Captain Obvious

Just when you think you have seen everything in this wacky world of ours something comes along that makes you sit up and take notice. With all the copycat drugs and devices we now have this doesn’t happen often. Nine times out of ten a company claims to have something whiz bang way cool that’s brand spanking new, when in reality it’s just an old idea in a shiny new box.

We have long felt this way about all the way cool whiz bang apps that come with patient coaching. While these way cool whiz bang apps claim to be a new idea, they are in fact a very old idea just updated using technology that was not here before. Way back in the day before everyone was attached to their smartphone, before every device a patient used communicated with that phone there was something called disease management.

Yep back before iPhones employers would contract with disease management firms to manage their employees with diabetes. The program was pretty simple these firms would call patients to make sure they were taking their meds, checking their blood sugars, etc. They would also answer questions from the patient. The goal was also simple save the employer money by lowering healthcare costs. The theory was patients under better control would save the employer money as they would have fewer doctor visits or would not have costly emergency room visits.

Today there is a plethora of companies who have taken this old idea and updated it using new technology. With all the connected devices we have today it’s not difficult to get patient data and with artificial intelligence it’s not all that difficult to identify patients who need some help. Yet rather than call the patient these new systems send the patient text messages offering advice and/or tips on how they can better manage their diabetes. These virtual coaches can also answer questions from the patient.

The goal remains the same, save the employer money by lowering healthcare costs.

One of the problems we’ve had with these companies is there is little if any data that proves they work. Most of the data we have seen uses fuzzy math to reach a conclusion which shockingly always says these way cool whiz bang systems work.

Another problem we have had is most of these so-called studies extrapolate short term results into long term benefits, use self-reported data and lack the rigors of a real clinical trial.

One of these companies, Livongo has been getting lots of attention recently as they are about to go public. Livongo has a connected blood glucose meter which sends data and receives messages. Livongo targets self-insured employers claiming their system will help lower healthcare costs for their employees with diabetes. Livongo has raised lots of money, signed lots of deals but until recently has never produced any hard evidence that their system actually works that it does save the employer money.
Yesterday the company reported results from a study which was published in the Journal of Medical Economics. Per a report on the mobihealthnews website;

“Working with pharma giant Eli Lilly and Company, chronic disease management company Livongo has completed a retrospective analysis of more than 10,000 paitents, which suggests that Livongo’s diabetes program can prevent $88 worth of medical spending per person per month.”

Now first we want to commend Livongo for a couple of reasons;

1. They actually did what looks like a real study so kudos for that.

2. Unlike others Livongo is NOT touting that patients who use their system achieve better outcomes. What they are claiming is what we have said all along, when it comes to diabetes management it’s not about outcomes it’s about MONEY, who makes it, who spends it and who saves it. Give Livongo credit for being honest a rare quality these days in diabetes.

Before we go any further, we want to make it very clear we do not hold any degrees in advanced analytics or economics. We mention this as after reading the study we came away with the feeling that gee this sounds good, but something just isn’t right. For example the study states;

“Total allowed and diabetes-specific monthly medical costs included reimbursed amounts by both employees and employers across all sites of care. Condition-specific monthly spending, site-specific monthly spending and utilization rates for services are listed in Supplementary Table S2. Pharmacy spending, non-reimbursed care, or the employer’s cost of the Livongo program are not included.”

Knowing what we do about these types of programs we find it curious they excluded pharmacy spending and the actual cost of the Livongo program. An irony of these programs is that if they do work pharmacy spending typically increases as participants are refilling their prescriptions because they are actually taking their meds. This is not a bad thing mind you but to exclude this impact seems odd.

It’s also odd they excluded the cost of the program itself. Again since we have no advanced degrees maybe this is standard but in the real world it would seem logical to include this cost. Let’s say for grins and giggles it cost the employer $100 per year per patient for the program, well if they are just saving $88 per year it would seem that program really isn’t saving them any money at all. But hey what do we know. To us it’s net savings that matter which by our crude way thinking looks at all costs.

Be that as it may none of this will really matter as we anticipate Livongo having a very successful IPO. The reality is with Google, Apple and Amazon all making the deep dive into the diabetes pool and healthcare costs spiraling out of control any system which looks like it saves money is going to get a lot of attention. Outcomes based reimbursement may be the wave of the future, but that wave is still off-shore so right now it’s all about … wait for it … MONEY.

Having been around this wacky world for some time we some similarities between the old disease management companies and today’s crop of companies like Livongo. Back when disease management was all the rage these companies found the easiest way to save the employer money was to keep insulin using patients out of the emergency room. Employers quickly realized this and stopped offering the program to all their employees with diabetes and just those who used insulin. This saved the employer money but killed the revenue stream for the disease management companies.

The study notes;

“A significant reduction in spending for office-based services, but not for other forms of care, is of particular interest. One potential explanation is that the Livongo program serves as a substitute for office-based care.”

Simply put the Livongo program did not appear to prevent costly emergency room or hospital visits but did replace the patient going to see their physician. In essence the Livongo program became a virtual physician. Now this is not necessarily a bad thing and it has the added benefit that employee is at work being productive rather than being at the doctor’s office. However office visits are useful and necessary particularly when you consider the lab work a meter does not do.

But again none of this matters all that much as the Street doesn’t care about that. With the diabetes population exploding combined with skyrocketing costs of diabetes care all the Street cares about is that it LOOKS like the Livongo program saves money. The fact is investors are enamored by way cool whiz bang; they just love the toys in the toy chest. Most investors either have forgotten or aren’t aware of why disease management came and went. What they see is way cool whiz bang program that appears to save money.

Nor does the Street care that Livongo is using outdated technology which will soon become obsolete. Not only will BGM be replaced by CGM but algorithms will replace coaching. Right now these algorithms are focused on insulin using patients but, in the future, they will help all patients no matter how they manage their diabetes. That smartphone that’s attached to the patient will become the hub of the patient’s diabetes management. Put simply more advanced technology will do what the Livongo program does only at a much cheaper price point.

Listen we don’t blame Livongo one bite for going public for as Momma Kliff used to say best to iron when the iron is hot and before anyone finds out that iron is about to be replaced. And as we noted previously, we anticipate the IPO being successful. Yet a successful IPO in no way means the program truly has value. So kudos to Livongo for being smart enough to understand this and providing their team and executives lucky enough to have options with a nice payday. This is after all about one thing and one thing only, MONEY.