overview - invacare · • homefill oxygen system cost = $1,999/33 = $60.58/month • oxygen...
TRANSCRIPT
Overview
• Early O2 and HME payments afforded high labor and service intensity with excellent profit
• Over the last 20+ years oxygen and other HME payments have been significantly decreased
• Operational costs have increased steadily in the same 20 year period, with particular increases in delivery & delivery related costs
• Modern O2 users are more stable, active and ambulatory…and more demanding
Overview
Demand for home O2 therapy is increasing, as is the demand for ambulatory systems
National Competitive Bidding (NCB) and other payment reduction initiatives continue to push reimbursement lower
The HME industry is relatively immature with few standardized process and accurate benchmarks
Technology offers cost shifting and total cost reductions without compromising service and care
Hypothesis
• Despite the changing reimbursement and continued operational cost challenges, home O2 can be provided in a clinically sound, patient focused, operationally efficient and cost beneficial manner
Competitive Bidding Metropolitan Statistical Areas (MSA’s) - Round 1.2
Charlotte, NC$122.12
Cincinnati, OH$106.60
Cleveland, OH$103.00
Dallas, TX$123.00
Miami, FL$125.00
Orlando, FL$115.00
Pittsburg, PA$102.84
Riverside, CA$122.90
Kansas City, MO$125.00
Stationary Concentrator (E1390): $175.79 $116.16 (- 33%)
Portable Oxygen (E0431): $28.77 $20.81 (- 27%)
O2 Generating Portable Equip. (K0738): $51.63 $41.88 (- 18%)
Key Operational Cost Metrics
Wages Over a 10 years period, average wages have increased
approximately 35%1
Fuel prices have more than doubled over the last decade Peaked in 2008 but increasing again in 2012 as crude
prices are rising Health insurance premiums have nearly tripled
over the last decade2
Vehicle maintenance expenses have increased Maintenance & repair
Freight services (UPS, FedEx) have increased
1Social Security Agency; national wage index 20102Kaiser Family Foundation 2010 Annual Summary of Employer Health Benefits
Valued Added or Non-Value Added?
• Non-value added (NVA) can be defined as:
– An activity that generates zero or negative return on an investment of resources that can be eliminated without impairing the process
• Simplified
– If you stop doing it, no one cares and nothing changes…it is NVA
– Example:
• Monthly or quarterly concentrator purity checks
NVA: The Enemy of Efficiency
• Home oxygen service is plagued with expensive NVA activities
• Many of the “services” grew from marketing strategies and sales related behaviors
– Not based in science or outcomes
– Cultural beliefs
• Most of the process related to portable gas delivery (of any type) are NVA
– Don’t mistake delivery for care and service
The Cascade of O2 Delivery Associated Events
Customer Service Order intake Keystroke work order
Order processing Pick & pull, staging for delivery Lot & serialized tracking
Loaded & routed Call family, schedule delivery
Delivery to home Signed delivery ticket, pick up empty cylinders
Return to warehouse/stock Dirty equipment returns; cylinders staged for refilling
Order confirmation System confirmation of delivery, lot & serial numbers and logistical
management of returned cylinders Cylinder refilling process Internal or external
Filled cylinders staged, ready for use
Cost of Providing Home O21
Delivery
21%
Preparation and
Return,
Disposables, and
Scheduled
Maintenance
12%
Other Operating
and Overhead
Costs
21%
Patient
Assessment,
Training, Education
and Monitoring
9%
Intake and
Customer Service
6%
Unscheduled
Repairs and
Maintenance
3%
System Acquisition
28%
1Morrison Informatics. A Comprehensive Cost Study of Medicare Home Oxygen. June 2006
Delivery is Not Care
• Elimination of routine O2 delivery is not the elimination of care & service
– Reallocation of technician & clinician time
• Identify value-added processes
– Clinical interventions that produce improved outcomes. Ex: disease management that drive compliance to therapy, reduced readmissions, etc.
– Clinician supported marketing & sales efforts
• Local conferences, CEU programs
Financial Model
Cost Assumptions:• Concentrator cost = $450/36 = $12.50/month• Cylinder cost = $24/cylinder x 16 = $384/36 = $10.66/month• HomeFill Oxygen System cost = $1,999/33 = $60.58/month• Oxygen contents cost
$3.00/cylinder Average patient uses 8 cylinders/month Oxygen content = $24/month
• Cost per delivery = $60Reimbursement Assumptions (NCB round 1 rates):• E1390 Concentrator = $103.00• E0431 Cylinder delivery = $20.00• K0738 OGPE = $40.00• Cylinder delivery monthly total = $123.00• OGPE monthly total = $143.00
Financial Model
Cylinder Delivery OGPE
Reimbursement $123.00 $143.00
Concentrator/OGPE Cost $12.50 $60.58
Cylinder Cost $10.66 $0.00
Content Cost $24.00 $0.00
Delivery Cost $60.00 $5.001
Total Cost $107.16 $65.58
Monthly Profit $15.84 $77.42
1. Assumes initial set up visit and annual visits afterwards
Summary
Home oxygen therapy is a mature but steadily growing business
Despite reimbursement and other regulatory pressures, demand for ambulatory O2 systems is growing
Change is a constant in the health care industry Eliminating NVA activities and getting lean is
essential in any maturing industry OGPE technologies offer operationally efficient
and clinically sound options and are the key to surviving and thriving today and in the future