Is the disease management business peaking?

Leading disease management company American Healthways reported an 83% earnings increase compared to the same quarter a year ago. The company reports expanding demand from health plans and payers to help coordinate and integrate the care of chronically ill patients. Most of the company’s services are provided by nurses who interact with patients by phone.

Disease management (DM) has gained acceptance in recent years. Almost all health plans and most employers have some sort of effort in place. However, the road ahead could be bumpy:

  • Most programs still address a single condition, such as CHF. Even when DM companies expand beyond one disease, they still can’t address certain co-morbidities such as mental health and cancer
  • Calculating return on investment is tricky. It’s not clear that DM provides a financial payback. Meanwhile, vendors have done a disservice to themselves by over-promising returns
  • There is some perceived conflict of interest as pharmaceutical companies have provided funding for a number of state initiatives. Some observers view these efforts as an attempt to sell more drugs
  • Customers are rarely satisfied with their vendors, and contracts are typically re-bid at the end of the term rather than being renewed automatically

Perhaps the biggest threat to disease management vendors is that hospitals, integrated delivery networks and physician groups will begin to provide disease management services themselves. The DM companies’ current customers would rather have providers coordinate care rather than having to pay a separate vendor. To the extent the providers pick up the ball, it will hurt the DM companies.

March 18, 2005

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