‘How much bang for each buck’

Can more be done better, but for less?

 
‘Simple Economics’

·        Dialysis is the most costly medical therapy funded by a health service

·        Funding streams, though well established, differ state to state, country to country

·        Bureaucracy rarely reacts easily or rapidly to new modalities or to modality modification

Apples are apples but not oranges

One of the major problems when discussing/comparing dialysis funding is the ‘local’ nature of most dialysis funding agreements. This makes it very hard to compare one expenditure report with another. It can be done to a reasonable degree of accuracy, however, if it is clear what costs are built in and what are excluded.

In the following document, I have tried to make it clear what costs are and are not included. Nevertheless, I am aware that even as I do this, new errors of interpretation are introduced.

Several ‘included’ costs are simply ‘estimates’ – another area for dollar ‘fudging’ – but I have tried to make this clear where I can

All dollar amounts are expressed in Australian dollars.

Our funding model

Funding for the Geelong program comes from the Department of Human Services in the state of Victoria

We are funded monthly according to the number of patients undergoing chronic maintenance dialysis as at midnight on the last day of each month. Each patient is given a ‘unique identifier’ to ensure that, if patients move from service to service, two services cannot simultaneously claim re-imbursement.

Funding is broken into 2 distinct components ...

n           A fixed ‘capitation’ component … payable to the ‘parent’ renal unit

n           A variable ‘DRG’ component … payable at point of service         

For the financial year 2003-4, the fixed and variable rates (in A$) are:

This funding arrangement allows for both components to be paid to the parent renal service if the patient dialyses in a facility belonging to the parent unit or, for the parent unit to be paid the capitation fee and a distant regional/country hospital/satellite the variable fee if the patient dialyses away from the parent service.

The fixed ‘capitation’ payment

The ‘capitation grant’ is provided to the parent unit and covers:

·        Haemodialysis consumables

·        Medical care/review/24hr call service

·        Acute dialysis treatments (acute renal failure)

·        Nurse training

·        Allied health: dietetics/social work/podiatry/physiotherapy etc

·        Pharmacy

·        Pathology

·        Provision/maintenance of HD and water treatment equipment, associated ancillary fittings/plumbing

·        On-call service of equipment

·        Water quality testing

·        Recovery of cross-charging fees to other parent units

The Variable DRG-based case payment

The variable (DRG) case payment is paid to the point of service per treatment given and covers:

·        Nurse care

·        Waste management

·        Power/water and domestic/cleaning services

·        Linen

·        Limited catering services

·        Supply department costs/receiving goods

·        Provision of some equipment – chairs/trolleys etc

·        Telecommunications

·        Medical records

·        Patient transport

Though the total funding for satellite and in-centre services is 46,242/pt/yr, each parent unit hospital administration takes a variable ‘cut’ to support its non-income earning functions

·        The % ‘cut’ varies from local administration to local administration across the state but ranges 25-30%

·        Our health service historically has removed 30% of $46,242/pt/year leaving $32,370/pt/yr for dialysis-related expenditure.

Cost analysis

We have compared the costs generated by our 8hrs/night, 6 night/week nocturnal home haemodialysis (NHHD) program (10 patients) with those of our largest satellite centre operating conventional outpatient ~4hrs/dialysis 3 days per week (sCHD) over a complete 12 month period (July 1^st 2002 –June 30^th 2003). This data was only collected on patients who completed a full year in either cost centre

All costs have been assessed as follows:

Actual costs: accurately tracked and including:

·        Nursing costs: all wages/overtime/superannuation/long service leave/sick pay for: all dialysis unit staff, home-training staff, supervisory nurses, Nurse Unit Manager administrative costs, ordering and on-call services

·        Food: ‘while-on-dialysis’ food/drink supplies, nursing catering

·        Domestic: cleaning, linen, waste disposal, pest control services

·        Administration: all books, periodicals, computer services, internet and software charges, freight, postal, printing, stationery, photocopying and telephone

·        Energy costs: water, gas and electricity

·        Maintenance: all minor works (building, plumbing, mechanical, electrical), fittings (new and replacement), contracts, repairs/maintenance of machinery/medical equipment

·        Pharmacy: saline, heparin, drugs

·        Consumables: Price/treatment agreement (Fresenius) including: on-off packs, dialysers, lines etc, gloves, sharps containers, dressings

Estimated costs: estimated but based on ‘reasonable assumption’.

Includes ‘bricks and mortar’, amortized machine and reverse osmosis (R/O) water treatment costs and home installation expenses

1.      Bricks and Mortar

·        In-centre units are, in Australia, commonly part of public hospital infrastructure and, as they are sited within existing facilities, are difficult to ‘separate’ and allocate a specific/isolated value

·        Satellite services, however, are either purpose built structures or refurbished existing buildings, (factories, warehouses, ex-hotels, suburban houses) with satellite costs varying depending upon the building specifications and/or renovating requirements

Example: ‘bricks and mortar’ costs

·        A recent (2002/3) ‘suburban house’ project in a lower socio-economic outer Melbourne suburb (low asking price) led to the purchase and re-furbishment of a suburban house suitable for:

·        36 patients , 9 machines @ 2 shifts/day, 6 days/week with 4 pts/machine

·        Refurbishing included internal rebuilding, decorating and fittings with no machine, chair, equipment or R/O costs included

·        Total cost = ~$350,000  = ~$10,000/pt

·        Assume a re-fit and/or renovation every 10 years then …

·        Bricks and mortar cost     = $1,000/pt/yr

= a per week cost of $19.23/pt/wk

·        NB: there is a potential ‘fallacy’ in this argument. The purchase price has been included in the cost and will thus not be a 10yr renovation cost

·        However, $350,000 is very low for a purchase price and renovation in suburban Melbourne, so true costs of satellite set-up are likely higher

2.      Machines

·        In-centre/satellite dialysis assumes 4pts/machine, 2 shifts/day, 3 treatments/pt, 6 days/wk

·        Home dialysis assumes 1 pt/machine, sole use

·        In-centre/satellite machines are purchased @ ~$21,500 /machine ± volume ($4,500) or temperature module ($4,500) = $26,000/single module machine. Assume a 10 year machine amortization …

= a per week cost of $12.50/pt/wk

·        Home dialysis requires a ‘no bells and whistles’ machine =$17,500/machine. Assume a similar 10 year amortisation …

= a per week cost of $33.65/pt/wk

·        NB. There are machine cost ‘confounders’. True home machine costs are over-estimated as it is our practice to purchase new machines for the satellite floor with the ‘older, pre-loved’ machines being ‘rolled-over’ to the home. The true cost of home machines is therefore somewhat less than stated. Off-setting this is the potential for transplantation of NHHD patients, thus ‘wasting’ or ‘duplicating’ home installation costs

3.      Chairs

·        Dialysis chairs are a cost oddly but commonly excluded from funding models yet they are an integral component of dialysis costs

·        Assume a chair costs $5,000/4 pts and a chair life-span is 5 years

·        Then the chair cost is $250/pt/yr or …

= a per week cost of $4.80/pt/wk

4.      Installation

·        In an in-centre or satellite units, the machine installation costs are included in the ‘bricks and mortar’ estimates and therefore …

= a per week cost of $0/pt/wk

·        At home, machine installation costs ~$2,500/patient/home. This is a variable cost (depending upstairs/downstairs) but includes plumbing and filtration systems. Assume a 10 year home re-fit cycle …

= a per week cost of $4.80/pt/wk

5.      R/O and water treatment equipment

·        For in-centre and satellite units, the approximate cost of an R/O = $150,000 (for a 36 patient unit). The expected R/O lifespan = 10-15 years (~12.5 yrs) while the servicing and membrane costs = $8,000/yr or $100,000/life of the unit (not allowing for $ depreciation) with an annualised per patient cost of $250,000/36/12.5 or $555/patient/yr. This yields …

= a per week cost of $10.68/pt/wk

·        A home R/O machine costs ~$7,500/patient (R/O lifespan 12.5 yrs) with a cost of $600/patient/yr or …

= a per week cost of $11.53/pt/wk

Summary of ‘estimated costs’

·        Bricks and Mortar Costs

o       Satellite @ $1,250/pt/yr                             = $19.23/week

o       Home                                                             = $0/week

·        Machine Costs

o       Satellite @ $26,000/4 pts  = $6,500/pt and amortized for a lifespan 10yrs is $650/year

= $12.50/week

o       Home @ 17,500/pt and amortized for a lifespan 10 yrs is $1750/year

= $33.65/week

·        Dialysis chairs

o       Satellite @ $ 125/pt/yr                                = $2.40/week

o       Home                                                             = $0/week

·        Machine Installation

o       Satellite (part of Bricks & Mortar)           = $0/week

o       Home is $2,500/pt home                           = $4.80/week

(assumes a 10 yr home refit)

·        R/O installation/costs

o       Satellite is $555/yr                                      = $10.68/week

o       Home is $600/yr                                          = $11.53/week

The program expenditure ‘Actuals’ and then the Total Program cost/wk and cost/treatment are shown below in table form …

·        Satellite @ 3 treatments/week (46 pts)              = $216.08/treatment

= $648.25/week

= $33,709/year

·        NHHD @ 6 treatments./wk (10 pts)                    = $631.14/week

= $32,819/year

And, notionally …

·        NHHD @ 3.5 treatments/wk (10 pts)                  = $105.19/treatment

                                                                                          = $368.16/week

= $19,144/year

And, hypothetically …

·        Assume 2 nurses can train/manage 30 pts  and all ‘per treatment’ costs are unaltered except for nursing costs

·        Then … with 30 pts/2 nurses as the ‘nurse-efficiency point’, nurse wages fall from $28.42/treatment to $8.34/treatment

·        Using the same data sets …

o       NHHD ‘actuals’ cost/treatment falls to $76.78

o       NHHD cost/wk (6 treatments/wk) falls to $460.68

o       NHHD program cost/treatment falls to $85.11

Then …

o       NHHD 3.5/wk                                               = $15,490/year

o       NHHD 6/wk                                                  = $26,554/year

o       compared with 3/wk satellite                   = $33,709/year

Potential additional ‘savings’ areas

·        Reduction in nursing wages – NB nurses will not lose jobs – rather, they can be deployed in in-centre/satellite units to provide care for those unsuitable for home care.

·        Conversion to NHHD of traditionally ‘home-unsuitable’ unpartnered  patients currently still within satellite units

·        Reduction in hospitalisation rates

·        Re-employment opportunities

·        Reduction in social security reliance

Un-partnered patients ‘go home’

In our program …

·        Of the 18 NHHD pts enrolled, only 3 entered from our 4hrs, 3/wk conventional home HD program. These patients will cost more.

·        15 (11 un-partnered) enrolled from our 4hrs, 3/wk satellite HD. These patients now dialyse un-partnered at home and cost less.

·        Currently, of our remaining satellite patients, 12/46 are un-partnered as the primary reason for satellite care and all 12 are assessed as ‘NHHD capable’. Not all are likely to take up an NHHD offer – mainly from satellite unit ‘habit’