Business 101 Utilizing an ROI Model to Evaluate Telemedicine ...

EdithForgeATA Business and Finance Sig WebinarBusiness 101: Utilizing an ROI model to evaluate telemedicinegrowth strategies14 February 2011

The Future is Now:Adopting Business 101 strategies todevelop distance delivery sustainabilityplanning and projections.Telehealth: Business 101 >p.2 of 28

Business Practices inDistance DeliveryStrategies?• Case Study forTelemedicine• Telemedicine programshave outgrown ability tothrive utilizing existing “oneoff” funding models• New Players in theemerging market,understand Business ModelsTelehealth: Business 101 >p.3 of 28Electronic Health Care Delivery

Stages for BusinessLife-Cycle•Emergence•Growth•Maturity•Regeneration•DeclineTelehealth: Business 101 >p.4 of 28Electronic Health Care Delivery

Business Life-CycleStage Characteristics• Emergence• GrowthTelehealth: Business 101 >p.5 of 28Electronic Health Care Delivery

Business DevelopmentComponents• Start-Up Costs+ Timeline+ Ongoing Expenses+ Income Potential= RETURN ON INVESTMENT (ROI)Telehealth: Business 101 >p.6 of 28Telehealth becomes mainstream

What can Business Life-Cyclebring to the Telemedicinediscussion?BusinessModeling:ROI Components• Revenue Modeling• Cost Modeling• Pricing Modeling• Return on Investment Modeling(ROI)Telehealth: Business 101 >p.7 of 28Telehealth becomes mainstream

What can Business Life-Cyclebring to the Telemedicinediscussion?BusinessModeling:ROI Components• An understanding of the full cost ofimplementing or growing aTelemedicine delivery system• Understanding revenue streamsneeded to support Telemedicineproviders and programs• A Common Language to discuss thecase for telemedicineTelehealth: Business 101 >p.8 of 28Telehealth becomes mainstream

EdithForgeVanessa Leigh McLaughlin1409 Franklin Street, Suite 211Vancouver WA 98660(360) 993-8872www.edithforge.com

FPO Company NameUsing ROI with Telemedicine CustomersPresented by REACH Health, Inc.Nirav Desai, Senior Vice President – Physician ServicesConfidential and ProprietaryFebruary 14, 2011Slide 1

FPO Company NameWhat Makes Telemedicine Complicated?• Fundamentally, we create a virtual environment forcollaborative decision-making in acute healthcare caresituations such as stroke• New technology• New relationships• New call coverage requirementsConfidentialConfidentialandandProprietaryProprietary• New practices (coordinating virtual collaboration)• Capital investment + ongoing expenditures• Administrative visibility and oversight• Concerns over liabilitySlide 2

FPO Company NameSustainable Telemedicine ProgramsRequire Administrative Buy-in• Administrative concerns• Return-on-investment• Strategy• Competitiveness• Liability• Anti-referralConfidentialConfidentialandandProprietaryProprietarySlide 3

ConfidentialConfidentialandandProprietaryProprietaryFPO Company NameGeneral Concept of a Telemedicine NetworkSlide 4

FPO Company NameThe Structure of a Telemedicine ROI Analysis• Build the case on incremental differences from the status quo• What care capabilities do you have such that patients would benefitfrom being provided the right care, at the right place?• Hubs and Spokes require different ROI modelsConfidentialConfidentialandandProprietaryProprietary• Sections of a business case• Assumptions• Volumes• Revenues• Expenses• Financial measuresSlide 5

FPO Company NameTelemedicine ROI Models for Hubs• Hub ROI drivers• New transfers from new spokes• Getting the “right” transfers from existing spokes• Volume: convert transfers to a case mix• Possible volume drivers: # of beds, or # of annual EDvisits at spoke hospitalsConfidentialConfidentialandandProprietaryProprietary• # of transfers to hub• Transferred case mix varies by region, relationship,spoke capabilities• Revenue: determine margins for case typesSlide 6

FPO Company NameTelemedicine ROI Models for Spokes• Spoke ROI drivers• New patients: minimizing unnecessary bypasses• Fewer transfers: keeping patients that would otherwisehave been transferred without telemedicine• Volume: convert new and kept patients to a case mix• Possible volume drivers: # of beds, or # of annual EDvisits at spoke hospitalsConfidentialConfidentialandandProprietaryProprietary• # of transfers to hub• Transferred case mix varies by region, relationship,spoke capabilities• Revenue: determine margins for case typesSlide 7

FPO Company NameTelemedicine ROI Model: Expenses• Technology expenses• Equipment and installation• Ongoing licensing/subscription/support fees• Physician call pay• Incremental FTE’s to support telemedicine program• CredentialingConfidentialConfidentialandandProprietaryProprietary• Expense considerations• Does the hub subsidize the spokes or require them tocontribute?Slide 8

ConfidentialConfidentialandandProprietaryProprietaryFPO Company NameTelemedicine ROI Model: Financial Metrics• Operating Margins• Cash Flows• Net Present Value (NPV)• Return on Investment or Payback PeriodSlide 9

Confidential and ProprietaryFPO Company NameThank Youwww.reachhealth.comSlide 10

Perspective on Telemedicine/Tele-presenceReturn-On-InvestmentPresented by:Dave ShinnebargerChief Marketing OfficerSystemsOne, LLCCopyright SystemsOne, LLC, 2011. ©

Table of Contents‣ ROI defined‣ Set up the problem‣ Define your expected solution/goals‣ Build the economic/ROI model‣ Implement Version 1.0 and measure results‣ Grow or HarvestCopyright SystemsOne, LLC, 2011. ©

ROI DefinedKeep it simple.The benefit (return) of an investment is divided by thecost of the investment;dividing the net income of an investment by the totalvalue of all resources that have been employed tomake and sell the product.Copyright SystemsOne, LLC, 2011. ©

Set Up the ProblemFirst – clearly define the problem you are tryingto solve. State the problem in a businesscontext, for example:Problem: XYZ Health Care Systems would like toimprove the quality of patient flow from outlyingcommunity hospitals. We need to better leverageour cardiac care resources and facilities, andimprove our share of market for cardiac services.Copyright SystemsOne, LLC, 2011. ©

Define Your Solution/GoalsSolution: Extend the capabilities of XYZ’sspecialists resources and acute care facilities toreach and serve patients in suburban and ruralcommunities with little or no comparativeresources.Goals:1. Improve the quality of patient flow/referrals2. Better leverage our specialist capabilities and acute carefacilities3. Improve market share for cardiac servicesCopyright SystemsOne, LLC, 2011. ©

Economic/ROI ModelCalculating XYZ Health Care Systems Financial Benefit -Incremental Revenue Generated/Costs AvoidedSpecialists consultation revenue (employed/owned resources)+ Referred Patients x Revenue/Contribution for ER treatment+ Referred Patients x Revenue/Contribution for Specialisttreatment/procedure(s)+ Revenue/Contribution for facilities/services revenue+ Costs avoided due to patients load leveling (deploying surgical team at3:00am)+ Costs avoided by reduced logistics for specialist resourcesIncremental Costs Generated- Equipment costs- Data Communications costs- Staff training costs- Marketing costs promoting the new service into affected marketsCopyright SystemsOne, LLC, 2011. ©

Management MetricsChanges in hospital business data should be measured – bothhard and soft factors:‣Patient referral patterns by facility or zip code‣ED patient mix (ratios of indigent, Medicare, Private, cash)‣Practice patient volumes (Cardiac, Neurologic, Ortho, ICU)‣Estimated value of patient load leveling at referring facilities‣ED patient flow efficiency & effectiveness‣Staff attitudes and perceptions of technology & processchanges (adoption vs. rejection – makes my life easier or morecomplicated)‣Quality of relationships with referring facilitiesCopyright SystemsOne, LLC, 2011. ©

Data Collection & Model ValidationProposed Data Elements for baseline and model developmentREVENUE TREE – 3 years of data preferred‣ Case/patient volume in the top 2-3 practice areas - DRG, CPT-HCPCS level of detail‣ Revenue history for ED‣ Revenue/contribution margin history, by practice‣ patient flow histories from each of the identified referring partner facilities for last 3 years (baseline)‣ Patient diagnostic breakdown for EDCOST TREE – 3 years of data preferred‣ Cost history, by practice area‣ Cost history for ED‣ Training cost estimate‣ ED patient treatment data by payor (Private, cash, Medicare, unpaid)‣ Number of patients treated in ER and were not high acuity (any other indicator that the patient couldhave been treated & released by primary care physician or first-aid)‣ Ambulance cost data (local market)Copyright SystemsOne, LLC, 2011. ©

S1 Tele-Presence HardwareConfiguration – Version 1.0Master HospitalConfigurationXYZ HealthCare Systems1 - Base Station2 - ER/ED Carts3 - Specialist ConsultStations (Cardiac,Neurology, Orthopedic)1 – Video FurnaceConnecting facility EHR, PACs, MRI, CT Scan, Echo,EKG, and other patient modalities through one hub toumbilical outlets anywhere patient care is provided.Connecting Specialist Consult Stations to in-houseER/ED and to Community Hospitals. Specialist Consultsession recording/playback enabled.XYZ HealthCare SystemsNetworked Hospital andCommunity HospitalConfiguration1 Base Station1 ER/ED CartConnecting facility EHR,PACs, MRI, CT Scan,Echo, EKG, and otherpatient modalities throughone hub to umbilicaloutlets anywhere patientcare is provided.Copyright SystemsOne, LLC, 2011. ©

Version 1.0 XYZ Health Care SystemsNew Remote Clinical Diagnostic SystemScheduled ConsultsCommunityHospitalsXYZ HealthCare SystemsEARHBusinessGoal:Improvereferralpatternsand qualityXYZ HealthCare SystemsEmergencyRoomBusinessGoal:Buildpatientvolume inkeypracticeareasCardiac ServicesNeuroscienceICUService LinesEt.al.OrthopedicCopyright SystemsOne, LLC, 2011. ©

Decision Point‣ Positive system benefits (financial andqualitative) = grow the project‣ Negative system benefits = assess quality ofproject implementation, refine and re-measure orplow the projectCopyright SystemsOne, LLC, 2011. ©

Contact UsFor more information about SystemOne solutions forambulatory and acute care tele-presence clinical diagnosticplatforms and networks, please reach out to us at:Dave Shinnebarger c/o SystemsOne LLC954.422.2820 (cell)772.600.4891 (office)dshinnebarger@systemsonellc.comwww.systemsonellc.comCopyright SystemsOne, LLC, 2011. ©