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“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

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American association of diabetes educators l.jpg

“The Business Case for Diabetes Education”

American Association ofDiabetes Educators

Donald Fetterolf, MD, MBA, FACP

Executive Vice President, Health Intelligence

Matria Healthcare, Inc.

Outline l.jpg

  • Overview

  • Introduction

  • Basic business principles

  • Presenting your ideas

  • Making the business case for diabetes education

  • Conclusion

  • References

The go bag l.jpg
The Go Bag

  • What is a Go Bag?

    • Several bottles of water

    • A compass

    • A hunting knife

    • A bar of soap and some clean underwear

    • Several bags of trail mix

    • A roll of toilet paper

    • Your teddy bear

  • What is a Go Bag For?

    • Surviving the first week or two of the post-apocalypse

  • What is the business equivalent?

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Introduction: Case Study

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.

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The Issue: Making the Business Case

  • Making the business case to someone or some entity that you should be paid for your valuable services is difficult for anyone. Money is tight everywhere.

  • You were trained as a clinician, not a business person. So, how do you put a price on quality or clinical improvement? What is the strategy to convince a potential nonclinical payer of diabetic education services that they are worth it?

  • Do your services create a “value proposition” for your services? How do you construct the approach and the arguments for the government, health plans and clinics that create a compelling case in your favor in the mind of a business person?

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Your Business Go Bag

  • You will need to collect all that you will need to have for a rapid, no thought needed response when you encounter:

    • Takeover of your company/hospital and a sudden visit by the new CEO

    • Sudden loss of your job and the need to find a new one

    • Talking your boss into a 10% increase in your budget so you can “improve the quality of care”

  • So, what’s in your go bag?

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The Big Committee on Medical Management

What they Say

  • Patient education is very important to our company.

  • Education is something we do at the individual level.

  • Quality is the key ingredient to making our business a success.

  • You are asked to present the results of three weeks worth of your work with others developing the medical management programs at your company.

What they Do

  • “Could you do pretty much the same thing with less? Could you just not do them for us, and give us a lower price?”

  • “How much will all these initiatives inflate my costs?”

  • “We’ll get to your report as soon as we get done with the important financial pieces of the agenda.”

  • As you get up to speak, members of the board sneak a look at their watch. The CMO starts to look at his watch.

  • Understand what they do carries the most meaning.

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Are You Irrelevant, or Just Boring? Do you know…

  • Why are clinical staff often marginalized in the “management” role?

  • If presentations aren’t interesting, how are you viewed by senior management?

  • What happens to your budget when the company needs to make a cut?

  • It is important to recognize the forces in business that direct you and the forces needed to advance the cause of your profession. You ignore them at your peril.

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Understand the Problem: What they want you to do.

“Maximize profit, minimize loss.”

  • Generate more revenue

  • Lower PMPM costs

  • Reduce administrative overhead

  • Measurably raise patient care quality

  • Make them look good to somebody

  • Have real impact, not inconsequential activities

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Why Bother with Accounting?

  • It’s the language your boss speaks.

    • e.g. What is the ROI?

  • You won’t be a member of the “leadership team”.

  • They will take advantage of you if you don’t participate.

    • e.g. Internal cost transfers

  • You’ll go to jail if you don’t fill in the forms right.

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Financial Information and the Language of Business

Typical Forms of Financial Information

  • Financial statements

  • Annual reports

  • Budgets

  • Invoices

  • Bank statements

  • Sales forecast results

  • Financial forecasts

  • Claims payment records

  • Billed and paid premium records

  • General ledgers

  • Investment reports

  • Financial models

  • Cost accounting reports

  • Actual versus budget results for provider risk pools

  • Medical loss ratio and expense ratio reports

  • Utilization statistics reports

  • Payroll records

Accounting Concepts

  • Financial Accounting

    • Balance Sheet

    • Income Statement

    • Statement of Cash Flows

    • Management Letter

  • Managerial Accounting

    • Contribution Income Statement

    • Financial pro formas

  • Statutory Accounting

    • DOI Forms

  • Annual Statement

  • GAAP

Source: Academy for Healthcare Management. Health Plan Finance and Risk Management. 1999.

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Income Statements

Form of a Regular Income Statement


Revenues $ 100


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?

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Income Statement: ABC Medical CorporationIncome Statement For 2002


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

Insurance 23,453

Total Expenses $ 1,223,976

Net Income $ 438,024

Revenue means a bigger organization and more visibility for your boss.

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Income Statements

Form of a Contribution Income Statement

PMPY* Total

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?

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Income Statements: Activity Based Cost Accounting – “ABC”

Example of activity-based cost accounting.

Product A B C Total



Revenue $50 $50 $20 $120



Expense $30 $ 5 $ 5 $ 40

Fixed Expense $15 $30 $ 5 $ 50

Profit (Loss) $ 5 $15 $10 $ 30

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Basic Business Concepts “ABC”


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Finance “ABC”

  • Cost of Capital

    • Opportunity cost

  • Discounted Cash Flow Analysis

    • Future Value = Present Value x (1 + Interest Rate)

    • Net present value (NPV) calculations

  • Budgeting

    • Annual Budget

    • Capital Budget

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Other General Principles “ABC”

  • Creation of business plans

  • Project management

  • Financial pro forma statements

  • Organizational psychology

  • Know when to get and ask for help

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Key elements of a business plan, each typically described in a few paragraphs, include:

Business Plans

  • An overview of the industry or company and a description of any products that are being produced or are under consideration

  • An evaluation of the current market, including the advantages of the proposed initiative over competitors’ initiatives

  • A formal outline of the proposed initiative and the opportunities that it provides to the company

  • Marketing research that identifies the potential target market and the projected costs and revenues for the initiative

  • A formal design for implementing the initiative and a development schedule

  • An overall operations plan that uses standard project-management approaches

  • A profile of an accountable lead person and the credentials of the management and operations teams

  • An overview of the economics surrounding the business and the initiative including general profitability, sales potential, and so on.

  • Anticipated risks and problems that could result in less-than-optimal outcomes

  • Financing arrangements and pro forma financial statements that outline return and costs over a period of several years

  • Estimated contracts, terms, agreements, and other items that must be negotiated

  • Exit strategy: the process for ending or discontinuing the program

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Business Planning a few paragraphs, include:

Financial pro forma l.jpg
Financial Pro Forma a few paragraphs, include:

Presentations l.jpg

Presentations a few paragraphs, include:

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Presentation Advice From the Experts a few paragraphs, include:

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.

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Tip: Don’t Get Lost in Your Stuff! a few paragraphs, include:

  • Convert complex concepts into the elements of their world.

  • Your job is not to turn them into clinicians or statisticians. Your job is to interpret for them in their world what you are doing in yours, and why it is important to them.

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Tips: Insights a few paragraphs, include:

  • Don’t emphasize the fact you are highly trained, or very qualified. It makes you different.

  • Remove clinical or foreign technical words

    • e.g. glycohemoglobin, skedastic

  • Don’t use big words or sound too scholarly.

  • Focus on their number one objectives

  • Watch the unneeded detail. It goes in a report appendix.

  • No sudden surprises. They frighten easily. Slide in the bad news but be truthful and unbiased.

  • Don’t be intimidating.

  • Fetterolf’s First Rule: Assume nothing.

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Operational a few paragraphs, include:



Intangible and Social

Productivity and workforce impacts






Developing the Value Proposition

Create a multidimensional approach to economic return.

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Tip: What a few paragraphs, include:Not to Include in the Final Presentation to Senior Management.

  • Glycohemoglobin levels. Diabetic foot exams.

  • All things that are abbreviated with more than 3 letters.

  • 8 ways to do the ROI methodology

  • How would you explain this to a 15 year old boy in a way he would find interesting and compelling?

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Example: Problem Presentations a few paragraphs, include:

  • “Diabetic foot exams increased under our new program.” – Pointless clinical statistic

  • “We spent $1 million generating the HEDIS statistics this year.” – High cost for something that isn’t necessary anyway

  • “If we had more people in my area, we could really improve care.” – Adding still more resources to an already bloated concept

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Better a few paragraphs, include:

  • Our HEDIS measurement is now a necessary component of our NCQA quality accreditation. The Intergalactic Business Group on Health is comparing our results with ABC Health, our biggest competitor. (smugly) Ours are better in 7 of 10 areas.

  • Our scores have been improving, which will be useful marketing information.

  • Our scores are good compared with national benchmarks and our competitors, so if any one asks you, they are a good thing.

  • While the cost to produce this information is high at $1 million dollars, the result will assure our competitive position with respect to accreditation and compliance needs.

  • Actually, the value is higher – for every point we increase mammography rates alone for example, economists estimate that we will experience $500,000 less costs in breast cancer treatment over the next 5 years.

Report format l.jpg
Report Format a few paragraphs, include:

  • Executive Summary

    • 6 or 7 Bullet points

  • Analytic Pages

    • Graph

    • Data

    • Text

  • Summary and Conclusions

  • Recommendations

    • Choices and Solutions

  • Addenda

    • Methods

    • Codes used

    • Supporting material

Tip report tips l.jpg
Tip: Report Tips a few paragraphs, include:

  • Always have bullets in an executive summary. No more than six (eight max).

  • Short length reports, larger fonts.

  • Use primary colors.

  • No more than two bars on a bar graph.

  • Reading level at or below 12th grade level.

  • Make both “high level” and specific recommendations so they can chose what course of action they can comfortably claim is theirs.

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Organizational Psychology a few paragraphs, include:

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Tips: Identification with the Aggressor a few paragraphs, include:

  • Convert being a staffer discussing boring issues into being a co-executive solving the problems of the company with them.

  • Build in marketing for your presentation

    • Branding

    • Ease of use

    • The bathroom test

    • Ease of access to retrieve your report

  • Give them some slides for their boss; make your case easy to fund or present.

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Tips: Organizational Psychology a few paragraphs, include:

  • Brevity and concise reporting. Clarity is job 1.

  • Smile often but appropriately.

  • How can they use what you have to look good themselves?

  • How is your stuff more interesting than what they are thinking about.

  • Don’t EVER add to their problems without preparing solutions.

  • Tie what you are presenting into something they relate to:

    • media coverage

    • personal life

  • “Inside, you are their lap dog; outside you are their bull terrier.”

  • Keep track of what you told them previously

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End Results a few paragraphs, include:

  • “I’ve learned something about our complex business and its problems.

  • The quality program is advancing the company.

  • This person understands the issues well.

  • We needn’t worry - he handled the problems from last time.

  • I’m sure glad they are handling it.

  • You want someone three levels above you to be upset if you threaten to go.

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Connecting the Dots: the value of treating disease in a systematic way

  • The “evidence based medicine” literature forms the essential scientific underpinnings behind disease management interventions.

  • Evidence based literature solidly establishes that certain interventions produce significant economic value generally, in many cases, in excess of amount spent.

  • Economic value is defined broadly, to include administrative/operational, clinical quality, clinical utilization, and productivity outcomes as well as pure accounting “ROI”.

  • Medical management programs seek to mirror in the commercial arena activities that have been proven in larger multicenter, randomized trials.

  • Direct evidence exists linking the specific activities of disease management programs and clinical, financial and productivity outcomes in many areas and across many diseases.

  • Medical management programs use comprehensive modern management tools to deliver programs in a systematic, monitored and outcomes focused manner.

  • Medical management programs additionally bring to bear expertise in behavior change that increases yield over standard clinical trial approaches, by targeting key levers in human behavior modification. (Prochaska, Bandura)

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Health Plan CMO systematic way

  • I have $5 million more in my budget this year for reimbursing medical services. I thought I would spend it on a new program for wellness health risk assessment and/or oncology disease management.

  • You want me to increase coverage for diabetes education. Why should I do that instead of the other two things?

  • Sound a little like you need a go bag here too?

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The Business Case: Why do you do it? systematic way

  • Evidence based literature, as seen in suggests it is the optimal thing to do.

  • AADE supports/accelerates the logic of disease management

  • Government mandates

  • Demands by the payer/business/consultant community

  • Financial effect

    • Lower effort is more expensive

  • Estimated economic impact from econometric attempts

  • Trade off between value of accreditation and lower costs

  • Social goals. It is a worthy thing to do.

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Multidimensional Categories of Impact systematic way

  • Can you relate your impact across a broader spectrum in a value statement?

  • Does your organization use a “Balanced Scorecard” approach?


  • Operational

  • Clinical

  • Financial

  • Productivity

  • Intangible

  • Social/Political

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DSME Standards and Outcomes systematic way

  • AADE

    • Define minimum data set of diabetes education outcomes

    • Identify appropriate measurements

    • Create an outcomes measurement tool to facilitate collection of education specific outcomes

    • Proof of concept for educator and program tools

  • Add the following

    • Demonstrate economic value to patients and organizations who used the services of AADE members

    • Link the changes in behavior created with desirable clinical and economic outcomes.

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Things to Consider: AADE7 systematic wayTM

  • Healthy eating

  • Being active

  • Monitoring

  • Taking medication

  • Problem solving

  • Healthy coping

  • Reducing risk

  • How do these things meet the CMO’s needs?

Health care outcomes continuum l.jpg

Immediate Outcomes systematic way

Intermediate Outcomes



Skill Acquisition

Post-Intermediate Outcomes



Long Term Outcomes

Improved Clinical


Improved Health Status

DSME Outcomes Measures

Health Care Outcomes Continuum

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Revenues and Costs systematic way

  • Revenues: Direct Sources of Revenue

    • Understanding coding and billing

    • Sales of consulting services

    • Sales of materials

    • Web page fees or advertising

    • Grants, research, and donations

  • Revenues: Indirect Sources of Revenue

    • Value of risk reduction: Edington model

      • Dee Edington approach and risk tiers

    • Long term care cost aversion

      • Glycohemoglobin vs changes in A/K

  • Costs: Direct costs

    • Salaries

    • Equipment

    • Supplies

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The Bureaucracy : Resources from AADE systematic way

  • On Line Webcast and similar materials


  • Private Payor and Medicare Coverage

    • Medical policy

    • Coverage policy

    • Payment policy

    • Appeals and special case items

  • Coding for Diabetes Education

    • CPT Codes

      • E&M services

      • Incident to a visit

      • Devices and therapy/training

    • HCPCS Codes

    • ICD9CM Codes

    • Billing for Devices and Related Therapies

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Diabetes - COHORT - Risk Profile -- Edington model systematic way

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.


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Outcomes: Integration of Diabetes Education and Disease Management

  • Friedman et al: Programs with comprehensive, diabetes disease management can result in substantially improved patient outcomes. (American College of Physicians Online; publications/ecp/augsep98/diabmgmt.htm)

  • Sidorov et al: Incorporating diabetes education into disease management programs can, in the short-term, yield significant improvements in glycemic control in patients being treated for diabetes. (Am J Manag Care. 2000 Nov;6(11):1217-26. )

  • McCullough et al: Patient and provider satisfaction improved as did rates of retinal eye screening, documented foot examinations, testing for microalbuminuria and hemoglobin A1C. (American College of Physicians Online;

  • Rothman et al: Diabetes education led to improvement in diabetes knowledge and satisfaction. The American Journal of Medicine® (Am J Med. 2005 Dec;118(12):1444-5; author reply 1445-6)

  • Greisinger et al: Diabetes education sessions reduced risk of hospitalization risk in patients with controlled blood glucose levels. (Dis Manag. 2004 Winter;7(4):325-32)

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Imputing Savings Management

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Any other ideas? Management

  • Case found that not following post partum protocols for gestational diabetes contributes to increased cost, and that diabetes education can play a role.

    • Diabetes Educ. 32(6): 877-86 Nov-Dec 2006

  • DSME can reduce DM costs within 1 yr in Medicaid populations

    • Balumarugan et al Diabetes Educ. 32(6): 893-900 Nov-Dec 2006

  • The literature supports the notion that diabetic education, coupled with DM programs, can be highly effective.

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Return on Investment in Medical Management Management




P = Probability of Outcome

$$$ Profitability/Impact of the Initiative

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Conclusions Management

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What’s In Your Go Bag? Management

  • A brief PowerPoint overview of what you do. 5 slides max.

  • An economic impact analysis of your area on the corporate functions and/or your customers. 5 slides max.

  • Samples of achievements in the past 12 months. 3 slides max.

  • Microsoft project plan for creating impact in the next 12 months. One page.

  • Your budget and financial plan for next year. One page.

  • Back pocket -- Your CV

Questions l.jpg

Questions? Management

References l.jpg

References Management

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Bibliography – Used in Presentation Management

  • 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.

  • Fetterolf, D. and West, R."The Business Case for Quality: Combining Medical Literature Research with Health Plan Data to Establish Value for Nonclinical Managers.." American Journal of Medical Quality. (19)2. Mar/Apr 2004. pp. 48-55.

  • Tufte, Edward. The Visual Display of Quantitative Information. Graphics Press. 1997.

Bibliography l.jpg
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--Torrance, G. "Preferences for Health Outcomes and Cost-Utility Analysis." The American Journal of Managed Care. (3(Suppl)). 1997. pp. S8-S20.

--Walton, M. The Deming Management Method. New York, NY. Perigee Books. 1986.

--Weinstein, M., Siegel, J., et al. "Recommendations of the Panel on Cost-Effectiveness in Health and Medicine." JAMA. (276)15. October 16, 1996. pp. 1253-1258.Wessels, WJ. Economics. Second Edition 1993.

--Wessels, WJ. Economics. Barron’s Business Review Series. New York. 1993.

Educational objectives l.jpg

  • I. Articulate approaches and strategies that can be used to demonstrate that diabetes education is worthwhile.

    • a. Where to find references

    • b. How to reference key points from the literature to your advantage

  • II. Describe your services in terms that are used by payers.

    • a. return on investment ("ROI")

    • b. value

    • c. cost-effectiveness

  • III. Use compelling arguments for increased access to and appropriate reimbursement of diabetes self-management education/training.


  • I. Articulate approaches and strategies that can be used to demonstrate that diabetes education is worthwhile.

    • a. Where to find references

    • b. How to reference key points from the literature to your advantage

  • II. Describe and present your services in terms that are used by payers.

    • a. return on investment ("ROI")

    • b. value

    • c. cost-effectiveness

  • III. Use compelling arguments for increased access to and appropriate reimbursement of diabetes self-management education/training.

Slide set information l.jpg
Slide Set Information Management

  • Author: Don Fetterolf, MD, MBA, FACP

    • Executive Vice President, Health Intelligence

    • Matria Healthcare, Inc.

    • 1850 Parkway Place, 12th Floor

    • Marietta, GA 30067

    • Phone: 770-767-7074

    • Email:

  • filename: AADE 080805 vx.ppt

  • date: August 2008.

  • date of this printout: March 11, 2014