Feasibility Studies: The Key to Evaluating Expansion OpportunityWritten by By Phillip Laux, MS
Continued from page 1
TCTM Service AreaPopulationOHS Utilization RateTCTM Projected Volume Primary TCTM™211,0122.76582 Secondary TCTM™76,0883.22245 * The primary TCTM utilization rates can differ from secondary TCTM. Utilization rates can be obtained through most state healthcare agencies or reports from third party data collection companies. Following a thorough market assessment, a cardiovascular operational review provided senior management with a detailed summary of current clinical area capability and what would be required for expansion. The operational analysis reviewed existing equipment, ancillary services capacity, staffing, and workflow processes. In addition, all future cardiac expansion needs were identified in a facility plan designed to provide a clinically and technically advanced program. The “state of art” design, One Stop Post Op™ was chosen by this facility to provide a new approach to post surgery care and a distinct competitive advantage. The One Stop Post Op model allows cardiovascular patient to remain in same room from admission to discharge. The nursing care level adapts to accommodate changing patient needs. The next step was to develop an accurate financial assessment of proposed expansion. The financial assessment was developed with historical information sources and assumptions for sensitivity and impact modeling. The finance department provided information on payor mix, reimbursement, salary, supply and indirect expense, capital investment, and projected facility expansion costs. Due to vulnerability of health care environment, senior management challenged financial model to test impact of various cardiac expansion scenarios. Return on investment of each scenario was analyzed and evaluated to determine profitability and margins. The demand projections were basis for financial model to produce a financial summary and following financial statements: Revenue & Expense, Cash Flow, Balance Sheet, and Revenue. The financial summary provided senior management with a five year pro forma projecting average return on investment and payback period for cardiac expansion project. In this instance, five year average ROI was 20.4% and projected payback period at 5.61 years. The Cardiovascular Expansion Feasibility Study provided senior management with a concise overview of needs of patients and community that hospital served. Feedback and guidance from medical staff was solicited and considered before a decision to proceed was made as physician support and acceptance is vital to program success. A through due diligence to accurately estimate level of resources, both operational and capital was essential to process and permitted organization to carefully evaluate financial viability of expanding services. In essence, study enabled key stakeholders to strategically decide on a course of action that could have a significant short-term effect and impact organization’s long-range future position as an acute care provider. The community based hospital in this case study approved cardiovascular expansion project and used feasibility study in multiple ways. They were able to document need and identify an underserved population as support for state application for a CON, feasibility study provided documentation necessary to secure financing and provided a “road map” for implementation of project. The report was used as a guide often during preplanning and start-up phase and after implementation of interventional cardiology and open heart surgery as a benchmark for review against actual program performance. Conclusion Hospitals experiencing increasing levels of financial and market risk are turning to feasibility studies to determine if they should offer new or expanded services. This case study analysis is an overview and discusses thoroughness of entire feasibility process. The process proved to be essential to this hospital’s strategic financial planning. Organizations, making substantial investments to expand into unfamiliar territory cannot make sound business decisions without proper tools. The cost of a feasibility study is a relatively small expenditure in light of overall project cost, but hospitals are finding it to be essential and vital to expansion success.
Phillip Laux, MS is the finance manager with Health Care Visions, Ltd a leading cardiac consulting firm. He earned his Master of Science in Management and Technology from Carlow University in 2000 and Bachelor of Arts in Administration from the University of Pittsburgh in 1994. Phillip has over 8 years of financial reporting, statistical analysis, revenue modeling for hospitals and physicians.
| | Peripheral Vascular Care: Should You Have a "Vascular Center"?Written by Barbara Sallo, RN, MBA
Continued from page 1
In addition to patient entrance and medical staff/exam location there are a number of additional components located in areas throughout hospital that provide services for PVD patient: 1.The Noninvasive Lab: ideally located in or close to Vascular Center, performs a comprehensive range of testing to diagnosis PVD, and should provide same day testing with rapid report turnaround, utilizing a dedicated staff. It is advisable for Noninvasive Lab to be accredited by Intersocietal Commission for Accreditation of Vascular Lab and/or American College of Radiology Accreditation. 2.Magnetic Resonance Angiography: a diagnostic tool for PVD that has patient benefit of not requiring contrast use and few procedural side effects. The equipment requires specialized software and personnel education. A new type of contrast (MS-325) to be released next year will offer additional imaging potential. 3.Radiology Suite: provides diagnostic and intervention procedures and advanced imaging quality. It is still considered “Gold Standard” for diagnostic testing, invasive procedures using both radiation and iodine based contrast. Procedures are performed typically by interventional radiologists. 4.Cardiac Catheterization Lab: typically used for cardiac procedures, however, underutilized labs may provide accommodation of advanced imaging for PV catheter based procedures. Labs with high cardiac volumes may prohibit PVD procedures and non cardiology practitioners are not always made welcome. 5.Operating Room: can be equipped to provide advanced imaging for catheter based minimally invasive procedures, should involve vascular surgeon in imaging choices, fixed equipment may limit room flexibility, sterile environment offers advantages for PVD procedures, supplies of stents and catheters should be controlled/coordinated with radiology and cath lab 6.Wound Healing Center: PVD is a common diagnosis for patients with non healing wounds. These patients may utilize services of wound center resulting in need for good coordination between Vascular Center and Wound Center if they not located within same department. What are Staffing Considerations of a Vascular Center? A number of physician disciplines have experience and involvement with vascular care. Today, we are seeing emergence of Vascular Medicine Specialist. This physician often has a background in family practice and/or internal medicine. They can serve as Medical Director of Vascular Center. This individual determines appropriate referral of patients to most appropriate sub specialist and maintains continuum of care process with daily rounding on all inpatients. The Vascular Medicine Specialist which is most common at academic medical centers can serve as attending physician for Interventional Radiologists. They also can be responsible for reading and reporting on vascular tests. While this physician staff model is growing in popularity, historically many different types of physicians have been in charge of patients’ PV care as shown in Exhibit 4. The nursing and technical staff has had a “home grown” tendency as it has only been of late that rationale for dedicated, trained and focused staff has taken off. The role and function of personnel vary from hospital to hospital but some distinct models are developing as shown in Exhibit 5. What is Revenue Associated with PVD Care? If PVD services are provided in existing surgery and interventional radiology suites, no additional capital costs can be expected. The expansion of catheter-based care in cath lab to include peripheral vascular interventions will give rise to additional expenses. Imaging requirements for PVD patient may require new equipment purchases but many hospitals have been able to use existing coronary cameras. Specialized supplies are also required. Staff education and training must be expanded to include peripheral procedure techniques and potential PV complications. Revenue from PVD care provides opportunity for healthy margins for hospitals. Medicare contribution margins for vascular DRGs compare favorably with cardiac DRG margins. Across all vascular DRGs average contribution margin (revenue less direct costs) is more than 30 percent (Source: Market Insights, Inc., San Francisco; Cardiovascular Roundtable analysis 1999). While there are no statistics on revenue generating figures for interventional radiologists and cardiologists treating PVD, a recent survey provides that information on vascular surgeons. Results from a survey of 1,200 hospital CFOs reveals that vascular surgeons generate an average of $2.2 million in revenue—derived from referrals and associated treatments—for their affiliate hospitals each year as show in Exhibit 6. Where to Go to from Here? Cardiovascular care is big business. This year alone, American Heart Association anticipates that $329 billion will be spent on this patient population. While PVD portion of total is significantly smaller than cardiac portion, patients are same. Peripheral vascular care is an essential component of full service cardiovascular care. There is no question that number of PVD patients is growing and these patients are underserved today. Hospitals must decide how to best care for this population. One of first steps is compiling a PVD dedicated business plan that covers: Market size/opportunity Competitive environment/issues Scope of service Physician specialties/medical coverage Clinical operations model Marketing and outreach initiatives Financial requirements/assumptions Structure/governance/ownership Conditions for success Implementation recommendations and timeline With growing trend toward healthcare self-education supported through press and Internet, public is becoming increasingly aware of potential dangers of untreated vascular disease. Quality of life has taken on new meaning and older population will continue to seek healthcare resources that will enable them to maintain active lifestyles. Be prepared for baby boomers to seek out and demand assessment and treatment of peripheral vascular problems.
Barbara Sallo, RN, MBA is the President of Health Care Visions, Ltd. a cardiovascular consulting firm based in Pittsburgh, Pennsylvania. The firm brings extensive knowledge and expertise in this area of clinical care. Health Care Visions, Ltd. has assisted a multitude of hospitals in all phases of cardiovascular programs from market assessments, program assessments and feasibility studies to business planning and implementation.
|
