It’s not about the tools
Diabetic Investor spent the past three days attending the HiMSS conference here in the great city of Chicago. This conference devoted to healthcare technology reinforced something we’ve been stating with increasing regularity. When it comes to interconnected diabetes management (IDM) we have all the tools we need to make this a reality. That technology is not standing in the way of IDM becoming the standard of diabetes management. We further believe that the transformation from fee for service to outcomes based reimbursement is not the issue either. There was near universal agreement between everyone attending the conference that this transformation has begun, that it’s no longer a question of if outcomes based reimbursement will get here rather when it will become the standard for reimbursement.
The biggest obstacle now standing in the way of IDM becoming reality are the paths companies in this market choose to follow. For all the promise of IDM helping patients achieve better outcomes which would lead to lower healthcare costs, this is still called the business of healthcare and companies in this business must make money to survive and prosper. With venture capital investing heavily in the space and high tech companies such as Apple, Samsung, Microsoft and Google playing in the IDM sandbox the issue isn’t whether these companies will be funded. The issue is can these companies take this money and build a sustainable business model, one that makes money over the long term.
We hate to say it again but this is all about money- who spends it, how much is saved and ultimately who makes it. The harsh reality is healthcare costs continue to rise with diabetes being a particularly heavy burden on employers, payors and Medicare. There is also no argument that when patients with diabetes are under better control this leads directly to lower costs and increased productivity. That these patients avoid many of the costly comorbidities associated with poorly controlled diabetes. Given the continued epidemic growth rate of diabetes this is a problem that isn’t going away. As we have said many times diabetes is not just a healthcare crisis but also an economic nightmare.
It would seem with all the facts that IDM is destine to succeed, that it must become the standard of care. In theory everyone wins with IDM. Employers, payors and Medicare save money, while patients lead better healthier more productive lives. Given the heavy demand for IDM it would also seem a lock that companies in this space will make money. As we said in theory everyone wins. However as we have seen many times in this wacky world what looks great theoretically does not work in the real world.
So what then will be the driving transformational force that takes IDM over the hump from working theoretically to working practically? Considering that the technology for IDM exists today it’s not about the tools. Given that everyone knows that better outcomes leads to lower costs it’s not about demand. While we could always use better therapy options there is near universal agreement that when used as prescribed the drugs on the market today get the job done just fine.
Just as quick side note here any company that can develop a system that helps patients become adherent with the medication regimen stands to rich beyond their wildest imagination. Medication adherence is the single largest obstacle standing between patients and better outcomes. We have written about this before ask any physician who treats patients with diabetes and they will state without hesitation that if their patients were compliant with their therapy regimen this would lead directly to better outcomes. The problem is how do motivate, track and monitor patients to insure they are compliant with their therapy regimen.
In the diabetes world this can be done easily with insulin or GLP-1 using patients as they need a device to deliver their medication. Whether it’s an insulin pump, insulin pen, insulin patch, inhaled insulin or plain old syringe the technology exists today to track when and how much insulin is delivered. The problem lies with the majority of patients who are not taking insulin, the millions of patients who use oral medications, typically more than one, to control their diabetes. Yes at the show Diabetic Investor reviewed several companies that have way cool devices that deliver data to the cloud when a patient opens their pill case or pill container. However all this tells anyone is the patient opened the bottle it does not know if the patient actually took the pill or took proper dose. Heck it doesn’t even know if the patient took the right pill as in the real world patients often mix more than one pill in container.
Diabetic Investor also has seen some way cool smartwatches that reminded the patient it was time to take their pill, even showing a picture of the pill on the screen. There are also many apps that send reminders to patient’s smartphone that do exactly the same thing. However what none of this technology can do is actually prove the patient took the pill.
We hate to stand on our soap box here but when it comes to Type 2 non-insulin using patients the most effective tool at improving medication adherence is patient education.
Now back to IDM and what the driving transformational force that takes IDM over the hump from working theoretically to working practically will be. The driving transformational force is …. wait for it… data, actual proof that IDM leads to better patient outcomes and were not talking about data from a small study. Any company in IDM must prove they can beyond a small group and scale their system. They must show there is straight line between using their system and better outcomes. They must also prove they can make money at the same time, not exactly an easy task.
Some out in the wacky world, those of us with a few grey hairs, can remember back when disease management was the hottest thing going. The concept was the same as it is for IDM lower costs by helping patients better manage their diabetes. Given that smartphones did not exist back then and the internet was just becoming a daily tool, disease management companies hired Certified Diabetes Educators or nurse practitioners who would call patients directly. The theory was that by having a professional to talk with these patients they would better manage their diabetes. Basically the CDE served as the patient’s diabetes coach.
The only problem was the biggest savings came from keeping insulin using patients out of the hospital emergency room. Patients who weren’t properly trained and would end up in the hospital with either a severe hypo or hyperglycemic event. Using insurance claim data these patients were easy to identify and once properly trained these costly events could be avoided. However what disease management could not do was identify out of control patients who were headed straight towards one of the many costly comorbidities associated with poorly controlled diabetes. They could not for example identify patients with a higher than acceptable HbA1c, intervene and prevent either kidney problems or amputation.
Not surprisingly employers or payors who hired disease management companies quickly realized it was not cost effective to pay these companies to manage all diabetics when it was easy to identify the ones who were costing them the most. As we noted back then why pay to manage 100% of the diabetes population when 80% of the cost savings comes from 10 or 20% of the population. This once hot area soon faded away.
In all candor IDM is just disease management using way cool technology. The goals are exactly the same, lower costs by helping patients with diabetes achieve better outcomes. The big difference is the people buying these services have become smarter they know for example that out of control non-insulin patients can experience costly complications. They know that they can save $2,000 per year in healthcare costs by lowering HbA1c by 1%. They know that patients with diabetes are less productive and miss more work days and productivity would increase if these patients were under better control. Most of all what they know is real money, big money can be saved by helping all the patients with diabetes not just those who weren’t properly trained on insulin therapy.
Like we said before this is all about money – who spends it, who saves it and who makes it.
Surveying the landscape of the companies currently in the IDM space there are certain elements of commonality. One is the collection and transmission of data. Yes everyone has a way cool device or devices that collects data sends it to the cloud where it can be shared with a patient’s physician, CDE, pharmacist and payor who in turn will look at this data and transmit back to the patient feedback. This feedback, which can come in the form of a text message, phone call or email, is intended to help the patient more effectively manage their diabetes.
The differences between these companies comes in what other services or tools they will provide the patient that gets them to use their systems. Patient engagement may be an over-used term but without an engaged patient there won’t be any data to analyze. We said it a thousand times if patients fail to use these systems better outcomes become nothing more than a pipedream. So the question becomes what tools will not just get the patient engaged but keep them engaged. What will motivate these patients to monitor their glucose regularly or take their medications as prescribed?
Over the past few years there has been an explosion in the number of employers offering incentivized health and wellness programs. Programs which in essence bribe their employees so they will lead healthier lives. These incentives come in all shapes and sizes, some programs offer out right cash, others lower co-payments or premiums while still others offer actual merchandise. Yet what most of these programs lack is any verifiable data that shows these programs are actually producing the desired result that they actually lead to better outcomes. Or put more simply few employers know whether they are getting a real return on their investment.
Just by way of example Diabetic Investor is aware of several programs which pay employers to attend a class or watch educational videos. Yet there is no corresponding follow-up or verification that this class or education had any impact on the patient. The money has been spent yet the employer has no verifiable data that shows this intervention worked. They don’t know for example if the employee has lost weight, is monitoring their glucose regularly or exercising. The technology exists to obtain this data but so far technology has not been merged with education.
Looking into the future Diabetic Investor sees the winners in IDM being companies who can transform all this data they are collecting into knowledge. Knowledge which leads to action by the patient. This knowledge will come not from data but by educated the patient so they understand what all these numbers mean. All the text messages in the world sent to the patient are nothing but white noise if the patient doesn’t understand why they are being told to do will directly impact their life. We’ve said it a million times patients with diabetes want to live their lives with diabetes not for their diabetes. They want their lives made simpler not more complex.
This is no easy task as diabetes is a very patient centric disease. That it’s virtually impossible to achieve better outcomes if the patient is not engaged. Again as we have noted with regularity managing diabetes is 24x7x365 job. A job that even when well-done does not necessarily make a patient feel better. We have said since we started writing Diabetic Investor that if the patient experienced physical discomfort or pain when their diabetes was out of control we would have a more engaged patient population. The sad fact is by time this does occur it usually too late to do anything about it.
This is why we see IDM companies offering a cornucopia of services to the patient. That in order to succeed it won’t just be a way cool device but a way cool device combined with incentivizes, education and coaching. In other words it will be a complete diabetes management system that provides the patients with the tools and motivation to become engaged with their diabetes management. A system which empowers the patient to take ownership of their diabetes management.
The hard part here is how these companies will make money doing all this. It goes without saying that they will not survive long if revenues are tied directly to sales of test strips. It also goes without saying that it’s unlikely the majority of patients will pay for systems with their own money. Diabetic Investor has seen several companies which are following the cellular phone pricing model, having patients pay a monthly fee. For this fee a patient receive a way cool device, an unlimited supply of test strips and coaching. However the problem is we still live in a world of cop-payments and fee for service reimbursement and unless these monthly fees are lower than a patients co-payment were not sure why a patient would sign up.
Now in the future Diabetic Investor can see patients buying their health insurance just as they buy their auto insurance. That they would pay lower premiums for better diabetes management. That better diabetes management would directly impact their pocketbook. THAT THEY WOULD SAVE MONEY THROUGH BETTER DIABETES MANAGEMENT. Auto insurers using technology reward safer drivers with lower premium payments and we see no reason given the technology that exists today why health insurers couldn’t do exactly the same thing. Should this transpire and we think it will then patients would happily pay a monthly fee that helps them save money on their health insurance.
Looking even deeper into the future we can see a company giving away their IDM system and only getting paid for producing verifiable better outcomes. The payoff may come later in the cycle but given the savings generated from better outcomes ultimately it would be a far larger payoff.
Still what IDM really boils down to is two critical elements data and money. IDM companies must prove their systems truly produce better patient outcomes, this is where data is critical. Once they can prove this the money, tons of it will follow. For at the end of the day this is all about money – who spends it, who saves it and ultimately who makes it. Even with healthcare reform this is still the BUSINESS OF HEALTHCARE.