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@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 hospital’s 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

6. A. Hospital-supported models Documentation opportunities Increase throughput capacity and limit denied payments for readmissions Optimize resource utilization

7. Improve Accuracy of Documented Patient Acuity May assess potential for optimizing reimbursement through improved accuracy of physician documentation and of coding Uncontrolled Diabetes Unrecognized Diabetes Diabetes complications/co-morbidities

8. 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

9. 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 > 200 particularly if symptoms Fasting BG (and A1C) criteria less clear

10. 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

11. 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

12. Remember Advisable to use conservative, realistic assumptions to guide projections Involve hospital finance and coding & reimbursement specialists in analyses

13. 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

14. 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 3&4 not improved by “uncontrolled” DM diagnosis) 49/246 (19.9%) with potential for changes in allowed charge

15. 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

16. Coding, cont’d Five year projection of net operating margin attainable at 50% compliance Potential for revenue continues forward with incremental step-down annually

17. Increase capacity & denied payments for readmissions Reduction in length-of-stay - Increase bed throughput Cost Aversion - Reduction in readmissions - Reduction in nosocomial infections

18. Resource Utilization 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

19. Optimize resource utilization Reduction in

20. Portland Group Experience CSII in CABG patients with BG target < 150mg/dl; non-randomized, prospective study (n=4,864) Reduction in mortality risk by 57% to 2.6% Reduction in DSWI risk by 66% to 0.8% p< 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

21. 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 > 180mg/dl any time during stay to those without hyperglycemia during stay

22. Opportunity for savings: comparison of costs between patients +/-hyperglycemia Outcome 2+ BG > 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

23. 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

24. Inpatient Diabetes CaseManagement Program (cont’d) 10 medical and surgical units Diabetes management order sets—3 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

25. Outcomes pre post BG (mo. avge) 177mg/dl 155mg/dl* MICU glucose mo. avge 169.4+66.1 123.5+ 56.1* < 70mg/dl 2.60% 7.98% BG < 40mg/dl 0.78% 0.77% * p< 0.0001 ? LOS (days) all adult units NCM units no-DM - 0.08 - 0.11 DM - 0.26** - 0.36 ** p< 0.01

26. 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

27. 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

28. Outcomes (cont’d) 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)

29. B. Self-supported Salary plus fringes, etc offset through income generated by billings Physician billings Mid-level provider billings (NP, PA)

30. Glucose Management Service Perioperative management by Endo-supervised NP service doing glycemic case management: IV insulin mean BG 135+49.9 mg/dl; hypoglycemia <60 mg/dl in 1.5% BGs SQ insulin mean BG 145.6 +55.8 mg/dl hypoglycemia < 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

31. 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

32. 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

33. 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

34. Thank you Questions Discussion Experience at your hospital