An article in MobiHealthNews caught my attention this morning when it talked about 2 payers agreeing to pay $100 a month for Welldoc’s diabetes application. This is fascinating to me since (a) I’m always interested in how people price and value services and (b) I’d love to bundle something like this into our diabetes offering.
This of course begs the key question which is what is the value of the application. We’re all familiar with the fact that diabetes drives significant costs within our healthcare system. Here’s a quick summary from the ADA.
The national cost of diabetes in the U.S. in 2007 exceeds $174 billion. This estimate includes $116 billion in excess medical expenditures attributed to diabetes, as well as $58 billion in reduced national productivity. People with diagnosed diabetes, on average, have medical expenditures that are approximately 2.3 times higher than the expenditures would be in the absence of diabetes. Approximately $1 in $10 health care dollars is attributed to diabetes. Indirect costs include increased factors such as absenteeism, reduced productivity, and lost productive capacity due to early mortality.
Of course, diabetics also spend a lot of money on out-of-pocket costs themselves. $6,000 from one study mentioned here.
But, I think the key question here is what assumptions make this a good investment. Let’s me walk through my thought process.
- At $100 per month, you pay $1,200 per year per member.
- BUT, members won’t actively stay engaged with the application all year long so you have to assume some percentage of engaged members. (A key question is whether you pay only for actively engaged members or all members enrolled in the program.) And, how long does a patient have to use the application to achieve the results?
- If 20% are engaged, the cost per engaged member would actually be $6,000 ($1,200 divided by 20%).
- If 60% are engaged, the cost per engaged member would be $2,000.
- The next question is how you estimate the value of the application. Based on their study, they saw a 1.9 point drop in A1c which is a good one-year drop and a good outcome metric to focus on (see article). So the question becomes…what is the value of a 1.9 point drop in A1c? This is a question I was looking for earlier.
- This pharmacist based study talks about a 0.8% reduction in A1c leading to $1,200 in total savings.
- This CVS study showed a $3,756 annual savings for an adherent diabetic versus non-adherent. (But, adherence wasn’t shown in the Welldoc study.)
- The President from Welldoc quotes a savings of $3,500-$4,000 per point drop in A1c, but I couldn’t find the study to support that. (I e-mailed their PR people about this.)
- And, a few weeks ago at a mHealth conference, I heard someone say the value was $7,000 per point reduction in A1c.
As you can see from this tweet, I was looking for this study yesterday and mentioned DiabetesMine to see if Amy might know, but she didn’t.
So, my conclusion is that this is worth it if:
- The value is closer to the $3,500 point.
- You pay based on actual engagement or utilization…or you only give it to people who actually use it versus the overall population.
- The application improves adherence.
I hope to figure this out since this was the first FDA approved device and looks very promising.