Statement of Richard Burford, Product Marketing Manager,
3M Health Information Systems, Wallingford, Connecticut

"On behalf of 3M Health Information Systems (3M HIS), I am pleased  to submit written comments to the House Ways and Means Subcommittee on Health hearing to be held on disease management on April 16th, 2002.  Our comments make the case for the importance of coordinated of care and the need for greater coordination of care in federally funded health care programs.  For the sake of simplicity, our comments are submitted in the attachment in a question and answer format.

3M HIS is a market leader in the healthcare information technology business.  3M HIS specializes in coding and classification tools in acute care and the payer market.  The views advanced in our written comments result from our experience in working in the managed care arena and, particularly, with companies in the business of delivering care management and case management services."

 A Case for Better Coordination of Care

What is coordinated care and care management?  Why is it important?

• “Coordinated care” is getting the right health care services to the right patients at the right time and in the right setting. Delivering well-coordinated care is important for maintaining and improving the health status of beneficiaries.
•  Effective care management is also important for successfully managing the financial risk of an enrolled population. 

What are the basic steps in the care management and care coordination process?

• The first step to delivering high quality care management services is understanding the disease burden of the enrollees. Enrolled members with chronic health conditions must be identified, classified into clinically meaningful groups and stratified according to severity.  Disease progression and anticipated costs must be projected.
• Next, specific beneficiaries are then targeted for case management intervention. Case management interventions (care plans) are devised and implemented to promote effective, high quality care.  The result is effective case management programs that meet the needs of enrollees by improving their health status while reducing health plan financial risk.

How did the original intent of managed care relate to better coordination of care?

• In managed care, payment methods were originally designed to foster and promote the provision of coordinated care. However, capitation, which is the predominant method of payment under managed care, does not provide adequate incentives to foster well coordinated care.

• Under capitation, health plans accept an annual fixed fee to deliver a defined set of health care services to an enrolled population and, thereby, assume financial risk. 
• If the capitated revenues health plans receive do not cover the costs of administering and delivering covered health care services, health plans lose money.  This creates an incentive for health plans to enroll healthy beneficiaries that are expected to have low costs and to avoid beneficiaries with chronic illnesses that are expected to have high costs. 
• The beneficiaries with chronic illnesses are the very ones that would benefit most from care coordination and case management services.
• To introduce positive incentives for the delivery of well coordinated care, payments to health plans must be adjusted to compensate for differences in the health status or disease burden of beneficiaries enrolled in the plan (risk adjustment) Also, direct payments for case management services can be made, specifically, for those beneficiaries that would benefit most from care coordination.

Why is effective case management and care coordination important to the future success of the Medicare + Choice program?

• Just 15.7 percent of Medicare beneficiaries account for 76.6 percent of all Medicare program payments. (1997 Medicare data)
• 76.2 percent of Medicare beneficiaries are relatively healthy and account for only 7.1 percent of Medicare program payments. (1997 Medicare data)
• Because of this high concentration of expenditures in a small number of Medicare beneficiaries, targeting enrollees for case management services and implementing effective programs of care coordination is vital to the future success of the program.
• Coordinated care is especially important for the high cost, chronically ill beneficiaries. These are the patients that, frequently, are at highest risk for deteriorating health status and the related “exponentially” increasing costs for health care services.

What are some key characteristics of a properly designed system of coordinated care?

An effective system of coordinated care should accomplish the following:

-     Predict future health care resource use of beneficiaries (costs), especially for the frail elderly and individuals with special health care needs.

-     Provide for effective systems of targeting cases for case management intervention and tracking the cases over time.

-     Pay health plans fairly for the delivery of case management services, taking into account differences in the health status of the populations they serve.

-     Be based on a clinical model that is easy to understand and verify.

-     Provide clinically meaningful information to health plans in order to promote care coordination, quality improvement, disease management and provider profiling.

-     Demonstrate value, i.e., the efficacy of the care management processes.

-     Provide Medicare with accurate data on the competitive performance of health plans in delivering coordinated care.

What are the benefits of an effectively designed system of coordinated care?

• Health plans are paid fair and equitable capitation rates that give them incentive to serve all beneficiaries, regardless of their health status.  Thus, negative program incentives that promote selective enrollment of healthy beneficiaries and the “de-selection” of sick beneficiaries are eliminated.
• Health plans are able to shift their operating emphasis from managing risk to delivering coordinated care that was the original vision of managed care.