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Why private health insurers should care about chronic disease management

17 Dec 2021, by Amy Sarcevic

Surgery for heart disease represents one of the largest costs for private health insurers in Australia at a collective $2.1 billion annually. By comparison, the sector has only modestly invested in heart disease management – a move that, paradoxically, could make acute outcomes like surgery much less common.

Since 2007, when the sector was first given authority to fund ‘Hospital Substitute’ and ‘Chronic Disease Management (CDM) Programs’, PHI investment into heart disease management has stagnated, with less than $20 million being spent across the industry in the 2021 financial year. Underlying this, insurers rarely even have insight into the long term health status of their members.

This ‘cure not prevention’ approach is also evident in the broader context of chronic disease. Out of a total $14 billion annual PHI industry spend, just $110 million (less than 1 percent) is currently allocated to CDM programs, despite 47 percent of Australians – and 10 percent of existing PHI members – living with at least one chronic condition.

Rhod McKensey, Chief Executive of Honeysuckle Health believes the case for upping CDM spend is high, but has so far been held back for a number of reasons.

“In the current system, private health insurers rarely know whether or not their members have a long history of disease, until they require inpatient care. For example, they might not know that someone has diabetes until just three days before they get their toe amputated. Getting a better foothold on this knowledge and intervening early makes lots of sense. But I believe some major capability and structural limitations will need to be addressed before this really starts to build momentum,” he said ahead of the 2022 Chronic Disease Management Conference.

Program measurement

While the logic behind higher CDM investment might be obvious, insurers need solid data sets to justify large investments; and until recently these data sets have not existed for CDM programs.

“Few research studies have zeroed in on the clinical and commercial impact of CDM programs; and studies that have focussed on quantifying the commercial CDM impact have not been robust,” McKensey said.

Honeysuckle Health recently sought to address this with its own research. Using an advanced methodology, the study made use of a retrospective or synthetic control groups to compare health and commercial outcomes with members who had been treated.

“Leveraging IP from Cigna, we built capability to analyse the impact of historically-delivered health interventions. Using advanced data science techniques we matched each ‘treatment member’ with one or more ‘control members’ and measured differences in terms of health outcomes, benefit outlays, member experience, and retention,” said McKensey.

Based on the review, Honeysuckle Health found that up to 30 percent of cardiovascular, 35 percent of muscular-skeletal, and 25 percent of mental health conditions were modifiable with financial intervention.

“It is clear that intervening early and injecting more funding into the management of these conditions could greatly reduce outcomes like surgery, joint replacement, or hospitalisation,” McKensey said.

Program targeting

With the benefits of CDM quantified in a way in which the PHI sector can trust, future CDM investment could be more easily justified. However, to fully realise any health and commercial benefits, efforts to improve targeting are also needed.

“On top of increased funding, selective member targeting for clinical programs is critical to ensure the efficient allocation of scarce health resources,” McKensey argued.

Honeysuckle Health makes use of advanced data science techniques to ensure clinical programs are targeted to members who will derive the most value from them. For example, to identify health insurance members most likely to benefit from its Hospital Support Program, it combines the output from three machine learning models that predict ‘expected readmission rate, ‘expected cost of readmission’ and ‘expected program effectiveness’.

“Our focus on basing predictions on the ultimate value drivers allows us to allocate program resources as efficiently as possible. It also helps ensure the program is commercially viable,” McKensey said.

Further concerns

Alongside program targeting, McKensey believes efforts are needed to improve program activation. In particular, he recommends CDM programs are integrated with GP consultations.

Structural issues, including perceptions of risk, also need to be addressed, he says. “There is a concern that upping protection for chronic disease may attract further participation from members who live with chronic conditions. This could have negative financial consequences for the sector.”

Finally, “leakage” of financial benefits from CDM programs to the public system – and to other insurers – is another concern worth consideration. “While this shouldn’t be a deterrent for CDM investment, it is a structural issue that should certainly be financially factored in,” McKensey concluded.

Talking more about these issues, Rhod McKensey will address the 2022 Chronic Disease Management Conference. The event will be held both virtually and in-person on 4-5 April in the Rydges World Square Sydney. Register now to secure your seat.

Rhod McKensey is the Chief Executive Officer of Honeysuckle Health, a joint venture between nib health funds and Cigna, a large international health insurer. Since forming, Honeysuckle Health has built capability in data and advanced analytics, health services contracting and the delivery and optimisation of health management programs. McKensey is passionate about improving Australia’s healthcare system through the application of data and analytics, improving transparency on price and quality, and applying value-based healthcare principles.

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