Return On Investment (ROI) for a Model RN/CHW Practice Raymond K. Neff, ScD Mark T. Lubberts RN, MSN Spectrum Health Healthier Communities July 19, 2016 2
Principal Objectives 1. Define Return on Investment 2. Describe methods to obtain ROI 3. State examples from a model CHW/RN Practice 4. Discussion and reflection 3
Mission: To improve the health of the communities we serve Health system Hospitals Medical group Health plan Healthier Communities Outputs vs Outcomes 4
Core Health Program One year, home visiting program for underserved populations in Kent County with Heart Failure and/or Diabetes. CHW/RN Teams Program design targeted individuals that: Have economic, demographic, or cultural barriers to healthcare Are struggling with selfmanagement, but have the ability Right place care 5
Triple Aim 1. Improved Health Care patient centered, equity, community connection 2. Improved Health Clinical and behavioral improvements, risk avoidance, preventative care, Population Health 3. Cost Effective improved coordination, reduce inefficiency and avoid miscommunication 6
Return On Investment (ROI) ROI = Net profit/cost of Program ROI = Cost avoidance/cost of Program 7
ROI ROI > 1.0 may be interpreted as indicating that a program or intervention is worthwhile in terms of cost efficiency An ROI of 3 means that the program s cost efficiency is 3 times its operational costs Higher ROI values are better than lower ones 8
ROI May be used to rank a set of programs as part of a resource allocation decision Alternative methods - ROI may be computed as a projection of potential costs under hypothetical (i.e., what-if) conditions 9
Calculation Numerator values: (ED and Inpatient avoidance) Charges for actual services rendered to a program participant Revenues as actually collected from payer(s) from those services Denominator values: Cost of program Variables 10
Data Considerations Time period Population (age, gender, race, etc) Diagnosis Asthma vs Diabetes Payer commercial vs Medicare /Medicaid Location urban vs rural Type of service ED, Inpatient, Urgent Care Revenue vs Charges 11
Two Methods Method 1 Actual charges Method 2 Average charges 12
Method 1- Actual Charges Simpler Actual charges of all healthcare services during the period before and during Look backward in time starting at the time of program enrollment for a period length exactly equal in days to the time during the program 13
CPI Enrollment Date Location Diagnosis Payer Before Visit Date Before Charges Before Revenue Before 92431258 7/22/2014 Core Health Heart Failure/Diabetes Blue Cross 9/19/2013 $13,408.82 $10,177.74 92431258 7/22/2014 Core Health Heart Failure/Diabetes Blue Cross 6/20/2014 $33,029.15 $23,549.60 Sum B $46,437.97 $33,727.34 CPI Enrollment Date Location Diagnosis Payer During Visit Date During Charges During Revenue During 92431258 7/22/2014 Core Health Heart Failure/Diabetes Blue Care Network 12/9/2014 $6,133.69 $4,630.29 92431258 7/22/2014 Core Health Heart Failure/Diabetes Priority Health - Medicaid 1/26/2015 $11,877.64 $7,261.84 Sum D $18,011.33 $11,892.13 Cost Avoidance = (Sum D Sum B) $28,426.64 $21,835.21 14
ROI =(sum D sum B)/C Numerator is the amount of Cost Avoidance attributable to the program (either as charges or revenues) Denominator is the Program s Operations Cost for a fixed budgetary period, say one year 15
Summary Data Average Charges and Length of Stay for Hospital Inpatient Admissions Diabetes only program participants (n=73) Measure Before Program During Program Savings Percentage Reduction Sum of Charges for Inpatient Admissions $11,120 $8,529 $2,591 23.2% Length of Stay (in days) 1.2 0.7 0.5 39.8% 16
Summary Data Average Revenue and Length of Stay for Hospital Inpatient Admissions Diabetes only program participants (n=73) Measure Before Program During Program Savings Percentage Reduction Sum of Revenues for Inpatient Admissions $4,468 $3,509 $958 21.4% Length of Stay (in days) 1.2 0.7 0.5 39.8% 17
ROI based on Charges Source of Savings for Charges Before During Sum(D-B) Total Charges for inpatient admissions Percent Reduction $1,579,832 $969,589 $610,242 38.6% Total Charges for ED utilization $221,337 $263,394 $-42,057-19.0% Total Savings for Charges $568,185 Total Operating Expenses for Core Health: April 1, 2015-March 31, 2016 = $176,063.44 ROI C = $568,185/$176,063.44 = $3.22 18
Average Revenue and Length of Stay for Hospital Inpatient Admissions Diabetes only program participants (n=73) Measure Sum of Revenues for Inpatient Admissions Average Revenue Per Inpatient Admission ROI based on Revenues Before Program During Program Savings Percentage Reduction $4,468 $3,509 $958 21.4% $2,889 $2,929 ($40) -1.4% Length of Stay (in days) 1.2 0.7 0.5 39.8% ROI R = $220,708/$176,063.44 = $1.25 19
Method 1 Actual Charges ROI =(sum D sum B)/C Numerator is the amount of Cost Avoidance attributable to the program (either as charges or revenues) Denominator is the Program s Operations Cost 20
Method 2 Average Charges Have the Finance Department determine overall average charges and revenues for all inpatients and ED utilization for the subpopulation that is reflected in the type of patients recruiting into your specific program Apply exclusion and inclusion criteria to define the subpopulation 21
Emergency Department Derivation of Service Charges Per Patient from Baseline Data for Specific Sub-Populations of Underserved and Uninsured for Applicable Time Period (July 1, 2010 June 30, 2011) Emergency Department Visits # of patient s (A) Hospital Charges (B) Service Charges per patient (B)/(A) Service Charges Reimbursed by Medicaid/Medic are or from Self- Pay (C) Service Charges Reimburse d or Self-Pay per patient (C)/(A) Hospital Charges Not Reimburs ed (D) = (B)- (C) Service Charges Reimburs ed per patient (D)/(A) Diabetes only 482 $223,486 $464 $151,605 $315 $71,881 $149 Heart Failure w/wo Diabetes 107 $61,606 $576 $56,192 $525 $5,414 $51 22
Inpatient Admission Derivation of Service Charges Per Patient from Baseline Data for Specific Sub-Populations of Underserved and Uninsured for Applicable Time Period (July 1, 2010 June 30, 2011) Inpatient Admissions # of patient s (A) Hospital Costs (B) Service Costs (per patient) (B)/(A) Service Costs Reimbursed by Medicaid/Medi care or from Self-Pay (C) Service Costs Reimburs ed or Self- Pay (per patient) (C)/(A) Hospital Costs Not Reimbursed (D) = (B)- (C) Service Costs Not Reimburs ed (per patient) (D)/(A) Diabetes only 545 $5,232,316 $9,601 $4,501,077 $8,259 $731,239 $1,342 23 Heart Failure w/wo Diabetes 1,114 $13,212,146 $11,860 $11,878,818 $10,663 $1,333,328 $1,197
Emergency Department 24
Inpatient Admissions 25
Method 2 ROI ROI = ($131,666 + $2,434,688)/ $1,972,464 = $2,566,354 / $1,972,464 = 1.30 26
VARIATIONS IN RETURN ON INVESTMENT Diabetes (w/wo HF) Cost Avoidance Heart Failure (w/wo Diabetes) Cost Avoidance ED Visits $115,118 $118,656 Inpatient Admissions $1,522,719 $3,230,664 Number of patients 458 196 ED Visits (per patient) $251 $605 Inpatient Admissions (per patient) $3,325 $16,483 ROI - ED Visits $0.08 $0.20 ROI - Inpatient Admissions $1.10 $5.47 27 Program Budget Per Patient $3,016
ROI General Method ROI = Estimated cost avoidance attributable to intervention Actual costs of program intervention 28
29 Questions??