Over the years, there has been an increase in patients with complex chronic diseases, leading to higher expenditure in the health care system. According to Luck et al (2007), individuals with chronic conditions normally consume 68% of spending in the Medicare program. Moreover, the ten very expensive chronic conditions among veterans above the age of 65 are responsible for 66% of the total costs of VA (Department of Veterans Affairs). At the national level, expenditure for patients with complex diseases could be significantly minimized while maintaining the quality of care. Generally, managers and policy makers within the health care systems desire to have comprehensive intervention or strategies that can control the care of individuals with chronic illnesses while improving or maintaining the patient outcomes and quality care. Such strategies or interventions that are in tandem with these standards are referred to as having satisfactory “business case” by managers.
Part I: Risk and Mitigation Analysis
Patients with severe chronic illnesses have numerous and varied diagnoses, including cancer, diabetes, autoimmune diseases, HIV disease, severe mental illness, and physical disabilities. Such patients are normally at increased risk of receiving poor quality care and are susceptible to incur avoidable costs. Notably, these risks include treatment strategies that are potentially conflicting; poor communication of critical medical information across various care settings and physicians; and poor compliance with treatment recommendations, leading to severe negative outcomes.
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It is noteworthy that managers in the health care systems have employed multiple strategies to alleviate these risks; therefore, improving care for patients with severe chronic conditions. Tools such as organized care management processes and Chronic Care Model (CCM) are typically employed by physician organizations. On the other hand, health plans strategies are often used in management of diseases. However, it is noteworthy that complementary mitigation strategies should be coordinated among health plan and patients’ physicians. Although physician organizations may not clearly adhere to the CCM mechanisms, they can utilize one or more management processes such as group visits, self-management support, medical practice guidelines that are evidence-based, case managers, reminders, electronic medical records, and performance feedback to physicians. Typically, patients can obtain essential information regarding their chronic illnesses from health plans such as disease management programs. Also, disease management programs can help in compliance to treatment, encouraging healthy behaviors, and availing information to the patient’s doctors.
Medicare is conducting numerous demonstration programs that are geared toward improving care for free-for-service recipients with severe chronic illnesses. For instance, huge multispecialty group practices in Physician Group Practice Demonstration will share in savings from Medicare if they improve care for cancer screening and four chronic conditions successfully. One of the large-scale disease management program, Medical Health Support Program has been utilized for beneficiaries with complex diabetes. Health plans and disease management vendors that have guaranteed the achievement of beneficiary satisfaction targets, net 5% in financial savings, as well as quality improvement successfully have been awarded contracts. Medicaid programs are the most commonly used mitigation mechanism across states in improving care for patients with chronic illness.
Part II: Benefit Analysis
Through analyzing the business case executing a number of strategies, it is possible to compare the estimated benefits of those strategies with the implementation costs. Notably, if financial benefits are more than the costs while improving or maintaining quality, then the business case is optimistic. In addition, if a set of mechanisms have been implemented and quality is improve but does not lead to increase in cost, then the case would also be positive. Both costs and benefits must meet certain standards. For instance, there must be inclusion of all implementation expenditures. In addition, the time value of money will require cost to the current account as well as discount in future benefits. If the present value of projected costs are less that the current value of estimated benefits, then the financial return on investment is positive.
Estimating Costs
Estimated costs should include:
Startup costs
Startup costs include data collection and evaluation for identification of target patients, new information systems, or initial training for staff and physicians. During the first 2 years, the organization will incur costs that will give direction to future expenditure.
Direct Costs
Direct costs include additional time for physicians, new staff, or additional time for nurses to improve communication with patients. Notably, direct costs will be incurred in the 3 rd year of the mechanism implementation since the organization would have realized the weaknesses and strengths when implementing the mechanisms.
Indirect costs
Indirect costs are attributable to the strategies, for instance, higher use of chronic disease medications or utilization of screening tests, or participation of senior management during the implementation process. Generally, this will be incurred in the final phase of implementation (4 th and 5 th years).
Estimating Benefits
Projecting clinical and financial benefits entails estimating how the strategies will alter the occurrence of future events. Relatively, it is easy to project the impact of efficiency, for instance, eliminating duplicate testing. However, analysis that is more sophisticated is required for the projection of cost savings from reduction, particularly in more occasional happenings such as avoidable hospitalization. The most challenging procedure is projecting the benefits of averting future occurrences of severe complex condition. It is important to note that in order to measure benefits, there is need to address two methodological issues. First, adjustment of cost reduction for probable regression to the mean is necessary. Usually, patients are selected to participate in procedures that are based on a sentinel event or previous record of high costs, for instance, hospitalization. Nevertheless, some patients may be in groups that involve high expenditures in a particular year, but will consequently have lesser expenditures in the following years.
Selection bias is the second issue that must be addressed. It is important to enroll patients who are motivated to behavioral change into the demonstration or pilot programs; therefore, they still would minimize future expenses even without considering the benefits that are tied to huge populations. The business case is less favorable if an organization does not obtain any benefits and incurs loses. For instance, physician organizations may realize benefits to their plans if they execute mechanisms that minimize preventable hospitalization. Since commercial health plan accumulate after the patient is likely to be off the plan, it does not benefit in savings from preventing future complication of severe complex conditions.
Cost Effective Analysis
Managers are not able to obtain proper guidance regarding whether to implement strategies that not only improve and maintain quality, but also increase costs from the standard business case analysis. If a mechanism proves that it can successfully improve health outcomes, then an integrated health care system or health plan may implement it. Notably, Cost-effective analysis (CEA) can offer guidance to these decisions. CEA does not quantify benefits n dollars but in Quality-adjusted life years (QALYs). Both delayed mortality and reduced morbidity are incorporated into QALYs.
References
Centers for Disease Control and Prevention. (n.d.). Part IV: Benefit-cost analysis [PDF] . Retrieved from http://www.cdc.gov/dhdsp/programs/spha/economic_evaluation/docs/podcast_iv.pdf
Douglas, H & Nomand, C. (2005). Economic evaluation: what does a nurse manager need to know? Nursing Management, 13 (5): 419-427. Retrieved from https://doi.org/10.1111/j.1365-2834.2005.00586.x
Korczak, D., Dietl, M., & Steinhauser, G. (2011). Effectiveness of programmes as part of primary prevention demonstrated on the example of cardiovascular diseases and the metabolic syndrome. GMS health technology assessment , 7 , Doc02. doi:10.3205/hta000093
Luck, J., Parkerton, P., & Hagigi, F. (2007). What is the business case for improving care for patients with complex conditions? Journal of general internal medicine , 22 Suppl 3 (Suppl 3), 396-402.
Plowman, N. (2014). Writing a cost benefit analysis [Blog post] . Retrieved from http://www.brighthubpm.com/projectplanning/58181-writing-a-cost-benefit-analysis/
Rabarison, K. M., Bish, C. L., Massoudi, M. S., & Giles, W. H. (2015). Economic evaluation enhances public health decision making . Frontiers in Public Health , 3, 164. Retrieved from https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4478374/
