American Association of Diabetes Educators

1. “The Business Case for Diabetes Education” American Association ofDiabetes Educators Donald Fetterolf, MD, MBA, FACP Executive Vice President, Health Intelligence Matria Healthcare, Inc.

2. Outline • Overview • Introduction • Basic business principles • Presenting your ideas • Making the business case for diabetes education • Conclusion • References

3. Overview

4. 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?

5. 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.

6. 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?

7. 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?

8. The Beginning…

9. 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.

10. 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.

11. 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

12. Basic Business Concepts Accounting

13. 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.

14. 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.

15. Income Statements Form of a Regular Income Statement Revenues Revenues $ 100 Expenses 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?

16. Income Statement: ABC Medical CorporationIncome Statement For 2002 Revenues Patient Revenues $ 1,575,000 Consulting Income 85,000 Investment Income 2,000 Total Revenues $ 1,662,000 Expenses 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.

17. Income Statements Form of a Contribution Income Statement PMPY* Total Members Affected 50,000 Revenues Variable Revenues $ 7 $350,000 Expenses Variable Expenses/Unit$ -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?

18. Income Statements: Activity Based Cost Accounting – “ABC” Example of activity-based cost accounting. Product A B C Total Revenue Variable Revenue $50 $50 $20 $120 Expense Variable Expense $30 $ 5 $ 5 $ 40 Fixed Expense $15 $30 $ 5 $ 50 Profit (Loss) $ 5 $15 $10 $ 30

19. Basic Business Concepts Finance

20. Finance • 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

21. Other General Principles

22. Other General Principles • Creation of business plans • Project management • Financial pro forma statements • Organizational psychology • Know when to get and ask for help

23. 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

24. Business Planning

25. Financial Pro Forma

26. Presentations

27. 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.

28. Tip: Don’t Get Lost in Your Stuff! • 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.

29. Tips: Insights • 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.

30. Operational Clinical Economic/Financial Intangible and Social Productivity and workforce impacts Productivity Absenteeism Presenteeism Disability Anecdotal Developing the Value Proposition Create a multidimensional approach to economic return.

31. Tip: What 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?

32. Example: Problem Presentations • “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

33. Better • 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.

34. Actual Report Construction -- Tips from the Experts

35. Report Format • 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

36. Tip: Report Tips • 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.

38. Organizational Psychology

39. Tips: Identification with the Aggressor • 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.

40. Tips: Organizational Psychology • 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

41. End Results • “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.

42. Now, The Business Case for Diabetic Education

43. 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)

44. Health Plan CMO • 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?

45. The Business Case: Why do you do it? • Evidence based literature, as seen in www.guidelines.gov 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.

46. Multidimensional Categories of Impact • Can you relate your impact across a broader spectrum in a value statement? • Does your organization use a “Balanced Scorecard” approach? Categories: • Operational • Clinical • Financial • Productivity • Intangible • Social/Political

47. DSME Standards and Outcomes • 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.

48. Things to Consider: AADE7TM • Healthy eating • Being active • Monitoring • Taking medication • Problem solving • Healthy coping • Reducing risk • How do these things meet the CMO’s needs?

49. Immediate Outcomes Intermediate Outcomes Learning Knowledge Skill Acquisition Post-Intermediate Outcomes Behavior Change Long Term Outcomes Improved Clinical Indicators Improved Health Status DSME Outcomes Measures Health Care Outcomes Continuum

50. Revenues and Costs • 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