© copyright 2004 American Healthways 1 The Role of Disease Management in the Private Sector The Disease Management Colloquium, Philadelphia, PA 1 p.m. Robert E. Stone Executive Vice President

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3 America’s Health Care Expectations To be cured To be cured right now To be cured for free

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5 Americans with Chronic Conditions In millions Medical Costs for Chronic Conditions In millions Source: JPMorgan Disease Management Health Plan Survey Growing Population and Costs

© copyright 2004 American Healthways 6 Something Important Has Changed Did not have a macro economic effect Did not have a macro economic effect Had a credibility gap in value measurement Had a credibility gap in value measurement Had no quality standards Had no quality standards Historically, Disease Management Programs…

© copyright 2004 American Healthways 7 Disease Management is now a strategic imperative Outcomes continue to show significant clinical and financial improvements among the country’s chronically ill, impacting medical costs trends for health plans and self-funded employers. Standardized measurement methodologies are beginning to take shape. NCQA, URAC and JCAHO have established quality standards. Today it’s a different story…

© copyright 2004 American Healthways 8 Employer Cost Containment Strategies

© copyright 2004 American Healthways 9 Healthy Returns Health Plan ROI on DM Programs Impact on Overall Medical Cost Trend, in basis points

© copyright 2004 American Healthways 10 From the Customer’s Perspective Chief Financial Officers see the macro-economic effect Chief Financial Officers see the macro-economic effect Chief Medical Officers see improved quality and clinical outcomes Chief Medical Officers see improved quality and clinical outcomes Chief Executive Officers see differentiation which translates into top line growth, customer retention and market leadership Chief Executive Officers see differentiation which translates into top line growth, customer retention and market leadership Employers see reduced costs as a result of improved work force health and productivity Employers see reduced costs as a result of improved work force health and productivity Consumers see their way to a much better life Consumers see their way to a much better life Government sees the promise and has taken action Government sees the promise and has taken action Why Disease Management is relevant

© copyright 2004 American Healthways 11 Value Proposition Aligned with Stakeholders Improve health of populations, Enhance patient satisfaction & care experience, Enhance physician satisfaction & delivery experience, Reduce total health care cost, and Improve work force productivity “Outcomes Improvement”

© copyright 2004 American Healthways 12 DM Strategy by % of Covered Lives DM Strategy by % of Plans

© copyright 2004 American Healthways 13 Parallel Group Comparisons 4 /’974 /’984 /’004 /’994 /’01 Chicago Kansas Dallas Houston Denver Mid-Atlantic Nashville Florida Ohio Tri-State Control Site Intervention Site

© copyright 2004 American Healthways 14 Pre-Post Comparisons 4 /’974 /’984 /’004 /’994 /’01 Kansas Dallas Houston Florida Tri-State Baseline Period Intervention Period Mid-Atlantic Ohio Chicago Nashville Denver

© copyright 2004 American Healthways 15 Quality Indicators: Parallel Group Comparison Control77.8%34.2%40.7%24.6%71.9% 17.1% Intervention81.1%39.9%50.2%39.6%82.6% 11.5% P <.24 P <.09 P <.007 P <.001

© copyright 2004 American Healthways 16 Quality Indicators: Pre-Post Analysis Control78.7%36.3%40.0%27.3%74.6% 16.1% Intervention82.3%40.3%48.0%37.3%81.2% 12.6% P <.19 P <.02 P <.001 P <.02 P <.001 P <.27

© copyright 2004 American Healthways 17 Cost and Utilization Changes Parallel Group and Pre-Post Comparisons Parallel Group Pre-Post P <.001 P <.012 P <.001 ER Rate Admissions Rate Pharmacy Overall Cost

© copyright 2004 American Healthways 18 Quality Indicators: Parallel Group Comparison Control77.8%34.2%40.7%24.6%71.9% 17.1% Intervention81.1%39.9%50.2%39.6%82.6% 11.5% P <.24 P <.09 P <.007 P <.001

© copyright 2004 American Healthways 19 Quality Indicators: Pre-Post Analysis Control78.7%36.3%40.0%27.3%74.6% 16.1% Intervention82.3%40.3%48.0%37.3%81.2% 12.6% P <.19 P <.02 P <.001 P <.02 P <.001 P <.27

© copyright 2004 American Healthways 20 Cost and Utilization Changes Parallel Group and Pre-Post Comparisons Parallel Group Pre-Post P <.001 P <.012 P <.001 ER Rate Admissions Rate Pharmacy Overall Cost

© copyright 2004 American Healthways 21 The Cohort Study Compares a population with disease enrolled in the program to a reference population with similar disease not enrolled in the program – Study Population – Fully Insured members, excluding Public Programs, Atrium, and First Plan – Reference Population – ASO (self-insured) members not eligible for care support during year 1 – Both Populations Continuously enrolled for 24 months (03/2001 – 02/2003) Diseases identified by same algorithm Members with the following age criteria –Asthma, age 5-64 –All other conditions, age All members have drug benefits

© copyright 2004 American Healthways 22 Effective, Efficient Translation

© copyright 2004 American Healthways 23 DM Programs Currently in Place

© copyright 2004 American Healthways 24 Challenges to Wider Adoption

© copyright 2004 American Healthways 25 The Next Frame

© copyright 2004 American Healthways 26 Thank You!