DSM/TECHNOLOGY: Is DSM going the way of the PBM? (mostly) by Matt Quinn

From THCB’s disease management office, Matt Quinn passed this little morsel my way.  Apparently disease management is now so effective that employers, payers and traditional providers are increasingly unwilling to pay extra for guarantees that DSM works. Traditionally DSM companies have charged extra to guarantee performance, and then have been prepared to share risk–paying back some of the cost if the services didn’t save money on care of those patients in the DSM program. Now they are so effective that they just don’t need that extra revenue any more. As Matt writes:

    Essentially, LifeMasters and American Healthways (AH) are arguing that (in exchange for having no stake in whether their programs work or not) they can charge lower rates for their services.  And managed care companies are so confident in the power of disease management that they’re willing to save a few dollars in exchange for alleviating disease management companies from any risk.  AH’s three largest customers (representing about 70% of the company’s revenue) are all "essentially risk-free for AH from the standpoint of clinical and financial performance."  That these contracts are all in excess of five years in length raises the possibility that a plan could pound money down the proverbial rathole for years – and get little or nothing in return.

Now Matt may be being overly cynical about this, but consider Lifemasters’ CEO Cristobel Selecky’s statement "I think what everybody has come to realize is that after several years of doing financial measures, there’s a recognition that it’s very hard to do, and you never end up with any one right answer".  There seems to me to be a kernel of truth in her words, if not in her intent. Selecky could be interpreted as saying that, no-one knows what the heck DSM is supposed to be doing as part of the wider medical care process, so no-one can agree on whether it’s saving money or not, so customers are not prepared to pay extra to get rid of a risk that they can’t quantify or control.  That’s more or less what happened with the few at-risk contracts that the PBMs signed in the 1990s.  They are in general back in the business of processing claims for money. Matt thinks DSM will end up like "managed care"–looking like just another FFS plan–as a result, with a consequent (lack of) impact on costs:

    Perhaps this represents the next step back from the risk-sharing philosophy (in financial contracting) that helped allow managed care companies to reduce the rate of increase of medical costs in the 90’s.  I find it difficult to believe that–with little or no "skin" in the game–AH or LifeMasters (or your friendly neighborhood medical group for that matter) will work as hard to meet clinical or financial goals.  And how much did premiums increase this year?

  Maybe DSM works so well that it’s logically being "carved-in" to standard medical processes, and AH and Lifemasters and the rest are on their way to becoming extremely specialized call centers. However, this may all be a consequence of the fact that earlier this year AH had to pay a customer back $14m for not achieving goals in its DSM program–goals that AH later claimed couldn’t be verified anyway. (Interesting that they signed a contract to perform to goals that they knew they couldn’t measure!) Perhaps the DSM folks realize that its easier to just provide a service rather than be responsible for a defined piece of care, and that it’s called "going at risk" for a reason.

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