Putting It All Together: A Strategic Capital Planning Case Study

(This is the final installment of a six-part series examining the role of clinical evidence in capital planning.)

Let’s consider a hypothetical 400-bed acute care hospital in Phoenix. With a well-respected cardiothoracic program serving the community’s large and growing population of aging retirees, the CEO has decided to pursue AHA/ACC accreditation as a Cardiovascular Center of Excellence. Empowered by this decision and wanting to expand treatment options for cardiovascular patients—inoperable or high-risk patients with severe symptomatic aortic stenosis who cannot tolerate open heart valve replacement surgery—the Chief Medical Officer decides to add transcatheter aortic valve implantation (TAVI), a less invasive procedure, to the hospital’s portfolio of cardiology treatments.

How would the CMO go about evaluating (1) whether the introduction of TAVI is a clinically, financially, and strategically sound decision, (2) which suppliers of TAVI technology and implants provide the best mixture of price and measurable clinical improvement in this specific high-risk patient demographic, and (3) whether other patient demographics might benefit from TAVI?

The Evidence Comes First

We begin with a comprehensive evidence review of the TAVI procedure itself, the goal of which should be to answer the above questions. The CMO needs to understand whether operationalizing TAVI will require upgrades to existing surgical suites, what the patient selection criteria are, what measurable improvements in care patients will experience, and, ultimately, whether patients will realize improvement in quality of life and survival. Questions the CMO needs to answer include:

  • Is TAVI contraindicated for lower-risk patients who might want to use it? Why? Is the contraindication likely to continue?
  • What impact will CMS and private payer coverage policies have on reimbursement for TAVI procedures?
  • Additionally, can the hospital support a volume of procedures required to ensure that its surgeons achieve and retain proficiency … and do community demographics support that volume of TAVI procedures?
  • Are there competitive (or even planned) TAVI programs in the area that could affect those projections?
  • Finally, are there any comparative technologies that can provide similar outcomes—or is TAVI the best option for the management of aortic valve stenosis disease in high-risk patients? Intermediate-risk patients? Low-risk patients?

More Research Is Needed

A Hayes health technology assessment of the TAVI category was conducted; the resulting clinical effectiveness report suggests that more research is needed before CMS and private payers will finalize reimbursement policies for the use of TAVI in low- and intermediate-risk patient populations. For now, low-risk patients will almost certainly be denied, based upon the low-quality evidence indicating a higher incidence of mortality after TAVI as compared to SAVR at 1 to 3 years follow-up.

Without clinical evidence showing the superiority of one device over the other, it will now be up the capital planning team to evaluate which supplier provides the best mixture of support, service, additional incentives, and return on investment over time.

Benchmarking Data Informs the Decision

A review of MD Buyline’s extensive database of TAVI benchmarking data reveals that the implant device offered by Vendor 1, at $2,500 less than the one offered by Vendor 2, could potentially offer a higher rate of return per procedure, without adversely affecting TAVI patient outcomes.

Armed with this information, it’s now up to the capital planning team to approach each vendor and leverage that information to the fullest during negotiations. Before doing so, it’s a good idea to evaluate the hospital’s financial and contractual agreements with each vendor: are there any gross spending thresholds above which bulk purchasing agreements will take effect for other devices (med/surg or other implantables)? Can either vendor offer any associated incentives, such as discounted supplies, training, or a reduction in list price? Are there differences in technique between the two devices, and what impact will the final choice have upon training? Are current staff more familiar or comfortable with one device as opposed to the other?

The Value of Evidence-Based Research

Ultimately, the final decision rests with the capital planning team. But by introducing evidence-based research into the capital planning process, the team has conducted a rigorous analysis of every factor that might influence the success or failure of this new effort … before introducing it into the hospital’s portfolio of services.

Armed with the confidence that only a well-informed process can provide, the committee now leverages its selection of a TAVI vendor as an opportunity to identify and negotiate value in other areas.

To access the white paper from which this post was extracted, please visit our website.

Bill Donato, General Manager, MD Buyline

Healthcare veteran Bill Donato joined TractManager early in 2017.

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