Making the Business Case for Hospital Glycemic Control

1
Making the Business Casefor Hospital Glycemic
Control

• Michelle F. Magee, MD
• MedStar Diabetes Institute
• Georgetown University School of Medicine
• Washington, DC
• Michelle.F.Magee_at_Medstar.net

2
General Principles

• Time and labor intensive undertaking
• Business plan for new process, resource or staff
  member justifies return on investment
• Will be analyzed by finance, operations,
  departmental heads administrators for not only
  clinical impact, but also fiscal and operational
  feasibility
• Involve operations and finance reps early and
  often

3
How hospitals are reimbursed for inpatients

• Regardless of payor, principal, secondary and
  procedure codes accurately appropriately
  documented in chart
• Grouped into Diagnosis-related group code (DRG)
• Average DRG weight for all inpatients case mix
  index (CMI) reflects severity of illness in
  patient population

4
How hospitals are reimbursed for inpatients

• Allowable charges vary by location payor
• Case mix index of the hospital
• Most other states, Medicare reimburses a flat
  rate for each DRG other payors may also be based
  upon set DRG payment or a percentage of charges
  based upon contractual stipulations
• Business case will be based upon given hospitals
  allowed charges

5
Models for Financial Justification

• A. Hospital-supported based upon
• 1. improved accuracy of documentation
• coding
• 2. reduction in LOS readmissions
• 3. optimization of resource utilization
• B. Self-supported based upon
• 1. physician billings
• 2. mid-level provider billings

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Improve Accuracy of Documented Patient Acuity
Hospital-supported strategy (1)

• May assess potential for optimizing
• reimbursement through improved accuracy
• of physician documentation and of coding
• Uncontrolled Diabetes
• Unrecognized Diabetes
• Diabetes complications/co-morbidities

7
Accuracy of designation of level of control of
diabetes

• No clear-cut criteria for designation
• Nonspecific term indicating treatment regimen
  does not keep BG within limits set
• Admit BG, or two or more BG during stay over 180
  (-200) during stay
• Lesser persistent hyperglycemia outside AACE
  ADA targets could also be considered consistent
  with uncontrolled DM
• http//www.ahd.com/pps.html ICD-9-CM
  Professional. 6th edition
• Diabetes Care 2004 27 553-91

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Unrecognized Diabetes

• Diabetes either unrecognized by the treating
• team or is not clearly documented in the
• chart during stay
• Paucity of data to guide hospital diagnosis
• Random BG gt 200 particularly if symptoms
• Fasting BG (and A1C) criteria less clear

9
Diabetes Complications

• Renal manifestations, eg DM nephropathy
• Ophthalmic manifestations, eg DM retinopathy
• Neurologic manifestations, eg DM gastroparesis,
• polyneuropathy
• Peripheral circulatory disorders, eg peripheral
  angiopathy, gangrene
• Other specified manifestations, eg DM
  hypoglycemia hypoglycemic shock associated
  ulceration DM bone changes drug-induced, eg due
  to adrenal cortical steroids
• 
  ICD-9-CM classification

10
Steps to quantify potential for improvement
(pre- post-implementation)

• Define population to be assessed
• Delineate time period to be assessed
• Obtain DRG code and ICD-9 codes
• Review implications of improved coding on
  reimbursement rates
• Extrapolate from number of cases identified as
  meeting criteria as result of team intervention
  dollar value per case to derive projected total
  dollar amount

11
Remember

• Advisable to use conservative, realistic
  assumptions to guide projections
• Involve hospital finance and coding
  reimbursement specialists in analyses

12
Revenue Opportunity Coding Uncontrolled diabetes

• Year 1 net operating margin attainable, at
  median or
• 50 compliance rate flat rate DRG 907 beds
• Total Year 1 Annual Revenue
  845,309
• 50 compliance
  (422,654)
• Subtotal
  422,654
• Additional Fingerstick Expense
  (27,155)
• Additional A1C Testing Expense
  (4,414) Total
  Expense
  (31,569)
• Total Adjusted Year 1
• Annual Revenue
  391, 085

13
Revenue Opportunity Coding Uncontrolled diabetes

• 344 bed hospital using CMI reimbursement
• Criteria for selection of population
• hospital X, all discharges time period (FY
• 2006 Q3) age 18 exclude DKA, HHS)
• Obtain DRG and severity of illness info
• Cases reviewed by rates reimburs. group
• 246 cases (SOI levels 34 not improved by
• 
  uncontrolled DM diagnosis)
• 49/246 (19.9) with potential for changes in
  allowed charge

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Calculation of potential thru CMI

• Item (o)
  CMI (i) CMI
• Case mix index (CMI) 0.9269
  0.9750
• Allowed charge/case 8,531
  8,973
• x 246 cases
• (total allowed charge) 2,098,522
  2,207,431
• Q3 Potential for improved revenue (i-o)
  108,910
• Annualized potential for improved revenue
  435,640
• Only applies if CMI not maximized

(o) original (i) improved
Magee Beck www.SHM.org Glycemic Resource Room
15
Coding, contd

• Five year projection of net operating margin
  attainable at 50 compliance
• Potential for revenue continues forward with
  incremental step-down annually

16
Increase capacity denied payments for
readmissions
Hospital-supported strategy 2.

• Reduction in length-of-stay
• - Increase bed throughput
• Cost Aversion
• - Reduction in readmissions
• - Reduction in nosocomial
• infections

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Resource Utilization
Hospital-supported strategy (3)

• Cost savings analysis (attributable to the
  initiative) can be performed based upon
  comparison between patients with and without
  hyperglycemia analysis of geometric mean cost,
  expected cost for the selected practice and
  comparative cost deviation and analysis of
  morbidity and mortality

18
Optimize resource utilization

• Reduction in

- Morbidity - ICU length of stay - Mortality
19
Portland Group Experience

• CSII in CABG patients with BG target lt 150mg/dl
  non-randomized, prospective study (n4,864)
• Reduction in mortality risk by 57 to 2.6
• Reduction in DSWI risk by 66 to 0.8
• plt 0.001 for both
• Analysis of direct indirect costs of insulin
  Rx, additional costs LOS attributed to DSWI
  determined intensive BG control realizes cost
  savings of 680 per patient (majority attributed
  to decreased costs for wound infections LOS

Furnary AP et al. Endo Pract. 2004 10 21-33
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COMPAS data FY 06 Q3

• Clinical Outcomes Management Process Analysis
  System (Quovadx)
• Patient characteristics resource utilization,
  most lab data for inpatients
• Analysis comparing costs for cases with 2 or more
  BG gt 180mg/dl any time during stay to those
  without hyperglycemia during stay

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Opportunity for savings comparison of costs
between patients /-hyperglycemia

• Outcome 2 BG gt 180mg/dl
  Controlled BG
• Cases 465
  1,228
• Geometric
• Mean Cost 10,312
  5,272
• Expected Cost
• (select practice) 9,639
  5,595
• Comparative
• cost deviation 673
  ( 323)
• Comparative cost
• sig level 90 sig
  90 sig

Magee Beck www.SHM.org Glycemic Resource Room
22
Inpatient DM Case Management Reduces LOS and Costs

• 750-bed hospital 23 of discharges with a
  diagnosis of diabetes
• Program based on ADA technical review
• Team program director and assistant DM
  clinical specialist MD director 1 nurse case
  manager/2 units

Newton CA, Young S. Endocrine Practice 2006 (S3)
43-48
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Inpatient Diabetes CaseManagement Program
(contd)

• 10 medical and surgical units
• Diabetes management order sets3 protocols floor
  insulin drip transition off drip SC insulin
  orders emphasizing basal, nutritional, and
  correction dose insulin
• Education of nurses and MDs
• Ongoing recommendation for DM Rx by DM case
  manager when BG above target

Newton CA, Young S. Endocrine Practice 2006
(S3) 43-48
24

• Outcomes
• pre
  post
• BG (mo. avge) 177mg/dl
  155mg/dl
• MICU glucose
• mo. avge 169.466.1 123.5
  56.1
• lt 70mg/dl 2.60
  7.98
• BG lt 40mg/dl 0.78
  0.77
• 
  plt
  0.0001
• ? LOS (days) all adult units NCM
  units
• no-DM - 0.08
  - 0.11
• DM - 0.26
  - 0.36
• 
  plt
  0.01

Newton CA, Young S. Endocrine Practice 2006 (S3)
43-48
25
Outcomes

• Reduction in catheter-related bloodstream
  infections by 33.5
• CDC average central line infection rate 5/1,000
  catheter use days
• Would save 1.675 infections per 1,000 event days
• Assume minimal increase in cost of
  3,700/infection, would save 6,197.5 per 1,000
  patient event days
• Compare to cost of 16.25/pt/day for IV insulin

Newton CA, Young S. Endocrine Practice 2006 (S3)
43-48
26
Cost Aversion for nosocomial infections

• Given incoming new Medicare reimbursement
  guidelines for hospital acquired infections
• Deep sternal wound infections
• Central line infections
• Nosocomial UTI
• Will become increasingly relevant to the business
  case for targeted glycemic control

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Outcomes (contd)

• LOS reduction of -0.26 days
• Multiplied by 6,876 discharges/year
• Equates to 1,788 days saved/year
• Incremental annual inpatient volume of 350 days
  with avge LOS of 5.11 days
• Multiplied by estimated net revenue margin of
  6,357/patient
• Subtracted direct variable nursing costs
• throughput value of of 2,224,029 for hospital
  (467 return on investment)

Newton CA, Young S. Endocrine Practice 2006 (S3)
43-48
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B. Self-supported

• Salary plus fringes, etc offset through income
  generated by billings
• Physician billings
• Mid-level provider billings (NP, PA)

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Glucose Management Service

• Perioperative management by Endo-supervised NP
  service doing glycemic case management
• IV insulin mean BG 13549.9 mg/dl
• hypoglycemia lt60 mg/dl in 1.5
  BGs
• SQ insulin mean BG 145.6 55.8 mg/dl
• hypoglycemia lt in 1.3 of BGs
• Billed for clinical services provided
• Revenues support salary plus fringes for 2 NPs
  and 0.25 FTE endocrinologist
• 
  DeSantis A, et al. 2006 Endocrine Practice

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Operating Revenue

• Gross Patient Service Revenue -
  328,320 Based on 4 - 5 new level 4 consults/day
  generating 24,000/month and 2 level 2 follow-up
  consults/day generating 5,760/month billings on
  average balance in level 3 outpatient visits.
  
• Deductions from Revenue -
• Contractual Allowances
  (123,504)
• Net Patient Service Revenue
  204,816
• 62
• Total operating revenue
  204,816

Magee Beck www.SHM.org Glycemic Resource Room
31
Operating Expenses

• Personnel 1.0 FTE endocrinologist
  150,000
• Benefits
  (15,000)
• Purchased services -9 billing fees
  (18,443)
• Risk Management
  (11,000)
• Other operating expenses
  (5,000) Pager/phone/printed materials/CME
• Total operating expenses
  (199,433)
• EARNINGS from OPERATIONS
• Net earnings
  5,383

Magee Beck www.SHM.org Glycemic Resource Room
32
Assess Leverage Individual Hospital
Opportunities

• Diabetes is everywhere in the hospital
• Targeted efforts improving glycemic control have
  significant potential to generate revenues /or
  effect cost aversion through hospital-supported
  and self-supported models
• Work with data manager, finance coding
  reimbursement groups to analyze hospital-specific
  opportunities that may be used to support
  business case for support