The Business Concept of Leader Pricing as Applied to Heart Failure Disease Management

The implementation of a disease management approach for patients with heart failure has been promoted as a way to improve outcomes, including a decrease in hospitalizations. However, in the absence of rigorous cost analyses and with revenues limited by professional fees, heart failure disease management programs may appear to operate at a loss. The literature outlining the importance of disease management for patients with heart failure is summarized. We review the limitations of current cost analyses and outline the economic concepts of leader pricing, vertical integration and transaction costs to argue that heart failure disease management programs may provide significant "downstream" revenue for an integrated system of health care delivery in a fee-for-service payment structure, while reducing overall costs of care. Pilot data from a university-based program are used in support of this argument. In addition, the favorable impact on patient satisfaction and loyalty can enhance market share, a vital consideration for all health systems. Options for improving the reputation of heart failure disease management within a health system are suggested. Viewed as a loss leader, disease management provides not only quality care for patients with heart failure but also appears to provide financial benefits to the health system that funds the infrastructure and administration of the program. The actual magnitude of this benefit and the degree to which it mitigates overall administration costs requires further study.