BY KRIS B. MAMULA

Western Pennsylvania’s leading insurer of the needy is using a social worker’s touch in enhancing care for its members while cutting costs. The move is paying off, with $24 million in pharmacy savings in fiscal 2005 alone. What’s more, by addressing such member needs as adequate housing and regular meals, Gateway Health Plan’s president and CEO Michael Blackwood sees still more savings to wring out of the system.

“If you can’t keep your house warm,” said the 57-year-old Blackwood, a soft accent betraying his Louisiana roots, “it’s hard to talk about the value of a mammogram.”

Medicaid insurers nationwide have long used aggressive case management to control spiraling costs, and David Mitchell, an analyst with A.M. Best, an insurance rating agency based in Oldwick, N.J., said companies have been getting smarter about curbing pharmacy costs in particular.
“There is a lot of opportunity
to control those costs,” he said,
adding that Gateway’s savings
were “significant.”
Gateway’s 267,000 members
in 39 counties are among the
most difficult populations for
control of health care spending;
the emergency room often substitutes
for family doctor visits
and preventive health care is infrequent.
By interviewing members,
Downtown-based Gateway
identifies issues that undermine
health and therefore drive up
treatment costs for members.

These issues include the availability
of transportation to doctor’s
appointments, adequate
housing and regular meals.
The connection between social
needs and health care,
while not yet backed by studies
offering hard data, is also not
far fetched; Blackwood points
out that social isolation, for example,
is the biggest single predictor
of hospitalization.

Gateway’s approach centers
on assessing the social needs of
each member and then matching
members with community
services that will lead to healthier
lives and, it is hoped, fewer
hospitalizations. The insurer
accomplishes the task through
close oversight of members and
early intervention by doctors,
nurses and social workers.
Based on age, medical history
and prescription purchases,
Gateway uses a computer program,
developed internally, to
predict the likelihood of a particular
member being hospitalized
in the next 12 months.
Armed with this data, Gateway
staff can contact the member
and doctor, and in many cases,
head off more serious health
problems.
The economics supporting

Blackwood’s approach are simple.
The average cost of a hospital
admission is $5,500, which
compares to $2,000 for an outpatient
visit.
Spending trends outside
pharmacy are still being measured
and the program continues
to be tweaked, but Blackwood
is so confident about the
software’s potential for savings
that Gateway has plans to eventually
market it to other health
care plans. Revenue for privately-
held Gateway was about
$903 million last year, Blackwood
said, and the return on investment
to its owners, Downtown-
based Highmark and
Mercy Health Plan of Philadelphia,
averaged 36 percent annually
from 1999 until 2004.
Gateway rolled out its
Prospective Care Management
program in May 2005. It targeted
high-cost, chronic conditions
including diabetes, congestive
heart disease and asthma.
The benefits are still being
assessed, but Blackwood believes
the effort will yield big
savings; a similar approach to
pharmacy expenditures that
was implemented in 2004 is
paying off handsomely.
Pharmacy bills, which make
up 40 cents of every medical
dollar that Gateway spends,
have been easier to target because
invoices are available to
the insurer within a month of
a prescription being filled.
Pharmacy records provide a
near real-time view of the patient’s
health and indicate developing
medical problems that
can be costly to treat if ignored.
For example, a patient with diabetes
who is prescribed a
steroid to control blood sugar
has an 80 percent likelihood of
hospitalization in the next 12
months, Blackwood said.
Before intensive case management,
Gateway’s pharmacy
costs of $300 million were rising
13 percent annually. Early
intervention in acute health
problems helped pare that increase
to just 4.9 percent in the
year ending June 30 2005,
Blackwood said. Buoyed by
those results, Gateway anticipates
reducing the annual hospital
admission rate to 118 per
1,000 members from 128 per
1,000 members.
Gateway’s approach to holding
down costs while enhancing
care is not without challenges.
Up to 21 percent of the general
population never fill their original
prescription and as many
as half of patients don’t follow
instructions for taking a medication,
according to the Massachusetts
Medical Society.
Hard data to support the
idea that early medical interventions
result in fewer hospitalizations
also is lacking, according
to Mike Nelson, a
Sewickley-based health care
consultant and former president
of Erie-based Ion Health
Holdings Inc., a Medicaid insurer.
Medicaid recipients can
switch health care carriers at
will, which complicates efforts
to measure outcomes, he said.
“Does their protocol work in
the time period they have
them?” said Nelson. “No one really
has the data.”
Still, Blackwood said the
number of members leaving
Gateway is at an all-time low,
three-tenths of 1 percent a
month, and he’s confident
about the insurer’s approach to
case management. “This isn’t
Gateway saving the world,” he
said. “This is Gateway engaging
the community.”
KRIS B.MAMULA