Companies head off costly health care


Just over two years ago, her baby was born with a rare genetic disorder, and, Joelle Scholl, of Lancaster, Pa., recalled that as soon as she got home from the hospital, "People said, 'This Kathleen Shelley keeps calling.' "

Kathleen Shelley, a nurse who used to work in the newborn intensive care unit at Johns Hopkins Hospital, was calling from a cubicle in Timonium.

In the top drawer of her desk, she keeps photos of some of the young patients whose parents she advises. She is employed by a company called FutureHealth. She is trying to keep health costs down - even if she has to spend money to do it.

In the case of Patrick Scholl, she recommended expensive shots to prevent a respiratory virus to which the infant was susceptible. "I never would have thought to have asked for that," Joelle Scholl says.

The nurse "fought the insurance company," successfully, to get them to cover seven shots at $1,600 apiece, Scholl recalls - but the shots, in the mother's view, likely prevented a hospitalization of one to two months that could have cost $100,000.

FutureHealth is in a business called "disease management" or "care management." Claire Rosse - an R.N. and an M.B.A. - started it about a decade ago, based on the simple premise that a small number of high-risk patients account for a disproportionate number of insurance costs.

Several studies show that about 8 percent of patients are responsible for more than 50 percent of medical costs, said Dr. David B. Nash, editor in chief of the academic journal Disease Management.

Rosse read the studies and thought, "We should find those patients and work with them." She proposed the idea to BlueCross BlueShield of Maryland, where she worked, but the insurer was in tough financial times and couldn't finance a new business initiative.

"So I said, 'OK, I really believe in this. I want to leave and start a company,' " Rosse said. She began with three employees in July 1992, "and I thought people would rush to my door."

They didn't rush. She said that it took a few years for people to get used to the concept and that potential growth was slow because it was hard to raise capital.

Now, however, FutureHealth has 60 employees and about $5 million in annual revenue. The company is hired by small insurance companies or by third-party administrators who operate self-insured plans for employers. It serves about 400 employer groups with about 450,000 employees.

Overall, employers can save up to 7 percent on health costs by using FutureHealth, the company says.

Rosse said FutureHealth uses custom software that scans insurance claims to identify "people at risk."

While FutureHealth reaches out to those high-risk employees through health fairs and other work place promotions, most of the work is done by nurses on phones.

Once contacted, the employees decide whether to participate. About 70 percent do, but "it has to be voluntary, and it has to be confidential," she said.

FutureHealth reports to employers on overall medical cost trends, but not on individual cases.

The nurses begin with a 20-minute questionnaire, then follow the patient and offer advice.

Scholl said Shelley explained Patrick's different medicines, suggested questions she should ask his doctor, and helped her arrange for insurance to cover unusual costs, ranging from an expensive baby formula to helicopter transportation to a specialty hospital.

Scholl recalled her worried calls with Shelley, "She said, 'Calm down, take care of Patrick, and I'll deal with the bills and make the calls.' "

Shelley, who has been with FutureHealth for three years, said she is able to smooth the way because she is familiar with insurance companies' procedures.

Among the items she has gotten insurers to cover, she said, is a "talking" computer for an 11-year-old cerebral palsy victim who is legally blind and cannot speak.

While some efforts to control medical costs focus on reviewing requests for care or denying payment for unnecessary services, Rosse said FutureHealth's emphasis is different.

Studies show that 50 percent of patients with chronic diseases don't follow medical advice, so the nurses try to make sure people are taking their medication, getting checkups on schedule and following their exercise and diet regimens.

Many companies have struggled to find the right clinical and business model for care management, said Nash, who also is director of the office of health policy and clinical outcomes at Thomas Jefferson University, an academic medical center in Philadelphia.

Magellan Health Services Inc. of Columbia, for example, bought two disease management companies, but losses forced it to shut them down, resulting in $99 million in write-downs last year. The companies focused largely on reviewing claims after care had been given.

Nash said some companies focused on a single disease, such as asthma, while others provided broader care. Some worked mostly with nurse phone banks, while others used fewer people and flashier technology, such as a voice-recognition computer that called patients and asked them questions.

In the end, Nash concluded, what has worked is a broader "population" approach, with generalist companies acquiring those that concentrated on specific diseases and "multiple technologies."

Another problem in the business has been how to price the service.

Like other care managers, Rosse said FutureHealth experimented with getting paid a percentage of the costs it saved. But it found the savings too difficult to calculate. (It's hard to tell, for example, whether Patrick Scholl would have been hospitalized for a lung infection if he hadn't gotten those expensive shots.)

Jim Canalichio, vice president and chief financial officer of DVCC Inc., a Chestertown manufacturer and distributor of industrial hose fittings, said that his company has been using FutureHealth for its 1,500 employees for about five years and is pleased with the service, but that the savings are hard to measure.

He said that DVCC has seen a drop in absenteeism and in high-cost premature births - FutureHealth has a prenatal program - but that overall medical costs are up.

And, he said, it has been hard to separate FutureHealth's impact from that of other wellness efforts by the company. It's also hard to measure savings at a time when health care costs for pharmaceuticals and other items are rising rapidly.

Nash said researchers are beginning to do a better job documenting savings. Companies have demonstrated "10, 15, 20 percent" savings on high-cost treatments, particularly in the areas of heart disease, asthma, diabetes and chronic lung disease.

Rosse charges about $3.50 to $4.50 per employee per month, depending on what services the employer or insurer wants.

For Joelle Scholl, the measure is that Patrick, who recently celebrated his second birthday, has gotten into a program that studies children with the same genetic problem he has and "he does pretty well - one of the best kids in the research project."

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