Healthcare: Costs of Chronic Conditions and Disease Management Programs

One should continue to think positive regarding our ability to contain healthcare costs. There have appeared numerous reports of obvious waste and abuse that should be correctable. Today we read about a better way to do things that actually saves money and leads to better medical outcomes. Unfortunately, the example comes from Germany not the US; fortunately, it is a basic, simple process that even we should be able to duplicate.



The McKinsey Quarterly reports on How to design a successful disease management program. The treatment of patients with chronic conditions such as heart disease and diabetes consume most of the healthcare dollar. These patients will also have secondary health problems related to their primary condition. The presumed solution has for many years been disease management programs (DMPs).

“In most developed countries, three-quarters or more of all health care spending is now devoted to patients with chronic conditions, and a large portion of that money is spent only on a small number of diseases.”

“By carefully coordinating the delivery of high-quality care to patients with chronic conditions, the programs are supposed to enhance the patients’ health, reduce hospitalization rates, and lower treatment costs.”

“Unfortunately, initial experience with DMPs was often disappointing. Many of them produced, at best, only modest improvements in health outcomes, and few were able to decrease health care spending. Thus, many payor, provider, and health system executives have questioned whether the programs are worth their cost.”

McKinsey has surveyed some programs that have recently begun to show positive results and attempts to synthesis the attributes of these programs that have made them successful. The intention is to provide guidance to other healthcare systems. Germany and its diabetes program are used as an illustration.


This chart illustrates the extent of the problem caused by chronic conditions and demonstrates the need for more efficient and more effective approaches.

More recent implementations of DMPs have begun to produce the desired results.

“Germany’s diabetes program, for example, has reduced the incidence of some complications and has lowered the overall cost of care by 13 percent. Germany is also achieving good results with its programs for coronary artery disease (CAD) and chronic obstructive pulmonary disease (COPD). Several other countries have also begun to achieve good results with DMPs.”

Germany’s initial experience with DMPs was unsatisfactory and it was necessary to come up with a different approach.

“Germany began giving its public payors extra funding for patients with chronic conditions. However, the size of the extra payments was capped to prevent health care costs from rising uncontrollably. Germany also coupled the increased funding with a requirement that the payors enroll patients with the most common chronic conditions in DMPs.”

“To overcome some of the problems that had hampered earlier DMPs, Germany set minimum standards for them. For example, the programs’ clinical protocols had to be evidence-based, all care was to be coordinated by a single provider (a general practitioner, in most cases), and there had to be clear guidelines for when a referral to a specialist was warranted. In addition, the programs had to be approved by a federal health agency and then run nationwide.”

Germany used diabetes as the first implementation of this method.

“Although the program is only six years old, it has already enrolled more than three million patients and has demonstrated that it markedly improves health care delivery to those patients. For example, the patients are now significantly more likely to have their feet checked regularly by a specialist, as a result of which the incidence of certain types of foot ulcer has plummeted. Preliminary evidence also suggests that the program may be decreasing mortality. Furthermore, patient satisfaction with treatment has risen markedly, and the overall cost of care has decreased; the small increases the program has produced in outpatient and pharmaceutical costs have been more than offset by a drop of more than 25 percent in inpatient costs.”

Investing extra resources in ensuring that patients follow the treatment protocol and take their medications properly generated significant net savings by avoiding many of the serious consequences of the disease.


McKinsey’s guidance as to how to set up an effective DMP is simple. The most relevant advice relative to the US is to make sure that all participants are properly incentivized.

“Few of the early DMPs tried to ensure that all the stakeholders (physicians, patients, and payors) had an incentive to follow the DMP’s protocols. For example, many physicians object to having an outside party attempt to influence their treatment decisions, yet few early DMPs offered them incentives to conform to the program’s care pathways. In our experience, as long as one stakeholder lacks a strong incentive to move in the same direction as the others, a DMP is unlikely to produce good results.”

“Both nonfinancial and financial incentives can be used to align the interests of all stakeholders with the DMP’s protocols. For example, patients can be told that participation in the program can improve their quality of life, decrease the likelihood that their condition will worsen, and make it easier for them to navigate the health system. Where local practices permit, patients can be offered financial incentives, such as a decrease in copayment rates.”

In a bit of encouraging news it was pointed out that the US had already demonstrated the efficacy of the DMP approach in one instance.

“....a DMP for COPD patients conducted by the US Veterans Health Administration has increased patients’ use of appropriate medications and lowered the rate of COPD-related hospitalizations and emergency-department visits.”

It would seem that the Accountable Care Organizations (ACOs) being encouraged by the recent healthcare legislation would provide the appropriate opportunity to implement this approach.


Savings of 13% on the majority of our health costs would be about $250B, about half of which comes from government sources. That ought to make it at least worth a try.