“The Business Case for Diabetes Education”. American Association of Diabetes Educators. Donald Fetterolf, MD, MBA, FACP Executive Vice President, Health Intelligence Matria Healthcare, Inc. Outline. Overview Introduction Basic business principles Presenting your ideas
“The Business Case for Diabetes Education”
American Association ofDiabetes Educators
Donald Fetterolf, MD, MBA, FACP
Executive Vice President, Health Intelligence
Matria Healthcare, Inc.
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.
What they Say
What they Do
“Maximize profit, minimize loss.”
Basic Business Concepts
Typical Forms of Financial Information
Source: Academy for Healthcare Management. Health Plan Finance and Risk Management. 1999.
Form of a Regular Income Statement
Variable Expenses$ 60
Fixed Expenses$ 20
Profit (Loss)$ 20
Important: Are you a profit center or a cost center? How are costs assigned to you?
Patient Revenues$ 1,575,000
Consulting Income 85,000
Investment Income 2,000
Total Revenues$ 1,662,000
Salary of Partners 853,347
Staff Wages 235,645
Laboratory Fees 32,583
Administrative Expenses 75,495
Interest Expense 3,453
Total Expenses $ 1,223,976
Net Income $ 438,024
Revenue means a bigger organization and more visibility for your boss.
Form of a Contribution Income Statement
Members Affected 50,000
Variable Revenues$ 7$350,000
Variable Expenses/Unit$ -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?
Example of activity-based cost accounting.
Expense $30 $ 5 $ 5 $ 40
Fixed Expense $15 $30 $ 5 $ 50
Profit (Loss) $ 5 $15$10 $ 30
Basic Business Concepts
Other General Principles
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.
Intangible and Social
Productivity and workforce impacts
Create a multidimensional approach to economic return.
Actual Report Construction -- Tips from the Experts
Now, The Business Case for Diabetic Education
Long Term Outcomes
Improved Health Status
DSME Outcomes Measures
Diabetes - COHORT - Risk Profile -- Edington model
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.
P = Probability of Outcome
$$$ Profitability/Impact of the Initiative
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