Business and clinical solutions for the home care industry Volume VIIl, No.2 March - April 2006 Inside this issue: 6 10 ! ! Measuring home telehealth ROI Associates’ Corner Developing a Business Plan for Home Telehealth By Charissa Ashman Y our home care agency recently purchased telehealth equipment with grant funds. Initial staff are trained, you have identified patients to sample and a few policies and procedures have been drafted. Good work! But have you considered how you will sustain your program next year? Three years from now? What will be your organization’s key indicators of success? Breaking even? Increased market share? Increased cost efficiencies? Something else? Home telehealth technologies are really “tools” to improve how you do business. Studies have demonstrated many clinical and economic benefits of telehealth. Nevertheless, two questions that agencies using telehealth need to ask are: (1) how do we make telehealth work in our organization and (2) how do we measure its effectiveness? Developing a business plan for home telehealth is a key tool for: • monitoring the progress and growth of this service in your organization; • determining your financial needs; • learning more about your market; and • securing additional grant funding and/or revenue sources from payers. Drafting the business plan Let’s begin by outlining some key components of a business plan and things to consider: ! The Executive Summary is often considered the most crucial part of the plan because it is the first section readers see. The Executive Summary captures the highlights from each of the other sections and functions as a brief synopsis of your business plan. The Executive Summary should be written last enabling you to write and review each section of the plan before determining which key points to include in the Summary. A strong Executive Summary is concise and engaging. ! The Business Description includes specific information about your organization including: • mission; • vision, goals and objectives for your telehealth project; • agency summary; Kelly Mueller of VNA of Albany demonstrates the usage of monitoring equipment to a client. • telehealth services you will provide (monitoring, video) and to what patient type(s); • competitive advantage — what makes your organization unique from others; and • organizations you are partnering with. ! The Vision is a picture of what your organization will look like using telehealth technologies and how these technologies will benefit your organization and its many stakeholders. A “stakeholder analysis” identifies the types of people your telehealth project will serve including: patients, caregivers, schools, hospitals, physicians, payers, policymakers, employees, telehealth vendors, public health departments and others. Continued on page 3 TRIAGE noun • The process of sorting the injured and providing complete care CLINICAL OPERATIONS OPERATIONS Holtz Rubenstein Reminick Healthcare Consulting Group FINANCIAL Emergency room doctors quickly assess patients and then provide complete care. The healthcare professionals of Holtz Rubenstein Reminick quickly assess the needs of its clients and then provide complete operational, clinical and financial advice. We are one of the only firms that offers a TRIAGE of services that includes a nurse on staff, in addition to our operational and financial specialists. Our TRIAGE of services is not limited to any one sector of healthcare. We have assisted hospitals, nursing homes, home care agencies and small businesses. Our services help new businesses get the momentum to be successful and make the right connections through our business networking. We can grow businesses through merger and acquisition as well as assisting in the sale of a business operation. The Healthcare Consulting team at Holtz Rubenstein Reminick is experienced, knowledgeable, and forthcoming -- leaving no stone unturned when analyzing a situation. We won't make you sit in the waiting room for hours. Contact Gary Carpenter at (631) 752-7400 ext. 383 or GCarpenter@hrrllp.com. Long Island: WORLDWIDE REPRESENTATION BY 125 Baylis Road, Melville, NY 11747 631.752.7400 New York City: 1430 Broadway, New York, NY 10018 212.697.6900 www.hrrllp.com C E R T I F I E D P U B L I C A C C O U N TA N T S . BUSINESS ADVISERS. Continued from page 1 Continued on page 5 Meeting the Needs of the Healthcare Industry Statewide Certificates of Need Compliance Credentialing Employee Benefits Employment Litigation Financing Capital District John M. Bagyi 518-533-3000 Central New York Larry P. Malfitano 315-218-8000 Visit us at www.bsk.com HIPAA Joint Ventures Labor Relations Licensing Litigation Medicare & Medicaid Long Island Terry O’Neil 516-267-6300 New York City Louis P. DiLorenzo 646-253-2300 Mergers & Acquisitions OSHA Tax Issues Third Party Reimbursement Transactional Matters Union Avoidance Northern New York John D. Allen 315-343-9116 Western New York Robert A. Doren 716-566-2800 BOND, SCHOENECK & KING, PLLC ATTORNEYS AT LAW NEW YORK FLORIDA KANSAS March - April 2006 ! Industry Analysis provides an overview of the local and national outlook for the home care industry, including trends, major players and growth. Home care is the fastest growing sector in health care today. The total home care market is valued at around $30 billion while the current penetration of home telehealth is approximately 20 percent of the market. An understanding of your local home care market, major competitors and growth trends is essential. Likewise, consider the barriers to getting telehealth services started, including some of the following: • regulatory and legal; • patient acceptance; • staff acceptance; • high capital costs; • physician buy-in; and • training and marketing. ! Market Analysis is an in-depth assessment of the primary target market for your telehealth product(s) or service(s), including geographic location, demographics (age, sex, race, incidence/prevalence of medical conditions, customer loyalty, etc.), your target market’s needs and how these needs are being met. Is there a market for telehealth? What telehealth services are being delivered and to what types of patients? You will need to examine local market penetration and competition to make demand projections for your target market. A target market consists of that segment or segments of the market to which a company chooses to market its product(s) or service(s). ! Market Segmentation is a process of dividing the total market into homogeneous groups (geographic, demographic, by disease type, etc.) where each group consists of customers sharing a set of common characteristics different from other groups. A Niche Market is a focused portion of a market where an organization tries to address a need for a product or service that is not being addressed by the competition. Future trends you may want to investigate for your telehealth services include usage for chronic disease management as well as health and wellness. ! ! Your long-term financial and business goals and objectives may include, but are not limited to, profitability; increase in the number of services you can deliver and/or bill for; reducing the cost of delivering services; improving employee productivity; competitive position; and social responsibility. Tools for the Trade Telehealth Plan 3 Tools for the Trade ! 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(sizes 39”, 42”, 48”, 54”, 60”). • 10 airflow settings allow custom pressure selection for individual patient’s needs. • Pulsate mode decreases airflow by 50% for 30 seconds allowing patient to submerge into mattress therefore reducing interface pressure. • Static function to allow treatment of patient. • Microprocessor pressure sensing technology produces low pressure support. • 2 CPR valves for rapid deflation. • Warranty: 15 month. As low as $ 1399 99 Mason Medical Products Division of MRC Industries, Inc. 85 Denton Ave, New Hyde Park New York 11040 Tel: 800/233-4454 Ext.516 • Fax: 516/328-6622 As low as $ 179999 Continued from page 1 " The Financial Plan determines whether or not your product or service is viable, which helps establish whether or not you will secure future funding. The financial plan consists of the income statement, the cash flow projection, the balance sheet and brief summary of the three statements. You will need to identify revenue sources and expenses associated with Continued on page 9 SWOT Analysis STRENGTHS OPPORTUNITIES Purchasing power Wellness population Breadth & depth of services Large private pay market Reputation Community linkages to leverage technology growth WEAKNESSES THREATS Losing market share Increased competition Staffing shortage Staffing shortage in local market Lack of technology Regulatory & reimbursement changes conditions for your organization) and Threats (potentially unfavorable conditions for you organization). The SWOT Analysis serves as a basis for the development of marketing plans. It is important to obtain the opinions of your stakeholders (particularly patients), ideally through surveys or focus groups. " The Marketing Plan explains how you’re going to get customers (patients, physicians, payers, others) to use or “accept” your telehealth products and/or services. The marketing plan includes the following pieces: a unique value proposition, pricing strategy, the DECHANTS FUGLEIN & JOHNSON, LLP CERTIFIED PUBLIC ACCOUNTANTS Small Businesses Nonprofit Organizations Real Estate & Construction Professional Medical & Legal Practices Accounting & Auditing • Retirement Planning • Computer Consulting & Systems • Business Management Advisory Services • Financial Planning • Tax Services • Estates & Trust • Business Evaluations 4 Avis Drive, Latham, New York 12110-2674 Tel: (518) 785-1211 Fax: (518) 785-4480 March - April 2006 " Perform a “SWOT” (Strengths, Reputation Weaknesses, Opportunities, Threats) Analysis, which is a scan of the internal and external environment and an important part of the strategic planning process. Environmental factors internal to an organization are classified as Strengths (what you can do) and Weaknesses (what you cannot do) and those external to your organization are classified as Opportunities (potentially favorable " target audiences with whom you wish to communicate, " Competitive Analysis identifies your competitive advertising and promotion plans, and the vehicles you advantage by determining who your competitors are will use for promotion. and to gain a thorough understanding of your own product(s) or service(s) against your competitors. List all the factors that you Competitive Analysis believe are important to your customers. FACTOR Us Agency A Agency B Customer For each factor, rate how you think you Importance stack up according to your customers (1Service low to 5-highly rated). Then analyze each Quality competitor to see how you think they stack up. In the last column, assess how Market Share important each competitive factor is to Expertise your customers. Reliability Tools for the Trade Telehealth Plan 5 Tools for the Trade Home telehealth: ! What’s your ROI? March - April 2006 6 By Sam Burgiss O ne way that home telehealth can return its investment is by reducing trips to the home while actually providing better care through more frequent contact with the patient. To determine the benefit of saving a trip to the home, you can calculate the cost of the salary and benefits for the nurse during the travel time to and from the home. Then, add the cost of transportation such as a vehicle. In Tennessee where I am, the cost of travel to and from the home was calculated in 2000 as an average of $49.33 per visit based on the data from 444 visits*. Since this evaluation was made six years ago, we will use the estimated cost of $60 per trip in the following discussion. For this calculation, we will estimate that you could save one trip per week for each patient that has telehealth services in their home. This is probably a high number because home care agencies average in the range of one to three in-person visits per patient per week. Let’s suppose you purchase equipment at a cost of $5,000 per home. How long will it take for you to pay for the equipment based on the saved trips to the home? The answer is 83 weeks ($5,000/$60) or a year and seven months. After this period of time, you will start receiving a return on investment on the equipment purchased. Keep in mind that most financial people consider the life of electronic equipment to be three to five years. Your time to pay for the equipment in the above example is half of a threeyear life. Certainly, if you purchase equipment for half of the above cost ($2,500) your time to pay for the equipment would be 42 weeks. But, if your trips saved per week are reduced to an average of 0.5 per patient, your time to pay for equipment with a cost of $2,500 would increase to 83 weeks. This concept can be applied to leased equipment and to telehealth services that you may purchase monthly. Several scenarios for return on investment and the background of this concept were presented in an article in Home Healthcare Nurse in 2004 (Burgiss S, Dimmick S. Home telehealth business planning and cost analysis. Home Healthcare Nurse, 22(10):715-17). *Dimmick S, Mustaleski C, Burgiss S., Welsh T. A case study of benefits and potential savings in rural home telemedicine. Home Healthcare Nurse, 18(2):125-35. 99 Troy Road, Suite 200, East, Greenbush, NY 12061 Tel: 518/463-1118 Email: hcp@nyshcp.org www.nyshcp.org Managing Editor: Rich Landers Dr. Sam Burgiss is a part-time, postretirement Professor of Radiology at the University of Tennessee Graduate School of Medicine in Knoxville and a consultant and writer in the national telehealth arena. Previously, he was the Director of the University of Tennessee Telehealth Network for 11 years during which time the program provided over 100,000 patient encounters and began its home telehealth program in 1998. He has contributed more than 140 invited lectures, papers, and book chapters on telehealth. Tools for the Trade is published bimonthly by the New York State Association of Health Care Providers, Inc. (HCP). Copyright © 2006 New York State Association of Health Care Providers, Inc. All rights reserved. Tools for the Trade ! Who can handle all your insurance needs with only one phone call AND has exclusive home care programs for HCP members? March - April 2006 7 THE PRM COMPANIES Administrators for the Health Care Providers Self-Insurance Trust (HCPSIT) and the health care providers disability benefits program workers’ compensation and disability benefits Let the staff who know and understand home care provide ALL of your insurance needs: Workers’ Compensation Professional Liability General Liability Director’s & Officer’s Liability Employee Fidelity Bonds NY State Disability Business Property Coverage Non-Owned Automobile Surety Bonds Umbrella/Excess Call us today and find out what we can do for you! 800/958-7475 or 518/456-5557 visit our website: www.prm.com John Conroy, Ext. 233 Harry Gregory, Ext. 242 Marianne Purcell, Ext. 223 Tools for the Trade ! Can HCP help us with workers’ compensation insurance? March - April 2006 8 Sure, we’ve been doing it for 12 years! The Health Care Providers Self-Insurance Trust has been saving participants between 30 to 40 percent* on workers’ compensation costs since 1993. Just as important, participants get the tools, education, personal attention, and data they need to lower their experience rating and save even more! Find out how much you could save! Call Program Risk Management, program administrator for the Trust, at 800/958-7475. Ask for John Conroy (ext. 233) or Harry Gregory (ext. 242) and get a free, no-obligation quote! the health care providers self-insurance trust Visit us on the web and download our newsletter and Annual Report. www.nyshcp.org/self-insurance.shtml *on average Continued from page 5 The final pieces B G CORE Benefits Group, Inc. ♦ Employee Benefits Group Medical, Dental, Disability Plans Consumer Driven Health Plans (FSA, MSA, HRA) ♦ Group Long Term Care Plans ♦ Pension and 401(k) Plans 330 South Service Road Suite 120 Melville, NY 11747 Tel: (631) 574-4991 Fax: (631) 574-4992 Email: corebengrp@aol.com For a home care agency, telehealth has the potential to reduce the cost of personnel services (travel, visit time and benefits) and related expenses (mileage, gasoline, supplies, etc.), thereby reducing the average cost per patient visit. By reducing in-home visits, agencies can increase their patient caseloads. This can only occur if an agency develops a visit reduction protocol to reduce in-person visits made. Of equal importance is ensuring that equipment is being used and is not “sitting on the shelf,” thereby decreasing an agency’s return on investment. Ensure measurement of your agency’s performance against the financial and operational targets set in your business plan. Positive outcomes support future reimbursement and additional services within your community, and educate your stakeholders about cost savings and success. If you have never written a business plan, try to network with other providers and identify how they sustain their programs, financed their equipment and what they are doing. ! Charissa Ashman, RN, MBA is Administrator of Grants & Demonstrations for HCP/CHC. March - April 2006 C regulatory; equipment maintenance; warranties) • Equipment • Depreciation (the cost of telehealth equipment is typically amortized over three to five years) Once you have your operating expenses list complete, the total will show you what it will cost you to keep your telehealth service running each month (Revenue - Expenses = Profit/Loss). The Cash Flow Projection demonstrates the cash anticipated to be generated or expended over a defined period in the future. It is important to perform some sensitivity analyses to determine how variations in estimates affect your projection. Sensitivity analysis is a technique that indicates exactly how much a project’s profitability will change in response to a given change in a single input variable, other things held constant. For example, your profitability may be very sensitive to changes in volume or reimbursement so it is good to project different percentages. Don’t be too optimistic at first! You need to track telehealth as a separate service to identify whether or not your organization will break even (income covering costs). ! your telehealth project for your income statement. Sources of revenue may include government or foundation grants, corporate contributions, payer reimbursement, private pay revenue, membership fees for your telehealth network, training fees (if you offer distance learning), expense offsets and universal service funding. Non-recurring revenue is for a specific period only (grants, legislative “earmarks,” etc.) and usually assists with start-up costs. Recurring revenue is ongoing revenue that generally covers project operating costs. Start-up costs of getting telehealth service up and running consist primarily of equipment costs — whether you buy, lease or rent; training consultant costs; and regulatory costs including policies, procedures and legal advisory. Ongoing expenses (fixed and variable) include some of the following: • Personnel (administrative, clinical and support) • Operating (supplies; telecommunications; ASP model; marketing; training; compliance/ Tools for the Trade Telehealth Plan 9 ! March - April 2006 Associates’ Tools for the Trade 10 Corner Gerald (“Jerry”) Halpern, attorney with the law firm of Meltzer, Lippe, Goldstein & Breitstone, LLP of Mineola, has been heavily involved with home care and HCP since the 1970s. A former HCP Associate Member of the Year, he is legal counsel for the HCP Long Island Chapter and a number of HCP members. Tell us about your early involvement in home care. That started about 1977. I had run for public office and one of the people involved in the campaign was Hazel Ross. She called me after I lost the election saying she was working for an agency, the owner was having some Jerry Halpern at HCP’s 2004 problems with a landlord, and asked if I could help her. The owner was Norma Home Care Lobby Day. Recco. Norma suggested that HCP, which was half a dozen agencies on Long Island, could use a good lawyer and I was interested. I met with the group and was engaged to prepare a plain English contract for Suffolk Department of Social Services (DSS) Medicaid. We came up with a great contract, got the blessing of DSS, sent it up to Albany to the State DSS and the attorney there said “wonderful contract but the State will never approve it.” That was my first experience with home care and I’ve been involved ever since. What differences come to mind in comparing today’s home care environment to 25 years ago? It is much more intensely regulated now. Back then, the proprietary agencies (and the initial HCP group was all proprietaries) could not have contracts with HRA (New York City Human Resources Administration), and there were no proprietary certified agencies. We worked with HCP and the State Legislature to formulate the first licensure law and change the regulations to permit proprietary agencies to become certified. That was a lengthy and interesting process that ultimately led to the two-tier system that we have in New York. I think that was the point when the industry really took off. It was much more rational and simple in the early days. I remember Department of Health (DOH) people talking about the process they would use — statements of deficiency and plans of correction — and we were assured it would not be punitive, this was just to help agencies provide better service and understand the regulations, but that has not turned out to be the case. There has been a proliferation in agencies all over the State and the caseload has increased tremendously. There are more frequent claims of fraud and abuse, many involving clerical errors or billing errors which are hardly intentional or fraudulent. There has been a change in the government’s attitude toward home care — it’s split between an awareness that home care really is cost-effective and more effective in terms of delivery of care, but on the other hand there’s a parallel feeling that it’s costing government too much money. What kind of questions or concerns are your clients asking these days? Claims by government agencies of fraud and abuse are a real concern. It’s no longer coming from DOH on the State level, but counties are looking to reduce costs and one of the ways they’re finding is to label as fraud or abuse activities that are not — they may be erroneous, but certainly not deliberate, overbilling. Living wage laws have also been a concern in Nassau, Suffolk, Westchester and New York City. When you point out that contractors would love to pay their aides more money but are limited by the money they get in reimbursement, the latter part of that message gets lost and that’s a real concern. What do you like to do outside the office? Go to meetings, especially HCP meetings. My partner, Roni Glaser, and I have been going to HCP’s Lobby Days in Albany for several years and the annual conferences as well. I’ve made a lot of friends among the people in the industry and over the years it’s become a growing part of my practice. I still do other things, but health care and particularly home care is a very, very substantial part of my practice. ! Associates’ Corner, a regular feature of Tools For The Trade, highlights a particular HCP Associate Member.