American Association ofDiabetes Educators

Donald Fetterolf, MD, MBA, FACPExecutive Vice President, Health IntelligenceMatria Healthcare, Inc.

“The Business Case for Diabetes Education”

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Outline

Overview Introduction Basic business principles Presenting your ideas Making the business case for diabetes education Conclusion References

Overview

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The Go Bag

What is a Go Bag? Several bottles of water A compass A hunting knife A bar of soap and some clean underwear Several bags of trail mix A roll of toilet paper Your teddy bear

What is a Go Bag For? Surviving the first week or two of the post-apocalypse

What is the business equivalent?

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Introduction: Case Study

The CEO/CMO of your company has made friends with the Vice President of marketing of a national company that claims that it can provide diabetes education effectively using a cool web based tool his company has designed. The two have gone golfing, have had dinner together, and have had several “high-level” discussions about having the vendor replace your program staff with the vendor's web site. Two of your organization’s senior vice presidents, in totally unrelated areas and who have no knowledge of clinical issues, think the proposal might be a viable option. The vendor claims that he can give your company an “8 to1 return on investment,” and will ”guarantee” it. You are now approached by the CEO/CMO, who admits that he might dissolve your area, but offers to give you 20 minutes to talk him out of it. He is interested in the value/return that you get now.

What do you tell him? Your answer should address both an analytic approach and recognition of the various political factors that may influence your choices.

Paraphrased and restated from Fetterolf, AJMQ Jan/Feb 2003.

The Issue: Making the Business Case

Making the business case to someone or some entity that you should be paid for your valuable services is difficult for anyone. Money is tight everywhere.

You were trained as a clinician, not a business person. So, how do you put a price on quality or clinical improvement? What is the strategy to convince a potential nonclinical payer of diabetic education services that they are worth it?

Do your services create a “value proposition” for your services? How do you construct the approach and the arguments for the government, health plans and clinics that create a compelling case in your favor in the mind of a business person?

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Your Business Go Bag

You will need to collect all that you will need to have for a rapid, no thought needed response when you encounter:

Takeover of your company/hospital and a sudden visit by the new CEO

Sudden loss of your job and the need to find a new one

Talking your boss into a 10% increase in your budget so you can “improve the quality of care”

So, what’s in your go bag?

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The Beginning…

The Big Committee on Medical Management

What they Say Patient education is very

important to our company. Education is something we do at

the individual level. Quality is the key ingredient to

making our business a success.

You are asked to present the results of three weeks worth of your work with others developing the medical management programs at your company.

What they Do “Could you do pretty much the same

thing with less? Could you just not do them for us, and give us a lower price?”

“How much will all these initiatives inflate my costs?”

“We’ll get to your report as soon as we get done with the important financial pieces of the agenda.”

As you get up to speak, members of the board sneak a look at their watch. The CMO starts to look at his watch.

Understand what they do carries the most meaning.

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Are You Irrelevant, or Just Boring? Do you know…

Why are clinical staff often marginalized in the “management” role?

If presentations aren’t interesting, how are you viewed by senior management?

What happens to your budget when the company needs to make a cut?

It is important to recognize the forces in business that direct you and the forces needed to advance the cause of your profession. You ignore them at your peril.

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Understand the Problem: What they want you to do.

“Maximize profit, minimize loss.”

Generate more revenue Lower PMPM costs Reduce administrative overhead Measurably raise patient care quality Make them look good to somebody

Have real impact, not inconsequential activities

Basic Business Concepts

Accounting

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Why Bother with Accounting?

It’s the language your boss speaks. e.g. What is the ROI?

You won’t be a member of the “leadership team”.

They will take advantage of you if you don’t participate. e.g. Internal cost transfers

You’ll go to jail if you don’t fill in the forms right.

Financial Information and the Language of Business

Typical Forms of Financial Information Financial statements Annual reports Budgets Invoices Bank statements Sales forecast results Financial forecasts Claims payment records Billed and paid premium records General ledgers Investment reports Financial models Cost accounting reports Actual versus budget results for provider risk

pools Medical loss ratio and expense ratio reports Utilization statistics reports Payroll records

14Source: Academy for Healthcare Management. Health Plan Finance and Risk Management. 1999.

Accounting Concepts

Financial Accounting Balance Sheet Income Statement Statement of Cash Flows Management Letter

Managerial Accounting Contribution Income Statement Financial pro formas

Statutory Accounting DOI Forms

Annual Statement GAAP

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Income Statements

Form of a Regular Income Statement RevenuesRevenues $ 100

ExpensesVariable Expenses $ 60Fixed Expenses $ 20

Profit (Loss) $ 20

Important: Are you a profit center or a cost center? How are costs assigned to you?

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Income Statement: ABC Medical Corporation

Income Statement For 2002

RevenuesPatient Revenues $ 1,575,000Consulting Income 85,000Investment Income 2,000 Total Revenues $ 1,662,000

ExpensesSalary of Partners 853,347Staff Wages 235,645Laboratory Fees 32,583Administrative Expenses 75,495Interest Expense 3,453Insurance 23,453 Total Expenses $ 1,223,976

Net Income $ 438,024 

Revenue means a bigger organization and more visibility for your boss.

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Income StatementsForm of a Contribution Income Statement

 PMPY* Total

Members Affected 50,000

RevenuesVariable Revenues $ 7 $350,000

ExpensesVariable Expenses/Unit $ -5 $250,000

Contribution Margin $ 2 $100,000

Fixed Expenses $46,000

Profit (Loss) $54,000 __________ *PMPY = Per member per year.Note also the relationship with a “breakeven analysis” – you need at least 23,000 members. Why?

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Income Statements: Activity Based Cost Accounting – “ABC”

Example of activity-based cost accounting. Product A B C Total RevenueVariableRevenue $50 $50 $20 $120  Expense VariableExpense $30 $ 5 $ 5 $ 40

Fixed Expense $15 $30 $ 5 $ 50

Profit (Loss) $ 5 $15 $10 $ 30

Basic Business Concepts

Finance

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Finance

Cost of Capital Opportunity cost

Discounted Cash Flow Analysis Future Value = Present Value x (1 + Interest Rate) Net present value (NPV) calculations

Budgeting Annual Budget Capital Budget

Other General Principles

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Other General Principles

Creation of business plans Project management Financial pro forma statements Organizational psychology

Know when to get and ask for help

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Key elements of a business plan, each typically described in a few paragraphs, include:

An overview of the industry or company and a description of any products that are being produced or are under consideration

An evaluation of the current market, including the advantages of the proposed initiative over competitors’ initiatives

A formal outline of the proposed initiative and the opportunities that it provides to the company

Marketing research that identifies the potential target market and the projected costs and revenues for the initiative

A formal design for implementing the initiative and a development schedule An overall operations plan that uses standard project-management approaches A profile of an accountable lead person and the credentials of the management and

operations teams An overview of the economics surrounding the business and the initiative including general

profitability, sales potential, and so on. Anticipated risks and problems that could result in less-than-optimal outcomes Financing arrangements and pro forma financial statements that outline return and costs

over a period of several years Estimated contracts, terms, agreements, and other items that must be negotiated Exit strategy: the process for ending or discontinuing the program

Business Plans

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Business Planning

# Goal Objective TacticAccountable

PersonStartDate

EndDate

SuccessMetric

Done?

Notes

46 Increase the Value Proposition Of the College and It’s Services47 Create and Maintain a Portfolio of Educational Offerings for the Membership Brodie 01/01/05 12/30/05

48 Core Curriculum in Quality Brodie 01/01/05 12/30/05 Book published

06/01/05 Completed and available on the ACMQ website.

49 AJMQ Brodie 01/01/05 12/30/05 Published 11 times a

Currently active and under way.

50 Focus Brodie 01/01/05 12/30/05 Published quarterly

Currently active and under way.

51 ACMQ Forums Brodie 01/01/05 12/30/05 Reqts Document

Currently active and under way.

52 Government & Public Affairs Forum Casey 01/01/05 12/30/05 Reqts Document

On Track

53 Health Care Quality in Diverse and Underserved Communities Beltran 01/01/05 12/30/05 Reqts Document

On Track

54 Informatics and eHealth Diamond 01/01/05 12/30/05 Reqts Document

On Track

55 Quality in Managed Care Fetterolf 01/01/05 12/30/05 Reqts Document

On Track

56 List serve Brodie 01/01/05 12/30/05 Operating Proposed.

57 Create Vehicles for Personal Continuing Education Brodie 01/01/05 12/30/05

58 Annual Meeting Brodie 01/01/05 12/30/05 Meeting held.

02/17/05

59 Annual meeting planning for 2006 Brodie 01/01/05 12/30/05 Plan for 2006 by 11/1/2005

60 CME Accreditation Capability for College and QI related programs Brodie 01/01/05 12/30/05 In place Ongoing.

61 Provide Networking Opportunities for Members Brodie 01/01/05 12/30/05

62 Create a Yahoo Discussion Group on Quality Beltran 01/01/05 12/30/05 05/01/05 Completed, but in need of advertising to drive participation.

63 Seek opportunities to partner/joint sponsor with local Quality programs Brodie 01/01/05 12/30/05 5 identified and sourced

64 Cosponsor national programs -- e.g. ACPM Brodie 01/01/05 12/30/05

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Financial Pro Forma

Estimated CHF QAPI Extra Payment Scanner Project Costs 2001 2002 2003 Total (July -December) (January - December) (January - December)

Revenue: Minimum Extra Payment Potential $375,000 $375,000 $750,000

Expenses:

Staff: .5 FTE (Temporary RN) @ 19.80/hr $9,652.50 $19,305.00 $19,305.00 $48,262.50

Onsite Expenses (e.g. travel, phone) $2,000.00 $8,000.00 $8,000.00 $18,000.00

Hardware: Computer $1,500.00 $1,500.00

Scuzi card $85.00 $85.00 Scanner (Panasonic KDSS25D) $2,500.00 $2,500.00

Software: Telform Single User License $6,000.00 $6,000.00

Software Maintenance Agreement $500.00 $500.00 $1,000.00

Mail: ($1.60/packet)

Mailing Cost ( 983 initial packets) $1,572.80 $1,572.80 Mailing Cost (1000/quarter) $6,400.00 $6,400.00 $12,800.00

Envelopes (#793 - 1000/$64.80) $64.60 $259.20 $259.20 $583.00

Printing: Paper (1000 sheets/$4.45) $39.74 $22.91 $22.91 $85.56 Printing (0.6/sheet) $5,362.80 $3,081.60 $3,081.60 $11,526.00

Total Expenses: $22,777.44 $43,568.71 $37,568.71 $103,914.86

Net Revenues: ($22,777.44) $331,431.29 $337,431.29 $646,085.14

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Presentations

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Presentation Advice From the Experts

Fetterolf, D.. "Commentary: Presenting the Value of Medical Quality to Nonclinical Senior Management and Boards of Directors.." American Journal of Medical Quality. (18)1. Jan/Feb 2003. pp. 10-14.

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Tip: Don’t Get Lost in Your Stuff!

Convert complex concepts into the elements of their world.

Your job is not to turn them into clinicians or statisticians. Your job is to interpret for them in their world what you are doing in yours, and why it is important to them.

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Tips: Insights

Don’t emphasize the fact you are highly trained, or very qualified. It makes you different.

Remove clinical or foreign technical words e.g. glycohemoglobin, skedastic

Don’t use big words or sound too scholarly. Focus on their number one objectives Watch the unneeded detail. It goes in a report appendix. No sudden surprises. They frighten easily. Slide in the bad

news but be truthful and unbiased. Don’t be intimidating. Fetterolf’s First Rule: Assume nothing.

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Developing the Value Proposition

Operational Clinical Economic/Financial Intangible and Social Productivity and workforce impacts

Productivity Absenteeism Presenteeism Disability

Anecdotal

Create a multidimensional approach to economic return.

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Tip: What Not to Include in the Final Presentation to Senior Management.

Glycohemoglobin levels. Diabetic foot exams. All things that are abbreviated with more than 3 letters. 8 ways to do the ROI methodology

How would you explain this to a 15 year old boy in a way he would find interesting and compelling?

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Example: Problem Presentations

“Diabetic foot exams increased under our new program.” – Pointless clinical statistic

“We spent $1 million generating the HEDIS statistics this year.” – High cost for something that isn’t necessary anyway

“If we had more people in my area, we could really improve care.” – Adding still more resources to an already bloated concept

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Better

Our HEDIS measurement is now a necessary component of our NCQA quality accreditation. The Intergalactic Business Group on Health is comparing our results with ABC Health, our biggest competitor. (smugly) Ours are better in 7 of 10 areas.

Our scores have been improving, which will be useful marketing information. Our scores are good compared with national benchmarks and our

competitors, so if any one asks you, they are a good thing. While the cost to produce this information is high at $1 million dollars, the

result will assure our competitive position with respect to accreditation and compliance needs.

Actually, the value is higher – for every point we increase mammography rates alone for example, economists estimate that we will experience $500,000 less costs in breast cancer treatment over the next 5 years.

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Actual Report Construction -- Tips from the Experts

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Report Format

Executive Summary 6 or 7 Bullet points

Analytic Pages Graph Data Text

Summary and Conclusions Recommendations

Choices and Solutions Addenda

Methods Codes used Supporting material

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Tip: Report Tips

Always have bullets in an executive summary. No more than six (eight max).

Short length reports, larger fonts. Use primary colors. No more than two bars on a bar graph. Reading level at or below 12th grade level. Make both “high level” and specific

recommendations so they can chose what course of action they can comfortably claim is theirs.

WeightedBaseline Period Program Period

PMPM 1/98-12/98 PMPM 7/99-6/00 % ChangeInpatient $1.98 $1.64 -16.8%Outpatient $0.74 $0.72 -2.4%Professional $1.57 $1.50 -4.3%Total $4.29 $3.87 -9.7%

PMPM Comparison by Claim Type - All Products1/98 - 12/98 vs 7/99 - 6/00

-9.7%

-4.3%-16.8%

-2.4%

%Change

%Change%Change

%Change

$0.00$0.50$1.00$1.50$2.00$2.50$3.00$3.50$4.00$4.50$5.00$5.50

Inpatient Outpatient Professional Total

PM

PM

Baseline Period PMPM 1/98-12/98 Program Period PMPM 7/99-6/00

Findings:

This graph is a Summary PMPM comparison of behavioral health claims data for the weighted baseline period and the PMPM program period, with six months of run-out, by claim type. The baseline claims are weighted by the program period product mix, to account for shifts in product mix between periods. This graph shows that overall PMPM costs decreased by 9.7%, (prior to the SMI parity and the audit adjustments). A significant decrease in Inpatient costs is driving this drop in PMPM, Outpatient costs and Professional costs are also decreasing. SecurityBlue is the product showing the greatest drop in care costs, 22%.

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Organizational Psychology

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Tips: Identification with the Aggressor

Convert being a staffer discussing boring issues into being a co-executive solving the problems of the company with them.

Build in marketing for your presentation Branding Ease of use The bathroom test Ease of access to retrieve your report

Give them some slides for their boss; make your case easy to fund or present.

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Tips: Organizational Psychology

Brevity and concise reporting. Clarity is job 1. Smile often but appropriately. How can they use what you have to look good themselves? How is your stuff more interesting than what they are thinking about. Don’t EVER add to their problems without preparing solutions. Tie what you are presenting into something they relate to:

media coverage personal life

“Inside, you are their lap dog; outside you are their bull terrier.” Keep track of what you told them previously

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End Results

“I’ve learned something about our complex business and its problems.

The quality program is advancing the company. This person understands the issues well. We needn’t worry - he handled the problems from last

time. I’m sure glad they are handling it.

You want someone three levels above you to be upset if you threaten to go.

Now, The Business Case for

Diabetic Education

Connecting the Dots: the value of treating disease in a systematic way

The “evidence based medicine” literature forms the essential scientific underpinnings behind disease management interventions.

Evidence based literature solidly establishes that certain interventions produce significant economic value generally, in many cases, in excess of amount spent.

Economic value is defined broadly, to include administrative/operational, clinical quality, clinical utilization, and productivity outcomes as well as pure accounting “ROI”.

Medical management programs seek to mirror in the commercial arena activities that have been proven in larger multicenter, randomized trials.

Direct evidence exists linking the specific activities of disease management programs and clinical, financial and productivity outcomes in many areas and across many diseases.

Medical management programs use comprehensive modern management tools to deliver programs in a systematic, monitored and outcomes focused manner.

Medical management programs additionally bring to bear expertise in behavior change that increases yield over standard clinical trial approaches, by targeting key levers in human behavior modification. (Prochaska, Bandura)

Health Plan CMO

I have $5 million more in my budget this year for reimbursing medical services. I thought I would spend it on a new program for wellness health risk assessment and/or oncology disease management.

You want me to increase coverage for diabetes education. Why should I do that instead of the other two things?

Sound a little like you need a go bag here too?

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The Business Case: Why do you do it?

Evidence based literature, as seen in www.guidelines.gov suggests it is the optimal thing to do.

AADE supports/accelerates the logic of disease management Government mandates Demands by the payer/business/consultant community Financial effect

Lower effort is more expensive Estimated economic impact from econometric attempts Trade off between value of accreditation and lower costs Social goals. It is a worthy thing to do.

Multidimensional Categories of Impact

Can you relate your impact across a broader spectrum in a value statement?

Does your organization use a “Balanced Scorecard” approach?

Categories: Operational Clinical Financial Productivity Intangible Social/Political

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AADE Define minimum data set of diabetes education outcomes Identify appropriate measurements Create an outcomes measurement tool to facilitate collection of

education specific outcomes Proof of concept for educator and program tools

Add the following Demonstrate economic value to patients and organizations who

used the services of AADE members Link the changes in behavior created with desirable clinical and

economic outcomes.

DSME Standards and Outcomes

Things to Consider: AADE7TM

Healthy eating Being active Monitoring Taking medication Problem solving Healthy coping Reducing risk

How do these things meet the CMO’s needs?

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Health Care Outcomes Continuum

Immediate Outcomes

LearningKnowledge

Skill Acquisition

BehaviorChange

Intermediate Outcomes

Improved Clinical

Indicators

Post-Intermediate

Outcomes

Improved Health Status

Long Term Outcomes

DSME Outcomes Measures

Revenues and Costs

Revenues: Direct Sources of Revenue Understanding coding and billing Sales of consulting services Sales of materials Web page fees or advertising Grants, research, and donations

Revenues: Indirect Sources of Revenue Value of risk reduction: Edington model

Dee Edington approach and risk tiers Long term care cost aversion

Glycohemoglobin vs changes in A/K

Costs: Direct costs Salaries Equipment Supplies

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The Bureaucracy : Resources from AADE

On Line Webcast and similar materials www.diabeteseducator.org

Private Payor and Medicare Coverage Medical policy Coverage policy Payment policy Appeals and special case items

Coding for Diabetes Education CPT Codes

E&M services Incident to a visit Devices and therapy/training

HCPCS Codes ICD9CM Codes Billing for Devices and Related Therapies

AADE. Diabetes Education Services: Reimbursement Tips for Primary Care Practices. 2008

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Diabetes - COHORT - Risk Profile -- Edington model

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Taking the number of individuals in each risk group, and multiplying times the PMPM for that group, costs are lower when compared to what might have happened if the group had stayed at the original risk level and incurred costs at that risk level in the new period.

Lo Mod High Sum Lo Mod High Stay same Actual

Lo 230 180 192 1,085 $541 $477 $2,208 $586,985 $895,529

Mod 175 353 136 664 $438 $354 $1,821 $235,056 $449,268

High 213 156 217 586 $668 $655 $2,838 $1,663,068 $860,310

Sum       2335       $2,485,109 $2,205,107

Outcomes: Integration of Diabetes Education and Disease Management

Friedman et al: Programs with comprehensive, diabetes disease management can result in substantially improved patient outcomes. (American College of Physicians Online; http://www.acponline.org/clinical_information/journals_ publications/ecp/augsep98/diabmgmt.htm)

Sidorov et al: Incorporating diabetes education into disease management programs can, in the short-term, yield significant improvements in glycemic control in patients being treated for diabetes. (Am J Manag Care. 2000 Nov;6(11):1217-26. )

McCullough et al: Patient and provider satisfaction improved as did rates of retinal eye screening, documented foot examinations, testing for microalbuminuria and hemoglobin A1C. (American College of Physicians Online; http://www.acponline.org/clinical_information/journals_publications/ecp/augsep98/population.htm)

Rothman et al: Diabetes education led to improvement in diabetes knowledge and satisfaction. The American Journal of Medicine® (Am J Med. 2005 Dec;118(12):1444-5; author reply 1445-6)

Greisinger et al: Diabetes education sessions reduced risk of hospitalization risk in patients with controlled blood glucose levels. (Dis Manag. 2004 Winter;7(4):325-32)

Imputing Savings

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Specific Activity or Outcome

Economic Refernce within Guidelines

Scientific Finding Linking Clinical and Economics

Health Plan’s ImpactCommercial

Health Plans Impact Medicare

Population Affected

Financial Impact

Increase the pct who receive nephropathy screening

Perkins, et al. NEJM 348: 2286-03. 2003.

CRF can essentially be prevented if gotten early.$53, 860 PMPY.Prevelance of nephropathy is 30% in DM

Increases rate screening from 52.07 to 60.4%, a 42% change.

Increased screening from 60.1 to 62.28%, a 2.18% change.

2515 additional screened commercial, 456 Medicare

$28, 707, 565

Any other ideas?

Case found that not following post partum protocols for gestational diabetes contributes to increased cost, and that diabetes education can play a role.

Diabetes Educ. 32(6): 877-86 Nov-Dec 2006 DSME can reduce DM costs within 1 yr in Medicaid

populations Balumarugan et al Diabetes Educ. 32(6): 893-900 Nov-Dec

2006 The literature supports the notion that diabetic

education, coupled with DM programs, can be highly effective.

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Return on Investment in Medical ManagementP

= P

roba

bili

ty o

f O

utco

me

$$$ Profitability/Impact of the Initiative

SoftHard Intangible

Conclusions

58

What’s In Your Go Bag?

A brief PowerPoint overview of what you do. 5 slides max.

An economic impact analysis of your area on the corporate functions and/or your customers. 5 slides max.

Samples of achievements in the past 12 months. 3 slides max.

Microsoft project plan for creating impact in the next 12 months. One page.

Your budget and financial plan for next year. One page. Back pocket -- Your CV

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Questions?

References

61

Bibliography – Used in Presentation

Fetterolf, D.. "Commentary: Presenting the Value of Medical Quality to Nonclinical Senior Management and Boards of Directors.." American Journal of Medical Quality. (18)1. Jan/Feb 2003. pp. 10-14.

Fetterolf, D. and West, R."The Business Case for Quality: Combining Medical Literature Research with Health Plan Data to Establish Value for Nonclinical Managers.." American Journal of Medical Quality. (19)2. Mar/Apr 2004. pp. 48-55.

Tufte, Edward. The Visual Display of Quantitative Information. Graphics Press. 1997.

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EDUCATIONAL OBJECTIVES I. Articulate approaches and strategies that can be used to demonstrate that diabetes

education is worthwhile. a. Where to find references b. How to reference key points from the literature to your advantage

II. Describe your services in terms that are used by payers. a. return on investment ("ROI") b. value c. cost-effectiveness

III. Use compelling arguments for increased access to and appropriate reimbursement of diabetes self-management education/training.

CONTENT OUTLINE I. Articulate approaches and strategies that can be used to demonstrate that diabetes

education is worthwhile. a. Where to find references b. How to reference key points from the literature to your advantage

II. Describe and present your services in terms that are used by payers. a. return on investment ("ROI") b. value c. cost-effectiveness

III. Use compelling arguments for increased access to and appropriate reimbursement of diabetes self-management education/training. 67

68

Slide Set Information

Author: Don Fetterolf, MD, MBA, FACP Executive Vice President, Health Intelligence Matria Healthcare, Inc. 1850 Parkway Place, 12th Floor Marietta, GA 30067 Phone: 770-767-7074 Email: Don_Fetterolf@matria.com

filename: AADE 080805 vx.ppt date: August 2008. date of this printout: April 11, 2023