WellPoint's CareMore Is Preventive Medicine For Healthcare

| About: Anthem, Inc. (ANTM)

By Martin Lariviere

Much has been written about applying operations management techniques — many developed in manufacturing environments — to health care settings. Indeed, this has been a regular topic in this blog. One thing that has been missing from this discussion has been a view of preventing errors through better design. When making things, the argument goes that it is easier (or at least more cost-effective) to prevent quality issues at the design phase than once production has begun. That gets us to Wellpoint-owned (WLP) CareMore, which was profiled in a recent article in The Atlantic ("The Quiet Health-Care Revolution," Nov. 2011, with a hat tip to Suraj Mathew of EMP 87 for pointing me to this one).

CareMore specializes in taking of Medicare Advantage patients. Medicare Advantage is a capitation program. The health care provider is paid a fixed amount per patient and gets nothing extra when something catastrophic happens. That is, it shifts risk from the insurer to the provider. How has CareMore done in this market?

CareMore, through its unique approach to caring for the elderly, is routinely achieving patient outcomes that other providers can only dream about: a hospitalization rate 24 percent below average; hospital stays 38 percent shorter; an amputation rate among diabetics 60 percent lower than average. Perhaps most remarkable of all, these improved outcomes have come without increased total cost. Though they may seem expensive, CareMore’s “upstream” interventions—the wireless scales, the free rides to medical appointments, etc.—save money in the long run by preventing vastly more costly “downstream” outcomes such as hospitalizations and surgeries. As a result, CareMore’s overall member costs are actually 18 percent below the industry average.

What has driven these savings is upstream intervention to identify problems while they are still minor and easy to deal with and proactively making sure that patients adhere to their treatment plans.

One of CareMore’s critical insights was the application of an old systems-management principle first developed at Bell Labs in the 1930s and refined by the management guru W. Edwards Deming in the 1950s: You can fix a problem at step one for $1, or fix it at step 10 for $30. The American healthcare system is repair-centric, not prevention-centric. We wait for train wrecks and then clean up the damage. What would happen if we prevented the train wrecks in the first place? The doctors at CareMore decided to find out.

An early discovery was that CareMore’s elderly patients failed to show up for as many as one-third of their doctor appointments. As Charles Holzner, one of Zinberg’s initial partners at CareMore and now a senior physician with the company, explains, “About one in three of the elderly people we were taking care of were home by themselves. They’d outlived their family resources, they couldn’t drive, and their kids lived out of town. So when they got sick, they ended up calling 911. And when it came to routine doctor visits, they sometimes just couldn’t make it at all.”

CareMore’s unconventional solution to the problem was to provide transportation, at no charge, to get patients to their medical appointments. Local car-service companies were happy to have the business, and while the transportation cost money, it ultimately saved a lot more. Increased regularity and consistency of medical care meant that many simple problems were recognized and treated in their early stages: complications were avoided, and rates of hospitalization and nursing-home admittance began to fall.

I really like this example. Paying for the patient’s transportation is basically a poka-yoke, a counter measure to fail safe the process and making sure it is followed. Scales that automatically transmit daily weight readings to CareMore (another company offering) is effectively an example of jidoka, automatically and quickly detecting that something is amiss. That is, CareMore’s operating system has a lot of the hallmarks of lean systems. That is now true of many hospitals and medical practices, but what stands out here is the willingness to move outside the ward or clinic. A lot has been done to make sure that policies are followed in treating patients when they are in front of the caregiver. (Think checklist manifesto.) CareMore is managing care while the patient is still at home.

One of things the article mentions is that WellPoint has bought them out with the intention of expanding. That raises the question of how well this will scale. I’ve got to think it will. Caring for this population is inherently a local business (CareMore already has 26 centers across the Southwest) so it largely a question of replicating their proven techniques in new locations. Yes, that requires getting the buy-in from the caregivers, but one suspects that the logic of the system would be appealing to them.