Y Business and clinical solutions for the home care industry

Business and clinical solutions for the home care industry
Volume VIIl, No.2 March - April 2006
Inside this issue: 6
Measuring home telehealth ROI
Associates’ Corner
Developing a
Business Plan for Home Telehealth
By Charissa Ashman
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
• determining your financial
• 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
• 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
Continued on page 3
noun • The process of sorting the injured and
providing complete care
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The Healthcare Consulting team at Holtz Rubenstein Reminick is experienced,
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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 .
Continued from page 1
Continued on page 5
Meeting the Needs of the
Healthcare Industry Statewide
ƒ Certificates of Need
ƒ Compliance
ƒ Credentialing
ƒ Employee Benefits
ƒ Employment Litigation
ƒ Financing
Capital District
John M. Bagyi
Central New York
Larry P. Malfitano
Visit us at
ƒ Joint Ventures
ƒ Labor Relations
ƒ Licensing
ƒ Litigation
ƒ Medicare & Medicaid
Long Island
Terry O’Neil
New York City
Louis P. DiLorenzo
ƒ Mergers & Acquisitions
ƒ Tax Issues
ƒ Third Party Reimbursement
ƒ Transactional Matters
ƒ Union Avoidance
Northern New York
John D. Allen
Western New York
Robert A. Doren
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
Tools for the Trade
March - April 2006
AS 5000
LS/AS 8000
• 20 (8”) bladders for optimum pressure relief.
• Static function to allow treatment of patient.
• Soft/ firm dial to obtain custom patient comfort
• Audio and visual low pressure alarms.
Removable, non-shear, anti-microbial nylon cover.
CPR valve for rapid deflation.
Warranty: 15 month.
Weight capacity: 300 lb.
• Low air loss mattress with alternating pressure
• Cell-on-cell design keeps bottom half of 8”
bladders inflated in case of power failure.
• Static function to allow treatment of patient.
• Microprocessor pressure sensing technology to
produce low pressure support.
• Non-skid bottom cover.
• Warranty: 15 month.
• Weight capacity: 350 lb.
As low as
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LS 9000 (E0277)
LS 9000B-42 (E0277)
• Powerful blower inflates mattress in 1 minute.
• 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.
• Weight capacity: 400 lb.
• Powerful blower unit supports up to 1,000 lb.
(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
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Division of MRC Industries, Inc.
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As low as
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
Purchasing power
Wellness population
Breadth & depth of services
Large private pay market
Community linkages to leverage
technology growth
Losing market share
Increased competition
Staffing shortage
Staffing shortage in local market
Lack of technology
Regulatory & reimbursement
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
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,
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.
Agency A
Agency B
For each factor, rate how you think you
stack up according to your customers (1Service
low to 5-highly rated). Then analyze each
competitor to see how you think they stack
up. In the last column, assess how
Market Share
important each competitive factor is to
your customers.
Tools for the Trade
Telehealth Plan
Tools for the Trade
Home telehealth:
What’s your ROI?
March - April 2006
By Sam Burgiss
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: [email protected]
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
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
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March - April 2006
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visit our website: www.prm.com
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Tools for the Trade
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March - April 2006
Sure, we’ve been doing it for 12 years!
The Health Care Providers Self-Insurance Trust has been saving
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*on average
Continued from page 5
The final pieces
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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
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
March - April 2006
Tools for the Trade
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
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.