Improving medical literacy helps lower health plan costs

WASHINGTON--One Oklahoma employer found that information can be powerful medicine, ultimately leading to lower health benefit costs.

An "information therapy" program, which pays incentives not only to providers but also to plan members who complete online classes about their conditions and then are tested on their medical knowledge, reduced health benefit costs for city of Duncan, Okla., nearly 30% over two years.

The program, developed by Oklahoma City-based MedEncentive, is built on the premise that improving medical literacy will encourage patients to modify their behavior, thereby improving clinical outcomes and ultimately lowering health care costs, said Jeff Greene, one of the company's founders.

He said this hypothesis was proven in a study, reported in July 2007, by Northwestern University in Chicago and Emory University in Atlanta, which found that 40% of patients deemed "medically illiterate" died during the study, compared with just 19% of those who were considered medically literate.

The reason for the higher death rate among the medically illiterate group, researchers theorized, was that it is difficult for people who cannot understand medical information and instructions to manage chronic illnesses such as asthma, diabetes and heart disease, Mr. Greene reported to those attending the second National Consumer Driven Healthcare Summit held Sept. 26-28 in Washington.

Although it falls under the category of "pay-for-performance," MedEncentive's information therapy program does not follow the typical structure of paying bonuses to providers who follow medical guidelines when treating certain conditions, he said.

Instead, it provides payments to doctors who refer patients for information therapy "for every diagnosis known to man" and then refunds the copayments of patients who complete the necessary coursework, Mr. Greene said. Plan members have up to two weeks to complete their prescribed classes, which are available online and are based on established medical guidelines. Once a patient answers a certain number of questions correctly, a voucher pops up on the screen. Patients can print the vouchers as proof they successfully completed their lessons. The online system also alerts the claims administrator, which issues a refund check to the patient.

The program works because "it aligns the interests of the three primary stakeholders: the patient, the provider and the payer," Mr. Greene asserted. "We liken it to a three-legged stool."

The program was implemented in less than 60 days using a health fair to orient plan members. Doctors and office staff all received one orientation session as well as instructional videos and printed materials. The city's claims administrator made system modifications to automate the bonus payment and rebate processes.

After two years, the city of Duncan, which had projected a 20% increase in the cost of its self-funded health benefit program for 2005-2006, instead experienced a 29.8% drop going into the 2006-2007 plan year, according to Mr. Greene. The 2003-2004 plan year was used as a baseline. That year, the city spent more than $2.3 million on health care for 1,100 employees and dependents enrolled in its benefit plan.

The program cost the city a total of $74,957, including $27,835 in patient rewards, $21,114 in doctor incentive payments and MedEncentive's fees of $25,978. Its two-year savings totaled $820,520, yielding a 995% return on investment, Mr. Greene said.

The greatest savings came from controlling noncatastrophic costs, which declined more in the second year than in the first, he said. In addition, there were significant reductions in hospitalizations and radiology services, Mr. Greene said.