Making it pay: For ambulatory infusion centers, profitability may be illusion
The key is careful market research
Michael P. Tortorici, president of AlternaCare of America, a Dayton, OH-based alternate site health care consulting company, says, "Ambulatory infusion centers are not a revolutionary thing. Physicians have been doing in-office infusions for their patients for many years. In fact, some physicians feel they can more adequately monitor the patient’s response to the medication by seeing them on an almost daily basis."
However, Tortorici observes, Medicare reimbursement is diminishing, so many physicians have to put their patients in the hospital in order to get paid. "The same thing is true for oncologists, many of whom will do office-based infusion, but their reimbursement is also changing. A lot of hospitalization for infusion services is fiscally motivated, which is hardly surprising as you can’t expect people to act against their own best interests. Since Medicare is limiting what it reimburses for, physicians really have no option but to put patients in the hospital if they want to be paid."
Physicians move away from home IV
Tortorici says that with third parties and HMOs ratcheting down and reducing reimbursement, physicians have to look for other ways to make money. "So, in many instances, rather than keep patients at home for infusion therapy, they are opting to have patients come into their offices. You also have hospital emergency rooms and outpatient areas that can successfully treat patients and get reimbursed because Medicare will compensate on a short-stay basis."
He points out that hospitals have economies of scale that enable them to provide infusion services on a more profitable basis than physicians can. "What’s coming down the pike now is that people are saying, Let’s put up ambulatory infusion centers. We can make a lot of money.’"
Tortorici says that’s absolutely untrue. "The only way somebody could make money with an ambulatory infusion center is to have an exclusive arrangement with an insure, and have a critical mass to fiscally support that venture. There are many people beating drums and advocating ambulatory centers, but they’re not doing their homework."
Cannibalism only works in the short term
Tortorici points out that by opening an ambulatory infusion center, some home care infusion agencies wind up cannibalizing their own home care businesses. "It’s nice for a patient to be treated at home," he says. "And it may be that for IVIG infusions, which take three to four hours to complete, an ambulatory center is a good way to go. But for daily antibiotic infusions, going to a center isn’t necessary. Patients can be treated at home. They can self-administer. People have to be very careful to find out, when they are looking to enter the ambulatory center market, what their population base is going to be, where their referrals are going to come from, and if their current home business could be harmed."
Tortorici, who has been in the infusion-consulting business since 1982, works with organizations to help them develop marketing and sales strategies. He also does interim sales management and coaching and sales training, and is a surveyor with the Joint Commission on Accreditation for Healthcare Organizations. He emphasizes the importance of knowing where ambulatory clients will come from. "It is reimbursable business? Is it going to be marginal? Is it going to be exclusive?"
He says that what insurance companies have done historically is to sign contracts with just about anybody. If five ambulatory infusion centers open in a given area, an insurance company may well sign with all five. "There’s no guarantee that you’ll get any business from them."
An exclusive agreement doesn’t violate any law. Insurance companies can select whomever they wish. Tortorici says a prime example of this is Bayer Company’s Bayer Direct service. "That is the manufacturer saying, We’re going to provide the product, as well as the service." Nobody can prevent them from doing that, he says.
"The insurance company pays the bills," Tortorici says. It’s just like an HMO. They say, You can use these doctors.’ An HMO can also say, You can use this ambulatory infusion center.’ Now, if you’re dealing with Medicare, which makes the reimbursement extremely marginal and you really need to have a physician involved in that because you need a physician number to do the billing. Even then, Medicare only pays about $40 for the first infusion period and then $18 per time period thereafter. That doesn’t even cover your costs, and you can’t bill for blood."
Another financial ramification an ambulatory infusion center must face is that delivering blood through an ambulatory infusion center requires developing a contract with a blood bank, which will provide the blood at no cost but charge a processing fee that insurance companies do not reimburse. Thus, a center can only bill insurers for infusion time and loses the processing fee in the transaction. "Home infusion care is working very well, even though insurance companies are reducing its profitability by lowering reimbursement rates," Tortorici says.
Despite the facts of an aging population and the financial savings that home care can offer, many insurers don’t appear to be looking at the long-term bottom line. Some, however, seem to be taking a harder look at how they serve their clients. Tortorici refers to one insurer that recently changed its posture regarding case managers. "They were spending millions of dollars having case managers authorize services and what have you," he says, "and a month ago, they came out with a statement saying they’re going to have the physician decide. Well, hello — it should have been the physician all along!"
Better delivery = creative efficiency
Tortorici stresses the need to provide services more efficiently. "We have the best health care in the world. But we have to deliver it better. For example, a Medicare patient receiving chemotherapy can get it much more cheaply at an ambulatory infusion center than in the hospital. But Medicare reimburses for very, very few chemotherapy drugs, and most of the people who get cancer are the elderly. People are now talking about having the government pay for medications. If that happens, it might be a good thing because the infusion drugs could come under that umbrella."
He cautions that until that happens, reimbursement and homework remain of paramount importance in determining whether to open an ambulatory infusion center. "People are selling manuals on how to do it," he says. "The requirements change like the wind. There’s no cookbook, and there’s no substitute for good, hard market research."
The first market research step determining if there’s a need for ambulatory infusion where you’d like to open a center. "Talk to the physicians and the insurance companies," Tortorici says. "Talk to the hospitals. Then see who would pay for it, what type of population could be served and if the potential exists for an exclusive agreement, possibly as a joint venture with an insurance company. That’s the key. Some oncologists and other physicians may support an ambulatory infusion center. If you can get one or more of them to be the responsible parties, you can get reimbursed."
However, Tortorici points out that such responsibility carries liability with it because the process is not entirely under the physician’s control. "A physician would have to provide oversight and would then be able to share in the profits, but a lot of physicians don’t want to do that."
One ambulatory infusion center Tortorici knows of that’s doing well is the Medical Infusion Therapy of Louisiana in Bossier City. Though the company caters mainly to privately insured patients, clinical administrator Jean Hoogendyk says she does not have a lot of problems getting reimbursed by Medicaid.
"We do electronic billing, so there’s no problem with that. Sometimes we have patients who are uninsured except for Medicare. If we have a Medicare-insured only patient who needs IVIG [intravenous immunoglobulin], which is very expensive and would cause a hardship for the patient to have to pay for the medication, we try to get them into a spindown program. It’s a program for the medically needy, a spindown from Medicare. Of course, they have to qualify. They can’t own 100 acres of land and three houses and hope to get on a spindown program, or be receiving two retirement incomes," she says.
Hoogendyk says Medical Infusion Therapy began as an ambulatory infusion company and an IV pharmacy. "We provide total parenteral nutrition, IVIG, antibiotics, chemotherapy drugs, [and] hydration therapy. We give injections and blood transfusions and provide lab services through an off-site laboratory. We also provide some community services and teach IV nurses."
[Michael Tortorici offers customized workshops to help clients start infusion therapy businesses and improve the profitability and efficiency of existing businesses. To obtain prices and details for those, please contact him at (800) 433-9503.]
Need more Information?
Jean Hoogendyk, RN, Clinical Administrator, Medical Infusion Therapy of Louisiana, 1525 Doctors Drive, Bossier City, LA 71111. Telephone: (800) 745-2082.
Michael P. Tortorici, President, AlternaCare of America, 5450 Far Hills Ave., Suite 214, Dayton, OH 45429. Telephone: (800) 433-9503. Fax: (937) 433-4111. Web site: www.alternacareofamerica. com.
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