Chairman Johnson, Congressman Stark, distinguished Subcommittee members – first, thank you for inviting me to discuss Medicare’s attempts to use disease management to improve the care provided to its beneficiaries. As the delivery of health care has evolved, individual health care providers routinely plan and coordinate services within the realm of their own specialties or types of services. However, rarely does one particular provider have the resources or the ability to meet all of the needs of a chronically ill patient. Ideally, as part of a fully integrated disease management program, a provider or disease management organization is dedicated to coordinating all health care services to meet a patient’s needs fully and in the most cost-effective manner. I want to discuss with you in greater detail the challenges and opportunities we face in integrating disease management concepts into Medicare. The lack of disease management services in traditional Medicare is an indication of how outdated Medicare’s benefit package has become. The demonstration projects being developed and implemented by the Centers for Medicare & Medicaid Services (CMS) can help ensure that America’s seniors and disabled beneficiaries receive high quality care efficiently.

CMS is determined to work constructively with Congress to achieve these goals. We are currently undertaking a series of disease management demonstration projects designed to explore a variety of ways to improve beneficiary care in traditional Medicare. We are looking to these programs to bring Medicare into the 21st Century and provide beneficiaries with greater choices, enhance the quality of their care, and offer better value for the dollars spent by beneficiaries and the government on health care. We appreciate your efforts to strengthen and improve Medicare, and we look forward to working with you on efforts to make disease management services more widely available, in Medicare – and across the health care system.

Background

Medicare beneficiaries with certain chronic diseases account for a disproportionate share of Medicare fee-for-service expenditures. These chronic conditions include, but are not limited to: asthma, diabetes, congestive heart failure and related cardiac conditions, hypertension, coronary artery disease, cardiovascular and cerebrovascular conditions, and chronic lung disease. Moreover, patients with these conditions typically receive fragmented health care from multiple providers and multiple sites of care. We need to find better ways to coordinate care for these patients and to do so more efficiently. Not only is such disjointed care confusing and ultimately ineffective, it can present difficulties for patients, including an increased risk of medical errors. Additionally, the repeated hospitalizations that frequently accompany such care are extremely costly to the patients, government, and private insurers, and are often an inefficient way to provide quality care. As the nation’s population ages, the number of chronically ill Medicare beneficiaries is expected to grow dramatically, with serious implications for Medicare program costs. In the private sector, managed care entities such as health maintenance organizations, as well as private insurers, disease management organizations, and academic medical centers have developed a wide array of programs that combine adherence to evidence-based medical practices with better coordination of care across providers.

Several studies have suggested that disease management programs can improve medical treatment plans, reduce avoidable hospital admissions, and promote other desirable outcomes without increasing program costs. There is little research on the overall benefits of disease management programs for seniors and thus, the CMS demonstration projects afford us the opportunity to test the value of these programs.

In the largest sense, both disease management and case management organizations provide services aimed at achieving one or more of the following goals:

• Improving access to services, including prevention services and necessary prescription drugs.
• Improvingcommunication and coordination of services between patient, physician, disease management organization, and other providers.
• Improving physician performance through feedback and/or reports on the patient’s progress in compliance with protocols.
• Improving patient self-care through such means as patient education, monitoring, and communication.

We are exploring a number of ways to pursue these goals even further in the Medicare program.

Where We Are Today

In order to identify innovative ways to incorporate disease management services into the Medicare program, we have a number of demonstrations underway.

Coordinated Care Demonstration

We are currently implementing a demonstration in 16 sites – including commercial disease management vendors, academic medical centers, and other provider based programs – to provide case management and disease management services to certain Medicare fee-for-service beneficiaries with complex chronic conditions. These conditions include: congestive heart failure; heart, liver and lung diseases; diabetes; psychiatric disorders; Alzheimer’s disease or other dementia; and cancer. This demonstration was authorized by the Balanced Budget Act (BBA) of 1997 to examine whether private sector case management tools adopted by health maintenance organizations, insurers, and academic medical centers to promote the use of evidence-based medical practices could be applied to fee-for-service beneficiaries. Also, Lovelace Health Systems in Albuquerque, New Mexico, is providing coordinated care services to Medicare beneficiaries with congestive heart failure or diabetes. All of these programs were designed to address important implications for the future of the Medicare program as the beneficiary population ages, and the number of beneficiaries with chronic illnesses increases. We are testing whether coordinated care programs can improve medical treatment plans, reduce avoidable hospital admissions, and promote other desirable outcomes among Medicare beneficiaries with chronic diseases.

To date, the 16 coordinated care demonstration sites have enrolled more than 7,600 Medicare beneficiaries in both intervention and control groups in care coordination and disease management programs. The BBA allowed for effective projects under a demonstration to continue and the number of projects to be expanded based on positive evaluation results – if the projects are found to be cost-effective and quality of care and satisfaction are improved.

These initial projects are varied in their scope, include both provider organizations as well as commercial companies, utilize both case and disease management approaches, are located in urban and rural areas, and provide a range of services from conventional case management to high-tech patient monitoring. In addition to Lovelace Health Systems, some of the sites we have selected include: Carle Foundation Hospital in Eastern Illinois; CenVaNet in Richmond, Virginia; Mercy Health Network in North Iowa; QMed in Northern California; and Washington University/Status One in St. Louis, Missouri.

BIPA Disease Management Demonstration

An integral part of our overall strategy for testing disease management, this demonstration, required by the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act (BIPA) of 2000, was designed to determine whether providing disease management services to Medicare beneficiaries with advanced-stage congestive heart failure, diabetes, or coronary heart disease can yield better patient outcomes without increasing program costs. As required by BIPA under this demonstration, disease management organizations will not only receive a fee for their services, but they will also receive payment for the cost of all the prescription drugs their patients are taking, whether or not the drugs are related to their patients’ targeted, chronic condition(s). Coverage of prescription drugs is a unique aspect of this demonstration. Moreover, this demonstration was designed to determine not only the impact on costs and health outcomes of offering disease management services, but also the impact of prescription drug coverage on Medicare beneficiaries. Enrollment is expected to begin this summer and up to 30,000 beneficiaries can be covered at a time under this demonstration.

Telemedicine

Another demonstration authorized by the BBA is our Informatics, Telemedicine, and Education Demonstration Project. Currently, we have a 4-year telemedicine cooperative agreement aimed at evaluating the feasibility, acceptability, effectiveness, and cost-effectiveness of advanced computer and telecommunications technology to manage the care of Medicare beneficiaries with diabetes.

Physician Group Practice Demonstration

Additionally, as required by BIPA, we are developing a physician group practice demonstration which will seek to encourage coordination of Part A and Part B services, reward physicians for improving beneficiary health outcomes, and promote efficiency through investment in administrative structure and process. Under the 3-year demonstration, physician groups will be paid on a fee-for-service basis and may earn a bonus from savings derived from improvements in patient management. At least six physician group practices will be selected to participate in the demonstration.

Building for the Future

We are also considering future demonstration projects that will build on our past experiences, enhance the clinical management of the patients, provide for more effective coordination of services, and improve clinical outcomes. We are investigating how disease management projects could work with a diverse group of organizations, such as Provider Sponsored Organizations (PSO), integrated healthcare systems, disease management organizations, and Medicare+Choice plans. Such projects could test a variety of payment methodologies, including capitation and risk-sharing arrangements. We also want to develop specific health plan options for those beneficiaries with chronic illnesses. We want to enhance the clinical management of care to better serve the patients, provide for more effective coordination of services, and improve beneficiaries’ clinical outcomes without increasing costs to the Medicare program.

Another potential area of investigation could be beneficiaries with end-stage renal disease (ESRD), potentially building on lessons learned from an ESRD demonstration program created under Social Health Maintenance Organization (SHMO) legislation. This demonstration created an integrated system of care for ESRD beneficiaries and tested its operational feasibility, its efficiency, and most importantly, whether such a system would produce health outcomes at least as good as the fee-for-service system. Our experience taught us that this approach can maintain or improve the quality of care for ESRD beneficiaries, and can result in high patient satisfaction and quality of life.

Additionally, we are investigating the feasibility of a demonstration in traditional fee-for-service Medicare that focuses on specific chronic diseases and is targeted at underserved areas in selected geographic regions. Our emphasis would be on early detection, patient outreach, patient education, and lifestyle modification.

Evaluation

The objective of our evaluations is to assess the effectiveness of these programs for chronic medical conditions. In particular, we are evaluating health outcomes and beneficiary satisfaction, the cost-effectiveness of the projects for the Medicare program, provider satisfaction, and other quality and outcomes measures. Using a combination of surveys, administrative claims and enrollment data, and site visits, we will focus on the impact of the demonstrations on quality of care, outcomes, and costs. We will pay particular attention to the impact of the demonstrations on the following types of measures: mortality, hospitalization rates, emergency room use, satisfaction with care, changes in health status and functioning, and program expenditures. We will examine whether the disease management interventions result in less fragmentation in care for the given chronic conditions. Finally, we will examine which characteristics of disease management programs appear to be most effective in reducing morbidity and improving quality of life for chronically ill Medicare beneficiaries. In each of these approaches, we expect that the costs to Medicare will be the same or lower through the efficiencies that will result in providing the most appropriate care. Through these demonstrations, we will continue testing and exploring new strategies for improving care and efficiency.

Conclusion

Disease management is a critical element for improving the nation’s health care and its delivery system. Along with the Secretary, the Administrator and I want to take full advantage of all of the opportunities for increased quality and efficiency that disease management offers. Unfortunately, seniors are far less likely than other Americans with reliable access to modern, integrated health care plans to have access to disease management services. Through our disease management demonstrations, we are working to give seniors the same access to modern disease management services that other Americans enjoy. We look forward to continuing to work cooperatively with you, Chairman Johnson, Congressman Stark, this Subcommittee, and the Congress, to find innovative and flexible ways to improve and strengthen the Medicare program while making sure that beneficiaries, particularly those with chronic conditions, have access to the care they deserve. I thank you for the opportunity to discuss this important topic today, and I am happy to answer your questions.