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SAN FRANCISCO – With a little number crunching and strategizing, pediatric practices can provide immunizations to their patients without getting financially soaked, according to Chip Hart, a pediatric practice management consultant.
He discussed various pitfalls and challenges when it comes to the business aspects of providing immunizations, and offered some solutions at the annual meeting of the American Academy of Pediatrics.
His company has collected data suggesting that as of 2015, revenue from vaccine products made up fully 21% of all revenue in private pediatric practices, a near doubling from the value in 2003. As a consultant today, “I try to find out how practices manage the vaccines because, after staff, it’s your biggest expense,” he noted.
Spotting hidden costs
In its business case, the AAP determined that direct and indirect expenses for vaccine product total to 17% to 28% of the cost. In other words, “if you buy a vaccine for $100, you need to collect somewhere between $117 and $128, on average, just to break even,” Mr. Hart explained.
What accounts for that extra expense? Carrying costs that are commonly overlooked, namely, those myriad costs of providing immunizations that accrue before a child is given any vaccine and that can add up quickly.
They include the costs of the refrigerator and examination table; the sharps and waste management; insurance to cover vaccine loss; vaccine wastage and denials; and opportunity cost, that is, the cost of not being able to invest the funds tied up in vaccine sitting in the fridge – some $75,000 to $100,000 for the average practice – elsewhere.
Add to those personnel costs; costs related to activities such as ordering, inventory and storage management, registry input, and temperature monitoring; and malpractice coverage. And not to be forgotten is the inability to collect payment for some vaccines.
“You’re not paid for carrying costs. Unfortunately, society or the American health care system has given pediatricians this burden,” Mr. Hart commented.
Doing the math
Pediatricians can get a handle on the true costs to their practice of providing immunizations by spending just an hour or two crunching some key numbers, according to Mr. Hart.
They should start by ascertaining those carrying costs. For example, assuming hazardous waste costs run $3,500 per year, vaccines account for 50% of the waste, and the practice gives 13,000 vaccines annually, it averages out to $0.13 per vaccine.
Similar calculations are done to determine the costs of administering the shot (preparing, administering, counseling, billing, recording, putting it in the registry, and so on), arriving at about $12 per vaccine. The largest share here comes from clinicians, so calculations focus on their hourly wages and the percent of their time spent on vaccines.
Next is a calculation of the cost of the vaccine product. This calculation starts with the hypothetical invoiced amount of $100, factors in units that are wasted or go unpaid (at least 5%, according to AAP data), and tacks on the distributed carrying costs, arriving finally at an actual cost to the practice of about $120.
Last, all of these data are loaded into a payer-specific spreadsheet. Commonly, payers go by Red Book values and will therefore cover, for example, only $98 of that $100 invoice cost of the vaccine. But they will pay roughly $27 for its administration.
Taken together, the math suggests the practice bears a total cost of $132 for this vaccine ($120 for the product and $12 for its administration) but will collect only $125 from this payer ($98 for the product and $27 for its administration).
“You see over and over again that the payers underpay for the vaccines and pay you well for the administration, and it very often makes up the difference,” Mr. Hart noted. “But even with that boost on the admin side, this practice is losing money on this vaccine – they get $125 for something that costs them $132.”
Practices strapped for time can use some estimates in their spreadsheets instead, he said. “If you use an assumption of 25% over your invoice” – roughly the midpoint between the AAP’s 17% and 28% – “and $12 to $15 on your administration” – based on the value found in a study using time-motion analysis (Pediatrics. 2009 Dec;124 Suppl 5:S492-8) – “for your costs, all you need is your fee schedule, and you can make a spreadsheet to find out whether it makes sense to continue giving immunizations to this payer’s kids.”
Striving for profitability
“In all honesty, from what I see nationally, pediatricians break even on vaccines. It’s a break-even situation, on average,” Mr. Hart commented. “But who wants to be average? No one. We want you to actually be profitable with vaccines because it’s the only way you can continue to give them.”
Practices can take a variety of steps toward that goal. First, they should negotiate payments with payers, using the AAP’s business case and other literature. “Don’t listen to anybody” who says you can’t negotiate, he stressed. “You can negotiate. I don’t care if you’re a solo practice or you’ve just opened. If a payer says they can’t negotiate, they are fibbing to you. The only payers who don’t negotiate are the state Medicaid and Medicare. Everyone else can and does.”
Second, practices should ensure that they are using proper Current Procedural Terminology codes when submitting claims to payers to maximize payment.
“I still see too many practices who don’t bill for these properly,” Mr. Hart commented. “If you have a typical pediatric practice and you use more 90471s and 90472s than 90460s and 90461s, and frankly, if [the latter] aren’t two to three to four to five times more common… you are losing a lot of money.”
Third, practices should join or confirm that they belong to an effective group purchasing organization (GPO) to reduce their vaccine costs, with data suggesting that doing so will save the practice $10,000 to $15,000 per physician each year.
“If you are solo, out on the furthest edge of Alaska, you can see Russia from your house, and you have no leverage whatsoever, you can sign up with one of these GPOs and you are as strong as any hospital,” he said. The AAP helps here as well, by maintaining a list of GPOs on its website.
Fourth, practices should review their vaccine delivery work flow to look for money leaks, Mr. Hart advised. For example, physicians who get caught up in tasks such as ordering and inventorying are losing revenue that could come in from seeing patients.
“This is the sort of thing that affects your bottom line substantially. And it’s exactly the sort of thing that is an invisible expense: the business owners don’t consider their time as part of the expense of doing this administration,” he said.
Additionally, legacy procedures should be re-evaluated to see if they can be streamlined. Gains also may be made here from investing in better technology, such as a refrigerator with a glass door that saves time by allowing ready identification of vaccines.
Finally, practices should join the AAP’s Section on Administration and Practice Management (SOAPM) as it’s an invaluable, interactive resource in this area when questions or challenges arise, Mr. Hart recommended.
[email protected]
SAN FRANCISCO – With a little number crunching and strategizing, pediatric practices can provide immunizations to their patients without getting financially soaked, according to Chip Hart, a pediatric practice management consultant.
He discussed various pitfalls and challenges when it comes to the business aspects of providing immunizations, and offered some solutions at the annual meeting of the American Academy of Pediatrics.
His company has collected data suggesting that as of 2015, revenue from vaccine products made up fully 21% of all revenue in private pediatric practices, a near doubling from the value in 2003. As a consultant today, “I try to find out how practices manage the vaccines because, after staff, it’s your biggest expense,” he noted.
Spotting hidden costs
In its business case, the AAP determined that direct and indirect expenses for vaccine product total to 17% to 28% of the cost. In other words, “if you buy a vaccine for $100, you need to collect somewhere between $117 and $128, on average, just to break even,” Mr. Hart explained.
What accounts for that extra expense? Carrying costs that are commonly overlooked, namely, those myriad costs of providing immunizations that accrue before a child is given any vaccine and that can add up quickly.
They include the costs of the refrigerator and examination table; the sharps and waste management; insurance to cover vaccine loss; vaccine wastage and denials; and opportunity cost, that is, the cost of not being able to invest the funds tied up in vaccine sitting in the fridge – some $75,000 to $100,000 for the average practice – elsewhere.
Add to those personnel costs; costs related to activities such as ordering, inventory and storage management, registry input, and temperature monitoring; and malpractice coverage. And not to be forgotten is the inability to collect payment for some vaccines.
“You’re not paid for carrying costs. Unfortunately, society or the American health care system has given pediatricians this burden,” Mr. Hart commented.
Doing the math
Pediatricians can get a handle on the true costs to their practice of providing immunizations by spending just an hour or two crunching some key numbers, according to Mr. Hart.
They should start by ascertaining those carrying costs. For example, assuming hazardous waste costs run $3,500 per year, vaccines account for 50% of the waste, and the practice gives 13,000 vaccines annually, it averages out to $0.13 per vaccine.
Similar calculations are done to determine the costs of administering the shot (preparing, administering, counseling, billing, recording, putting it in the registry, and so on), arriving at about $12 per vaccine. The largest share here comes from clinicians, so calculations focus on their hourly wages and the percent of their time spent on vaccines.
Next is a calculation of the cost of the vaccine product. This calculation starts with the hypothetical invoiced amount of $100, factors in units that are wasted or go unpaid (at least 5%, according to AAP data), and tacks on the distributed carrying costs, arriving finally at an actual cost to the practice of about $120.
Last, all of these data are loaded into a payer-specific spreadsheet. Commonly, payers go by Red Book values and will therefore cover, for example, only $98 of that $100 invoice cost of the vaccine. But they will pay roughly $27 for its administration.
Taken together, the math suggests the practice bears a total cost of $132 for this vaccine ($120 for the product and $12 for its administration) but will collect only $125 from this payer ($98 for the product and $27 for its administration).
“You see over and over again that the payers underpay for the vaccines and pay you well for the administration, and it very often makes up the difference,” Mr. Hart noted. “But even with that boost on the admin side, this practice is losing money on this vaccine – they get $125 for something that costs them $132.”
Practices strapped for time can use some estimates in their spreadsheets instead, he said. “If you use an assumption of 25% over your invoice” – roughly the midpoint between the AAP’s 17% and 28% – “and $12 to $15 on your administration” – based on the value found in a study using time-motion analysis (Pediatrics. 2009 Dec;124 Suppl 5:S492-8) – “for your costs, all you need is your fee schedule, and you can make a spreadsheet to find out whether it makes sense to continue giving immunizations to this payer’s kids.”
Striving for profitability
“In all honesty, from what I see nationally, pediatricians break even on vaccines. It’s a break-even situation, on average,” Mr. Hart commented. “But who wants to be average? No one. We want you to actually be profitable with vaccines because it’s the only way you can continue to give them.”
Practices can take a variety of steps toward that goal. First, they should negotiate payments with payers, using the AAP’s business case and other literature. “Don’t listen to anybody” who says you can’t negotiate, he stressed. “You can negotiate. I don’t care if you’re a solo practice or you’ve just opened. If a payer says they can’t negotiate, they are fibbing to you. The only payers who don’t negotiate are the state Medicaid and Medicare. Everyone else can and does.”
Second, practices should ensure that they are using proper Current Procedural Terminology codes when submitting claims to payers to maximize payment.
“I still see too many practices who don’t bill for these properly,” Mr. Hart commented. “If you have a typical pediatric practice and you use more 90471s and 90472s than 90460s and 90461s, and frankly, if [the latter] aren’t two to three to four to five times more common… you are losing a lot of money.”
Third, practices should join or confirm that they belong to an effective group purchasing organization (GPO) to reduce their vaccine costs, with data suggesting that doing so will save the practice $10,000 to $15,000 per physician each year.
“If you are solo, out on the furthest edge of Alaska, you can see Russia from your house, and you have no leverage whatsoever, you can sign up with one of these GPOs and you are as strong as any hospital,” he said. The AAP helps here as well, by maintaining a list of GPOs on its website.
Fourth, practices should review their vaccine delivery work flow to look for money leaks, Mr. Hart advised. For example, physicians who get caught up in tasks such as ordering and inventorying are losing revenue that could come in from seeing patients.
“This is the sort of thing that affects your bottom line substantially. And it’s exactly the sort of thing that is an invisible expense: the business owners don’t consider their time as part of the expense of doing this administration,” he said.
Additionally, legacy procedures should be re-evaluated to see if they can be streamlined. Gains also may be made here from investing in better technology, such as a refrigerator with a glass door that saves time by allowing ready identification of vaccines.
Finally, practices should join the AAP’s Section on Administration and Practice Management (SOAPM) as it’s an invaluable, interactive resource in this area when questions or challenges arise, Mr. Hart recommended.
[email protected]
SAN FRANCISCO – With a little number crunching and strategizing, pediatric practices can provide immunizations to their patients without getting financially soaked, according to Chip Hart, a pediatric practice management consultant.
He discussed various pitfalls and challenges when it comes to the business aspects of providing immunizations, and offered some solutions at the annual meeting of the American Academy of Pediatrics.
His company has collected data suggesting that as of 2015, revenue from vaccine products made up fully 21% of all revenue in private pediatric practices, a near doubling from the value in 2003. As a consultant today, “I try to find out how practices manage the vaccines because, after staff, it’s your biggest expense,” he noted.
Spotting hidden costs
In its business case, the AAP determined that direct and indirect expenses for vaccine product total to 17% to 28% of the cost. In other words, “if you buy a vaccine for $100, you need to collect somewhere between $117 and $128, on average, just to break even,” Mr. Hart explained.
What accounts for that extra expense? Carrying costs that are commonly overlooked, namely, those myriad costs of providing immunizations that accrue before a child is given any vaccine and that can add up quickly.
They include the costs of the refrigerator and examination table; the sharps and waste management; insurance to cover vaccine loss; vaccine wastage and denials; and opportunity cost, that is, the cost of not being able to invest the funds tied up in vaccine sitting in the fridge – some $75,000 to $100,000 for the average practice – elsewhere.
Add to those personnel costs; costs related to activities such as ordering, inventory and storage management, registry input, and temperature monitoring; and malpractice coverage. And not to be forgotten is the inability to collect payment for some vaccines.
“You’re not paid for carrying costs. Unfortunately, society or the American health care system has given pediatricians this burden,” Mr. Hart commented.
Doing the math
Pediatricians can get a handle on the true costs to their practice of providing immunizations by spending just an hour or two crunching some key numbers, according to Mr. Hart.
They should start by ascertaining those carrying costs. For example, assuming hazardous waste costs run $3,500 per year, vaccines account for 50% of the waste, and the practice gives 13,000 vaccines annually, it averages out to $0.13 per vaccine.
Similar calculations are done to determine the costs of administering the shot (preparing, administering, counseling, billing, recording, putting it in the registry, and so on), arriving at about $12 per vaccine. The largest share here comes from clinicians, so calculations focus on their hourly wages and the percent of their time spent on vaccines.
Next is a calculation of the cost of the vaccine product. This calculation starts with the hypothetical invoiced amount of $100, factors in units that are wasted or go unpaid (at least 5%, according to AAP data), and tacks on the distributed carrying costs, arriving finally at an actual cost to the practice of about $120.
Last, all of these data are loaded into a payer-specific spreadsheet. Commonly, payers go by Red Book values and will therefore cover, for example, only $98 of that $100 invoice cost of the vaccine. But they will pay roughly $27 for its administration.
Taken together, the math suggests the practice bears a total cost of $132 for this vaccine ($120 for the product and $12 for its administration) but will collect only $125 from this payer ($98 for the product and $27 for its administration).
“You see over and over again that the payers underpay for the vaccines and pay you well for the administration, and it very often makes up the difference,” Mr. Hart noted. “But even with that boost on the admin side, this practice is losing money on this vaccine – they get $125 for something that costs them $132.”
Practices strapped for time can use some estimates in their spreadsheets instead, he said. “If you use an assumption of 25% over your invoice” – roughly the midpoint between the AAP’s 17% and 28% – “and $12 to $15 on your administration” – based on the value found in a study using time-motion analysis (Pediatrics. 2009 Dec;124 Suppl 5:S492-8) – “for your costs, all you need is your fee schedule, and you can make a spreadsheet to find out whether it makes sense to continue giving immunizations to this payer’s kids.”
Striving for profitability
“In all honesty, from what I see nationally, pediatricians break even on vaccines. It’s a break-even situation, on average,” Mr. Hart commented. “But who wants to be average? No one. We want you to actually be profitable with vaccines because it’s the only way you can continue to give them.”
Practices can take a variety of steps toward that goal. First, they should negotiate payments with payers, using the AAP’s business case and other literature. “Don’t listen to anybody” who says you can’t negotiate, he stressed. “You can negotiate. I don’t care if you’re a solo practice or you’ve just opened. If a payer says they can’t negotiate, they are fibbing to you. The only payers who don’t negotiate are the state Medicaid and Medicare. Everyone else can and does.”
Second, practices should ensure that they are using proper Current Procedural Terminology codes when submitting claims to payers to maximize payment.
“I still see too many practices who don’t bill for these properly,” Mr. Hart commented. “If you have a typical pediatric practice and you use more 90471s and 90472s than 90460s and 90461s, and frankly, if [the latter] aren’t two to three to four to five times more common… you are losing a lot of money.”
Third, practices should join or confirm that they belong to an effective group purchasing organization (GPO) to reduce their vaccine costs, with data suggesting that doing so will save the practice $10,000 to $15,000 per physician each year.
“If you are solo, out on the furthest edge of Alaska, you can see Russia from your house, and you have no leverage whatsoever, you can sign up with one of these GPOs and you are as strong as any hospital,” he said. The AAP helps here as well, by maintaining a list of GPOs on its website.
Fourth, practices should review their vaccine delivery work flow to look for money leaks, Mr. Hart advised. For example, physicians who get caught up in tasks such as ordering and inventorying are losing revenue that could come in from seeing patients.
“This is the sort of thing that affects your bottom line substantially. And it’s exactly the sort of thing that is an invisible expense: the business owners don’t consider their time as part of the expense of doing this administration,” he said.
Additionally, legacy procedures should be re-evaluated to see if they can be streamlined. Gains also may be made here from investing in better technology, such as a refrigerator with a glass door that saves time by allowing ready identification of vaccines.
Finally, practices should join the AAP’s Section on Administration and Practice Management (SOAPM) as it’s an invaluable, interactive resource in this area when questions or challenges arise, Mr. Hart recommended.
[email protected]
AT AAP 16