid directors need to determine how emerging health information technology will affect the bottom line and decide whether the investment is "worth it."

State Medicaid directors should develop a strategic vision of how their state should move forward with HIT, says Mr. Rodgers, and what role Medicaid should play.

"In our state, we developed a road map. We brought all the stakeholders to the table and developed a consensus around, 'How are we going to move forward with statewide adoption of electronic health information exchange?' That gave AHCCCS the ability to start planning how we could contribute to this effort," he says.

Identify "exactly what you want to accomplish," Mr. Rodgers suggests. "You don't acquire technology for the sake of technology. You invest in HIT to improve cost-effective results."

For example, if you deploy electronic prescribing to reduce your medication costs, you have to make sure your e-prescribing system is configured to achieve the maximum ROI.

Arizona's Medicaid program set out to reduce the number of duplicate laboratory tests. These usually occurred as a result of patients showing up in physician's offices without their lab results, which often meant another lab test was ordered.

Another goal was to reduce medication costs due to duplicate prescriptions written by different doctors for the same patient, which can cause adverse drug reactions and, in severe cases, emergency department visits. The third area being evaluated is reduction of inpatient costs due to unnecessary hospital admissions that occur because the patient's ED physician doesn't have access to full information.

"Before you set out to plan and develop a health information system, determine the health care outcomes that will justify your financial investment. Then, develop your information system specifications and project plan to optimize your outcomes," advises Mr. Rodgers.

Contact Mr. Rodgers at (602) 417-4111 or