Wound Care Articles and Insights

Wound Center Revenue and Financial Viability

Wound Center Revenue and Financial Viability

When we receive calls or e-mails from hospitals with existing centers, the first question we hear is usually; “How much revenue should we be seeing?” With hospitals looking to build a new center, the question is most often; “How long until we break even?”

Financials are a vital part of any out-patient wound care program. Rule # 4 is “We must do well in order to do good.” Without the collections to keep the program doors open, you will not be able provide this vital service for very long. Notice that I said collections.

Collections is the amount that your hospital actually receives. Often times when I speak with different hospitals, they are confused to see the numbers we use (Which are based on Medicare allowable rates, wage index factor adjusted) compared to the substantially higher numbers that another wound care management company may have provided. Those numbers are usually based on charges. Charges can be as much as four times what Medicare may actually pay, and since on the average over 65% of a typical wound center’s patient load is Medicare in some form, basing your operations on Medicare recievables is a very smart move.

A wound care center can offer a financial benefit to a hospital in four ways:

The first is cost savings.

When a hospital does not have a comprehensive center, they are still probably providing wound care to patients, whether they know it or not,  across several services which are not designed to provide appropriate reimbursement of the level of care needed for difficult wounds. These services may include the Emergency Department, Physical Therapy, or in-patient care. Your staff of these departments may also be providing supplies to these patients without reimbursement which can add up to large losses very quickly. Diagnostics needed for appropriate treatment may be duplicated or referred out of your hospital which slows care for the patient and can make it more difficult for caregivers to get results quickly. By providing a wound care center, you have a program designed and operated with reimbursement guidelines in mind. Patients have one location for their care which can be coordinated across the hospital’s continuum. The center can be reimbursed for certain supplies. The program staff also has access to services that provide supplies to patients when needed. Diagnostics can be ordered and tracked easily, and the resources used are specific to the patients needs relieving unnecessary pressure on your emergency department or other hospital services.

Second, is the length of stay.

When a patient in your facility has a non-healing or difficult wound, most physicians are reluctant to discharge patients unless there is a clear pathway for ongoing care. Not only does an outpatient center provide that advanced care, the discharged patient is also seeing a physician and nursing team at least once a week. It eases the transition and also provides how a program can offer the third financial benefit:

Third, reduces readmissions.

By focusing on wound patients in an outpatient environment, you are treating often times the most difficult patients, with the highest amount of co-morbidities, who many times are the least compliant. By focusing on these patients with a comprehensive approach, you are often able to reduce the need for these patient to be readmitted by providing an exceptional level of care at an appropriate site of service. This is of benefit all around, especially to the patient. There are sick people in hospitals!

The fourth benefit is revenue.

A typical wound program started with WCA from scratch, breaks even in about six months, and runs an average margin of about 40% for the hospital. (WCA’s 2010 average was 42%) With a moderate program this can mean several hundred thousand dollars each year to the hospitals bottom line, in addition to the previous three benefits. The secret to all of these benefits is careful monitoring of your program. These benefits are easily lost if you are not careful. Overzealous handing out of supplies can add up quickly, not implementing the appropriate billing system can cause a high spike in Medicare denials due to duplicated dates of service, and CMS changes that come out almost monthly must be implemented appropriately at the risk of losing substantial reimbursement.

Big surprise here, WCA is focused on each of these aspects and we can be of great value to hospitals in realizing these financial benefits. Now before someone starts screaming at their computer screen, I have not forgotten about “spin-off revenue.” (the revenue realized by hospitals when services are utilized in-house that might not have happened without a wound care program) I happen to have a few strong feelings on that subject ( also a big surprise, I am sure) and plan to address them in my next blog.