NEW ORLEANS – One way to make sure your practice providing immunizations is in the black is to calculate your “carrying costs” and apply them to the cost of your vaccines.
Another is to make sure that you join an effectively managed and effective group purchasing organization.
Doug Brunk/MDedge News
Chip Hart
Those are two tips that Chip Hart shared with attendees at the annual meeting of the American Academy of Pediatrics.
said Mr. Hart, director of the Winooski, Vt.–based the Pediatric Solutions Consulting Group at the Physicians Computer Company. “Providing immunizations is the single most valuable thing that you do, by far. Yet you get ripped off by the payers all the time.”
Two documents from the AAP – “The business case for pricing vaccines” and “The business case for pricing immunization administration” – provide clear-cut guidance on the impact of vaccine delivery to your bottom line. Based on data from his company’s client base, Mr. Hart said that vaccines have grown from 13% of an average pediatric practice’s revenue in 2003 to 22% in 2018. “The AAP’s own research shows that you need to generate 17%-28% above what you paid for the vaccine in order just to break even,” he said. That’s to cover the administrative overhead required to purchase and store the product in an office-based refrigerator, and the staff time to administer it. Such “carrying costs” often are not factored into the analysis of many managing pediatricians.
“The unfortunate reality is, you are not paid for carrying costs related to the administration of vaccines, including your refrigerator, your sharps and waste management, claim denials, and especially every time you waste a vaccine,” Mr. Hart said. “None of those things are part of any fee schedule.”
How to determine your vaccine product overhead
There are two ways to go about determining your vaccine product overhead. The first is to perform an in-depth analysis of your costs, including time studies and cost accounting. For example, he said that if your hazardous waste costs are $3,500 per year and half of the material is composed of vaccine waste, that leaves $1,750. “If you divide that by the number of vaccines you did last year, it might come out to 13 cents per vaccine,” Mr. Hart said, “but these things add up.” On the administration side, he offered the example of a nurse who makes $45,000 per year and who devotes 10% of her time to vaccines in a practice that administers 13,000 vaccinations per year. In this case, $45,000 per year divided by 13,000 vaccines equals 35 cents than can be added to the cost of every vaccine.
“You can go into each one of these elements and figure out how much you need to clear in order to do all right,” he said.
Alternatively, you can use the research from the AAP to presume that you need to have a margin of 17%-28% on your product. “Use a figure like 20% or 25% – it’s likely as accurate as any analysis a busy private practice is capable of doing, and you can immediately determine if you are in the profitability ballpark,” Mr. Hart said. On the administration side of the equation, in 2009, researchers estimated that the total documented variable cost per injection, excluding vaccine cost, was $11.51 (Pediatrics. 2009 Dec;124 [Suppl 5]:S492-8). That figure is more like $14 or $15 per vaccine in today’s dollars, Mr. Hart estimated. “You can perform a time-motion study and determine all of your immunization administration costs or you can just simply pick an evidence-based figure like $14 and see how well you are doing,” he said.
On his company’s web site, he offers a free administrative analysis tool that clinicians can use to determine how they fare. The AAP also provides information about vaccine financing here.
How to make sure you are operating in the red
Mr. Hart advises practices operating in the red to review their vaccine delivery work flow “to look for leaks,” to use proper administrative codes, and to negotiate the price of vaccine product with payers. “The only payers that don’t negotiate are state Medicaid and Tricare,” he said. “Everyone else negotiates. You want to determine the methodology they use to calculate what they pay you for the vaccine product. Different payers have different rule sets.”
Another strategy to join a group purchasing organization (GPO), which can leverage volume purchasing to negotiate discounts on vaccines. “They’re like [the] Costco or Sam’s Club of vaccine purchasing, and in most cases they can save you about $10,000 per year,” Mr. Hart said. A list of GPOs from the AAP can be found here.
Implementing effective inventory management is also key. “Practices that have the discipline to maintain their inventories are inevitably the ones who are more profitable,” Mr. Hart said. “I’ve worked with too many practices where flu shots go missing. Staff take them home or bring in their friends after hours. You need inventory control, and you should be able to generate an inventory report out of your practice management system. You also should be able to generate a report out of your EHR.”
Mr. Hart reported having no relevant financial disclosures.