Outsourced Wound Care Centers: A Promising Revenue-Generator For Hospitals
Quarterly gross revenues as high as $1.9 million tags wound management as a profit center for growth-seeking hospitals.
What keeps administrators up at night? For any hospital C-level executive facing today's challenging healthcare environment, it might be an unrelenting search for clinically sound revenue enhancement opportunities. Yet, a handful are waking to find that one of the most overlooked, strategic options for growing a hospital's "top line" as well as bottom line, is wound care. Operating a wound care program has consistently proven to achieve twin goals: filling a gap in meeting the needs of patients and filling in the profit side of the income statement.
With $5.7 million fiscal year-to-date gross revenues from its Wound Care CenterÒ as of July 31, 2004, Deaconess Hospital-a 315 bed, JCAHO-accredited hospital serving Oklahoma City, Oklahoma¾represents one of several hospitals that can attest to the added value an outsourced wound care program can bring to an acute care facility.
"In today's hospital arena, services with margins are becoming increasingly rare; yet, in spite of continual pressure on the reimbursement side of healthcare, the wound care program at Deaconess Hospital has generated consistent margins from operations," says John Hackbarth, Vice President, Finance/Chief Financial Officer for Deaconess. "I am well pleased with this service line."
The revenue growth center for the aging population boom
Why wound care now? Traditional revenue-generating centers such as cardiac care and cancer treatment have worked in the past. However, the over-representation of such programs conspires to thwart the attempts of similar entries into the field. On the other hand, the treatment of wounds is now emerging as a new focus in niche marketing for hospitals and promises to rapidly increase in importance because of a growth potential driven by demographics.
Chronic wound cases are on the upswing largely because of the steady increase in patients with diabetes and the aging of our population. Of approximately 18 million people with diabetes in the U.S., one third already have foot or leg ulcers, or will go on to develop them, according to a recent University of Pennsylvania study.
The National Center for Health Statistics concurs, with findings that more than 600,000 patients were hospitalized in 2001 with chronic wounds. Along with diabetes, other etiologies include decubitus ulcers, venous stasis, burns and other injuries, surgical wound dehiscence and hypertensive ulcers.
Healing wounds heals the balance sheet
The various causes of wounds account, in part, for the tremendous revenue-generating capability they portend. Proper diagnosis requires the use of outpatient diagnostic services such as lab work (CBCs, culture and sensitivity tests), radiology (X-rays, MRIs, CT scans, nuclear imaging), vascular studies (plethysmography, phlebograms, arteriograms, and Doppler) and pathology (biopsies-since some non-healing wounds may indicate cancer).
The second source of income derives from treating wounds as prescribed by physicians. Hospital-based, medically-necessary modalities include treatment for severe infection, such as the IV infusion of antibiotics, rest and elevation, and hyperbaric oxygen therapy. Increased utilization of the OR results from surgery such as incision and drainage, extensive debridement or excision, vascular surgery, and reconstructive surgery like skin grafts or flaps. The fitting for orthotics, lymphadema therapy, and gait training involve additional hospital departments such as physical therapy. Also, medical nutrition therapy or diabetes education may be required as part of necessary services for the wound care patient. For those hospitals that offer home care, follow up services include periodic administration of IV antibiotics and dressing changes.
Comprehensive wound care equates with the appropriate utilization of many hospital services¾that in turn helps to heal the patient. In the process, treating wounds contributes to strategic goals by acting as an investment opportunity as opposed to an operating expense. Equally important, while the utilization of hospital services increases, the total cost to patients, and the healthcare system as a whole, can actually decrease because of the proactive care a wound care program can provide. Avoiding advanced disease states that require long hospital stays, such as gangrene, helps avoid unnecessary amputations and DRG issues.
"If a hospital doesn't have a wound care program, they are missing out on an increased revenue stream via in-patient and out-patient ancillary services throughout the health system," sums up Steven Oster, Executive Director of Ambulatory Services at Stamford Health System in Stamford Connecticut-a 305-bed community teaching hospital associated with Columbia University College of Physicians and Surgeons.
Through the end of June (Q3, FY 2004) gross revenue was 9% ahead of budget while net revenue was over $100,000 ahead of budget for Stamford's Wound Care Center.
Why outsourcing is "in"
For all of its potential, though, treating wounds exists as a major challenge unto itself, that, if mishandled, can result in poor healing rates and increased complications (such as amputations) that result in hospital stays that extend beyond DRG allowances-hardly a way to keep patients satisfied and a hospital afloat.
Yet, few hospitals possess the core competencies to handle wounds on a volume basis through a comprehensive, integrated continuum of care. Most offer a "reactive" program that is piece-meal based in its approach. Such programs can fail to heal wounds as quickly as possible, while missing out on opportunities to utilize existing hospital services. Of additional consideration are the increased up-front development costs, as well as the ongoing expense of keeping the program updated.
For such reasons, many hospital administrators are increasingly turning to outside vendors to provide turnkey wound management programs that handle all of the implementation, integration and on-going support it takes to provide a successful program, rather than suffer the growing pains of setting one up de novo.
"Could a hospital set up and run a wound care program itself?" posits Avilla Williams, Vice President of Bethany/Branch Operations for Deaconess. "Yes, they could; but Curative provides the expertise, data tracking system and benchmarks needed to evaluate your service, immediately at your fingertips."
Having reached the milestone of treating its one-millionth wound in 2004, Curative Health Services (www.curative.com) ranks as one of the largest wound management services companies, with over 90 centers in the U.S. and Puerto Rico. More than 380,000 patients have been treated via a Curative Wound Care CenterÒ program since 1988, with a healing rate currently at 90.4% for those who complete therapy. Curative has been awarded Joint Commission on the Accreditation of Healthcare Organization's "Disease Specific Certification" for wound management-one of the few organizations to receive such certification.
"In general, most hospitals will be presented with wounds that are somewhat confusing as to what the most appropriate course of action is," continues Williams. "Treatment can be challenging, so having someone who is completely dedicated and specialized in wounds allows us to provide a better product for our patients and provides them with a better potential for healing."
Built upon a foundation of eight essential "building blocks"¾program management, clinical systems and education, medical management, community education and marketing, operations management and tools, reimbursement support, professional development and training, and information technology¾Curative offers a tailored fit for each hospital through a clinical pathway across a "continuum of care" that consists of both an outpatient wound care clinic, an inpatient component, and an outreach program that extends to post-acute facilities; as well as hyperbaric oxygen therapy.
Through this continuum, each patient is proactively followed throughout the course of treatment by a nurse case manager to ensure that no element of therapy is missed. Options include revascularization, infection control, wound debridement, surgical repair, nutritional guidance, rehabilitation, home health services, and patient education. Adjunctive therapies such as hyperbaric oxygen therapy, growth factor therapy, or grafts using living skin equivalents could be indicated as needed.
"One of the biggest challenges of wound care for most hospitals is providing treatment with the best products available," notes Bill Heist, Program Director of the Wound Care Center at Stamford Hospital¾which, like Deaconess, also utilizes the services of Curative. "There's so many new modalities out there that it's really difficult trying to decide how to best go about treating specific wounds and figuring out what dressings to use. Plus, trying to hold all available products in inventory is very expensive."
"Whereas, at Stamford, we now cut down on central supply costs because we know exactly what works," continues Heist. "We have the ability, through the Curative network, to know how much supplies we're going to need in a given month. This accuracy also helps in rendering treatments. We can have a patient in and out in 30 minutes, fully treated and dressed. We take care of their insurance work, too."
Wound management services companies also help a hospital by coordinating the installation and operation of a hyperbaric oxygen therapy (HBOT) chamber, which, when indicated, can significantly improve healing and bolster a hospital's income.
"Our HBOT acts as an opportunity to provide a more high-tech way of treating patients that they have not necessarily been accustomed to, which is one more reason that we find our wound care program offers several financial advantages to the organization," says Deaconess' Williams. "It attracts new patients and it provides referrals back into our acute care center for surgeries, labs, X-rays and other ancillary services."
A strong "magnet" for patient development
One explanation for the success of wound care programs in appropriately driving increased patient loads for hospitals is today's lack of full-time attention to treating wounds in private doctor's offices.
"The outside doctors like the Wound Care Center because it's difficult for them to treat wounds in their office-it takes way too much time and then they have to stock all the dressings, etc." confirms Stamford's Heist. "Whereas we do all of that, it makes life easier for them to just send their patients over here."
Since its inception in 1993, the Wound Care Center at Stamford Hospital has treated more than 8,000 wounds. Validating its status as a needed community resource, 51% of wound care patients were brand new to the hospital and 28% came from outside the hospital's market area.
"Curative's outcomes are proven, and many physicians in the referral network know the results of our Wound Care Center," adds Steven Oster. "I was at one of my son's ballgames, talking to a family practice physician whose son was on the same team. He told me, 'You guys have a wonderful reputation for your wound care program.' He actually refers from Fairfield down to us in Stamford, which is a good 35 minutes away. So the clinic acts as a good referral base."
"We've been busier this year than ever," adds Sue Devilliers, the Program Director for Deaconess' twin Wound Care Centers. "We saw 1,310 new patients and had 12,340 total visits in all of 2003. Around 60-70% of all our wound care patients have never been to Deaconess Hospital before, so the program certainly gets people in the door. We also have a lot of nursing homes that bring their patients to us."
Successful clinical outcomes fortify the bottom line
"I think the main reason we attract so many patients is because we've had such great success with our healing rates, and it has helped build the hospital's reputation of being dedicated to providing care to the community at large," says Deaconess' Williams.
"During the early nineties, many patients ended up getting an amputation because Oklahoma has such a huge population of diabetics," adds Devilliers. "Currently, though, with our Wound Care Center, our amputation rate is less than one percent."
Within one quarter alone (November 1, 2003 to January 31, 2004), Deaconess achieved a documented gross revenue of $1.92 million, with a net operating income of over half a million dollars at both its Wound Care Centers.
Excellent clinical results at Stamford's Wound Care Center¾a healing rate of 93.9% and a patient satisfaction rate at 97% by June 30 (Q3, FY 2004)¾have resulted in a total contribution margin of over $500,000 over the same period.
Clinical and financial success of this caliber appears closely linked to the successful management of the wound care programs.
"We have a couple of distinct advantages over another hospital that has a different wound care program," observes Stamford's Heist. "We are following a very specific proven protocol that includes surgical debridement and utilizes the optimum dressings. Because we believe in aggressive wound treatment, that includes flaps and grafts as needed, we're getting our patients healed and back to their regular doctors ASAP."
"Curative certainly has a proven track record with its clinical pathways, and hence, its outcomes," Oster adds. "It's really an outstanding program. I would absolutely encourage other facilities to explore the use of Curative if they're thinking about embarking on a wound care program.
Wound care, a viable option
The ongoing success experienced at several hospitals across the country prompts other hospital managers and executives to consider establishing a wound care program as a strategic move to help themselves while helping others. By turning to a wound management services company, they can meet their goals for positive clinical and financial outcomes; at a faster rate with less up-front cost than if they were to do it themselves.
"The Wound Care Center has been a bright spot for the hospital because it's a money-making clinic even without the downstream service business," Devilliers sums up. "The administration of any hospital wants to make sure that any clinic stands on its own, and ours certainly does."
For more information about wound management programs, contact Curative Health Services at 150 Motor Parkway; Hauppauge, NY 11788; (800) 874-7503 or visit http://www.curative.com/.
Source: Curative Health Services