College of Nursing and Health Professions

Overview

The focus of today's health care environment is on quality, cost effective, and client-focused care. The case manager is in a unique position to influence the quality and cost of care through the selection of the preferred method of care after exploring multiple care options. A cost benefit analysis is one method the case manager can use to demonstrate the quality and cost effectiveness of the selected care option.

Objectives

Upon completion of this program, the participant will be able to:

1. Define cost benefit analysis.
2. List three advantages and three disadvantages for the case manager in preparing a cost benefit analysis.
3. Identify methods the case manager can obtain and/or calculate potential and actual costs of a case.
4. Evaluate the effectiveness of case management services through the use of the cost benefit analysis method.

Definitions

Cost-Benefit Analysis (CBA) - method to illustrate in financial terms the cost savings associated with case management services and the selected method of providing care.

Hard Savings - savings that results from the case managers actions and that directly result in true savings.

Soft Savings - savings that might have been accumulated if other methods of care had been implemented. May also be referred to as avoided costs.

Actual Costs - costs associated with the selected method of care.

Potential Costs - costs that would have potentially been incurred if other methods of care had been implemented.

Instructor Provided Information

1. Historical Overview of Cost Benefit Analysis
   1. Developed in 1930 during the Great Depression by the business community to assist in the decision making related to flood control projects.
   2. Insurance companies were some of the first health care organizations to begin to ask for cost benefit analysis when looking at the financial impact of different approaches of care for the insured population.
   3. In the 1970's, an increased use of cost benefit analysis was noted with the increase in laws and regulations to protect health, safety, and the environment.
   4. Today, more health care organizations are asking for this documentation to support decisions made about quality and cost effective care.
2. Reasons to Conduct a Cost Benefit Analysis
   1. Family request for comparative information on different approaches to care.
   2. Financial institutions such as insurance companies may request documentation from case manager.
   3. Method for the case managers to document their influence on outcomes of selected cases.
   4. A method to organize, evaluate, and present information about options of care. The challenges to completing a cost benefit analysis is finding the information and sometimes applying a monetary value to attributes that have are almost impossible to quantify.
3. Advantages and Disadvantages of Cost Benefit Analysis
   1. Advantages
      1. Method to demonstrate effectiveness of case management services.
      2. Method to demonstrate cost savings or cost avoidance associated with implemented care.
      3. Method to market case management services to potential consumers by demonstrating the potential influence a case manager may have on the outcome of a case.
   2. Disadvantages
      1. May lead readers of report to misconstrue the case management role as one of saving money only.
      2. Sometimes difficult to accurately identify and report potential and actual costs.
      3. May be difficult to quantify all aspects of care such as quality of life or satisfaction with care.
4. Cost Benefit Analysis
   1. Several different designs to present the information are available; only one design will be used throughout this program. In most instances the information is the same, the sequence of presenting the information may be different.
   2. Design
      1. Demographic data including name, identification number, diagnosis, type of insurance coverage, important dates associated with the case.
         1. When discussing the diagnosis, present a brief overview of the pertinent information needed to understand the case and implications for care provided.
      2. Case Management fees
         1. There are multiple methods to determine case management fees. Whatever the arrangement, the fees associates with the case should be reflected in the cost benefit analysis.
            1. Fees may be presented as one negotiated fee.
            2. Fees may be presented as the number of hours spent on the case multiplied by an hourly rate.
            3. Fees may be pre-arranged based upon an agreed upon contract.
      3. Overview of case management interventions
         1. Concise summary of interventions should be presented under this heading
      4. Costs
         1. Potential costs
            1. Specific list of services and the costs associated with each service that could have occurred with this approach to care.
            2. The challenge is finding the sources to obtain this cost information.
               1. The cost of each service is documented in this portion of the CBA, not to be confused with the charge for the service. An organization can assign a charge to a specific service that may not represent the cost of the service.
               2. Some organizations are unwilling or unable to share this financial information. There are some specific sources that may assist in the collection of this information.
                  1. If an organization has developed a critical path for a specific type of patient, the costs associated with this path may have been established.
                  2. If the organization has a cost accounting department, the information should be available.
                  3. Community business groups on health may also have financial information but again caution must be taken to insure that the information provided is about costs.
                  4. The Internet may provide information about costs associate with care but again caution should be taken when using these numbers
            3. If the case manager is unable to obtain costs but is in a position to obtain charges for the potential services, these numbers may be used as long as the charges are then used for the actual costs as well.
               1. the preferred method is to compare potential costs with actual costs.
               2. in reality, the organization may not truly know the costs associated with various services.
               3. the case manager may have no other choice but to use the charges associated with the potential and actual services provided.
         2. Actual costs
            1. Provide the same information as with potential costs.
            2. Include discounted and negotiated reductions in cost.
      5. Net Savings
         1. To obtain the net savings subtract the actual costs and the case management fees from potential costs.
         2. Potential costs - (Actual cost + Case Managers Fee)
      6. Outcome of case including influence on quality of life
         1. There are times when a dollar amount cannot be assigned to an aspect of care but was a critical component of the care provided. Documentation of this information may be provided here.
         2. Satisfaction surveys such as the short form 36 (SF36) or short form 12 (SF) are just two examples that may be used to quantify outcomes that are not financial but may be critical to the overall case.
5. Conclusion
   1. The cost benefit analysis can be used as one of many tools to support the implementation of quality and cost effective care.
   2. The cost benefit analysis can also demonstrate the effectiveness of case management as an integral component in assuring the patient receives a quality care.

Case Study

Six months ago, AJ (27 year old) was involved in a MVA resulting in multiple fractures and lacerations including a fractured left femur, fractured left wrist, and three fractured ribs on the left side. All of the fractures have healed with the exception of the femur. AJ is now diagnosed with osteomyelitis in the femur and will be on IV antibiotics for the next six months.

AJ is a single mother with 2 small children and has minimal support in the home or community. The physician was planning to send AJ to a progressive care unit for two months and then sending AJ home with home health care support for the remaining four months she will be on IV antibiotics. AJ has insurance that will cover progressive care and home health care. The case manager on the case discussed the case with the physician who ultimately sent AJ home with home health care support. The following cost benefit analysis was completed.

Cost Benefit Analysis

Demographic Data:

Name: AJ
ID number: (social security number or medical record number)
Insurance Carrier: ABC Insurance

Case:

Opened: date
Closed: If applicable
Anticipated length: if known and relevant to case

Diagnosis: MVA six months ago resulted in fractures to left ribs, left wrist, and left femur. Fracture of femur has resulted in a diagnosis of osteomyelitis with six months of IV antibiotic therapy anticipated.

Case Management Fees:

Monthly fee: 4 hours per month at $80 per hour
Six Month Total: $320 x 6 = $1,920

Overview of Case Management Intervention:

The case manager negotiated fees with various agencies while preparing for AJ's care. The case manager maintained contact with AJ, the PCU, and the home health agency to insure quality of care. A representative of the insurance company was contacted monthly to review the activities and costs associated with AJ's care.

Potential Costs:

1. Potential Costs for two month stay in progressive care unit (PCU):

2. Potential Costs for 4 months of home health care

Actual Costs:

Actual Costs of 6 months of IV antibiotic therapy in the home.

Net Savings:

Potential Costs - (Actual Costs + Case Management fees) = Net Savings
$54,160 - ($32,610 + $1,920) = $19,630

Outcomes:

The osteomyelitis was resolved with IV antibiotic therapy.

AJ was able to remain at home with her children.

Cost of childcare if AJ had spent 2 months in PCU was eliminated.

Potential infections from hospital-type environment were eliminated.

RESOURCES:

Aspen Reference Group. (1998). Medical Case Management. R Howe (Ed.). Gaithersburg, MD: Aspen Publication.

Chang, C., Price, S. & Pfoutz, S. (2001). Economics and Nursing: Critical Professional Issues. Philadelphia: F.A. Davis.

Mullahy, K. (1998). The Case Manager's handbook (2nd ed.). Gaithersburg, Md.: Aspen Publication.

Powell, S. & Ignatavicius, D. (2001). CMSA Core Curriculum for Case Management. Philadelphia: Lippencott.

Rossi, P. (1999). Case Management in Healthcare: A Practical Guide. Philadelphia: W. B. Saunders.

Web Sites for Additional Information

http://www.cnie.org/nle/rsk-4.html (has an extensive bibliography list)

Continue to the post test.