Getting into the Business of Electrophysiology: Strategies to Keep Your Program from Flat-lining

James Burns, Vice President, Corazon, Inc. and Elizabeth Wertz Evans, Consultant, Corazon, Inc.
James Burns, Vice President, Corazon, Inc. and Elizabeth Wertz Evans, Consultant, Corazon, Inc.
It is often said that healthcare is between 10 and 15 years behind in adopting best business practices. This characteristic is quite prevalent in the area of new business or service development. A typical business may spend hours in planning and developing services with detailed estimates on market and financial implications. However, many healthcare initiatives are not researched as well and subsequently are not as successful. Consider the concept of adding or expanding electrophysiology (EP) services. Often, ambitious program leaders or overzealous physicians lunge forward in offering new services such as device implantation, ablations, and mapping. Then, after the dust settles, reality sets in as the thousands of dollars of expected profit do not materialize. The hospital leaders, physicians, and other involved players become very disillusioned with the entire program and second-guess their decision to start it. Electrophysiology services encompass the full range of diagnosis and treatment for heart rhythm disorders. What does venturing into this emerging discipline really mean? Is it all that simple? For now, electrophysiology is a very complicated science with a broad range of treatments and expertise that can readily be divided into two distinct categories: 1) ablation procedures, which are catheter-based and used to cure abnormal rhythms arising from the electrical system of the heart; and 2) devices, which include pacemakers, defibrillators, and resynchronization implants used to treat slow or life-threatening heart rhythms. The extent of EP treatment can range from addressing a slow heartbeat with a pacemaker, to alleviating congestive heart failure with a resynchronization device, to preventing sudden death with a defibrillator. Favorable results from recent clinical trials have revised clinical guidelines to allow more aggressive use of both ablation and device therapies.2 Commensurate with these new evidence-based findings, CMS has expanded coverage and improved payment for ablation procedures and device implantation. This combination of clinical efficacy and increased reimbursement has triggered widespread interest in adding or expanding EP services in the community hospital setting. Furthermore, electrophysiologists have access to more resources than ever before, with industry predictions showing double-digit annual market growth estimates in the subspecialty. As one of the fastest growing sectors within cardiology, EP is no doubt becoming a high priority for hospital administrators and their physician counterparts. Market Dynamics Unfortunately, offering these services is not so straightforward. Different types of programs are suited to different types of hospitals depending on market size, population demographics, competitive dynamics, and the overall current or planned scope of cardiovascular services. Now more than ever, introducing electrophysiology offers the ability to diagnose and treat heart rhythm disorders in a way that not only benefits patients, but also hospitals; yet, the sophisticated devices, equipment, and practitioners come at a high price. Therefore, the introduction of EP services or expansion of the current scope of EP practice requires specialized planning expertise and a diligent focus on the desired program scope, the clinical requirements, and the costs associated with successful development and implementation. Action Plan When approaching the decision to implement or expand EP services, determining the scope and type of program is just as important as gauging the potential for profitability. It is critical to understand the best use of space and ensure collaboration among all the key stakeholders of the program. There are a number of reasons that an EP program can fail; a proactive approach can help you head some of them off before they even start. Consider these top three challenges that can place program success in jeopardy, as well as Corazon’s recommended solutions: 1) Disillusioned Specialists – Top-notch electrophysiologists, those with extensive training, diverse experience, and quality clinical practice, are hard to come by. This explains why these specialists can be both difficult and costly to recruit. Integrating them into a practice model can be a challenge as well. Often, due to their high salaries, they are expected to perform other services outside of the field of EP. Covering general call, staffing cardiology clinics, office days, and performing non-EP procedures are just a sampling of what might be expected in many situations. Lastly, if joining a privately-owned practice, unrest on behalf of the other partners can emerge due to a perceived mismatch in salary versus revenue generated. This is why discussions with key stakeholders and a thorough business plan are essential. 2) High Inventory Costs – Every supply used in an EP case is expensive, from catheters to implantable devices. There is also an abundance of pressure from physicians who lean toward using high-cost devices and supplies for medical liability reasons, even though the patient’s condition may not warrant the need for top-of-the-line supplies. Further, payors will generally cover the lowest amount possible based on clinical presentation. In fact, many ICD implantation cases are considered outpatient, where the difference between the cost of the high-level devices and the reimbursement can result in losses of $20,000 or more. As one solution, Corazon recommends that programs manage these issues by categorizing their devices in levels. For example, a Level A device is the low-end basic model, while a Level D device is the most expensive, with a multitude of features. The same level system is used for reimbursement tiers. Whenever there is a mismatch in tier level of device type and payment, there is an automatic case review. In addition, pricing negotiations are based on these tier levels to help programs negotiate the best reimbursement. Lastly, vendor representatives who may have had unfettered access to staff and physicians should be required to be regulated within the organization. This is accomplished through a multitude of methods such as differentiated badges or special colored scrubs to allow for easy identification. These tactics may seem extreme, but they are very effective at limiting access to, and potentially influencing the decision of, those who decide what product is stocked or selected for individual cases. 3) Space Considerations – Surely, cath lab space doesn’t make money when its empty. It seems like this should be a simple consideration, but for many programs, it is the biggest misstep that is made in the introduction of EP services. As mentioned previously, introducing EP services can create time constraints on space due to the unpredictability and length of some of the procedures. No one wants to tie up a lab for one billable procedure, when many other types of higher-paying activities could be accommodated in the same time frame. Strict scheduling rules and blocking time can assist in making the best use of high-cost cath lab “real estate.” Indeed, the success and acceptance of EP relies greatly on right-sizing the type of procedures performed and the type of equipment utilized, while profitability depends on securing the volume necessary to justify the level of investment. Meanwhile, collaborative practice should be a hallmark of any program development or expansion, especially one with as many complexities as EP. With these factors in mind, a blueprint can be developed that best meets the market need to ensure success with electrophysiology services, no matter what level, now and in the future. Corazon’s experience has shown that a well-planned program based on sound implementation or expansion principles, like those used in other businesses, can make the difference between celebrating success or picking up the pieces of a failed initiative. Below are the basic steps to take before starting a new EP service: 1. Complete a thorough business plan and value proposition for the planned new service. Include the following components: a.) Detailed market analysis that includes market shares for the proposed services, utilization rate comparisons, and current/future service areas; b.) Complete list of equipment and supplies needed to launch and maintain the program; c.) Detailed marketing and business development plan that outlines all of the activities necessary to achieve the volume potential outlined; d.) Plans to secure the physician(s) and other skilled staff support necessary; and e.) Pro forma analyses that includes all of the above as well as market and volume sensitivities. 2. Conduct discussions with key stakeholders to understand the level of commitment and expectation for the new services. 3. Create an implementation plan that includes training and infrastructure development for all affected areas. 4. Develop a tracking mechanism for critical activities and performance indicators to show success with program development and ongoing performance. Phased-in planning is vital to the initial and ongoing development of a best-practice EP program. For example, there is a certain danger in implementing an atrial fibrillation ablation program based solely on an overly optimistic outlook by a newly-recruited electrophysiologist. In this case, once the new physician arrives, he or she may become so quickly overwhelmed with the pent-up volume of routine EP work that the demands of initiating an atrial fibrillation ablation program become unmanageable, even for the most ambitious specialist. An organization would be better positioned to invest the time and dollars required for an atrial fibrillation ablation program when a second or third electrophysiologist joins the practice. This approach allows more time for the workload involved in specialized program development and implementation. Profitability Achieving overall profitability for an EP service line relies on several factors, including astute vendor negotiations, appropriate equipment, and highly capable clinical professionals. With careful attention to overhead costs and proper coding procedures, EP can indeed bring a new revenue stream to the hospital, as illustrated in Table 1. Remember, without attention to critical details, any EP procedure, even a simple ablation, can have the potential to generate sizable financial losses. There is also a substantial difference in Medicare hospital reimbursement for a device implant performed as an outpatient vs. as an inpatient. For example, today a defibrillator implant is reimbursed $27,000 as an outpatient procedure vs. $37,000 for an inpatient stay; an outpatient resynchronization defibrillator implant receives an average payment of $35,000 vs. up to $50,000 for an inpatient admission if other complex cardiovascular diagnoses are recognized and properly documented. However, simply performing all EP device implants with inpatient status is not the answer, especially since a hospital admission requires documentation of medical necessity by the physician. Be aware that Medicare’s Recovery Audit Contractors (RACs) have signaled an interest in focusing on this particular issue because of the huge sums involved. Further complicating matters, private insurers might actually pay more for an outpatient procedure in certain instances. In short, it is important to clearly understand the rules for reimbursement and make decisions that are best for the patient and in compliance with payment guidelines. Many hospitals incur losses through a poor understanding of the unique and complicated relationship between coding and reimbursement for EP procedures. This scenario is especially challenging for new start-up EP programs. Ongoing mandatory education for coders (at least yearly) with a thorough update and review of intricate coding and billing procedures is necessary to ensure that payment for an EP procedure is well matched with patient acuity, and as a result, better approximates the cost of appropriate treatment. Another major factor in EP reimbursement is a hospital's specific Medicare payment calculator, which factors in four major areas including geography, presence or absence of a post-graduate medical residency training program, disproportionate share, and federal payment factor. The Medicare payment calculator should be familiar to most hospital administrators, but its importance cannot be overemphasized. Because of the variances in reimbursement under the current Medicare system, understanding the calculator range is important to understanding the overall revenue-generating and profit potential for an EP program. Aggressive negotiations with vendors may also lower device costs and improve profit margins, though such an initiative can be quite challenging to undertake. The first step in meeting this challenge is to gain buy-in from the physicians who are or will be implanting the devices. An open dialogue between hospital leadership and the involved electrophysiologists, cardiologists, and cardiovascular surgeons can demonstrate the differences between products and pricing and the impact that these differences can have on the overall quality and bottom line of the EP program. The participants can gain a better understanding about supply and device cost differences and recommend an informed purchase decision. Knowing that such cost savings (or losses) might determine whether the hospital is able to acquire other equipment for the cardiovascular service line may encourage more realistic decision-making. Do be aware, however, that focusing on exact costs by particular vendor may be unrealistic, as physicians may practice at multiple locations and the disclosure of specific financial information may have certain legal ramifications. Indeed, the market is ripe to support EP program growth and development, simply based on the skyrocketing demand and overwhelming unmet patient need for services all across the country. However, this dramatic interest in electrophysiology does not eliminate the need for hospitals to closely evaluate their current scope of services and decide whether the time is right — in terms of physician availability, staff complement, facility layout, community need, and available equipment budget — and whether the scope is appropriate given the market need and organizational wherewithal. A feasibility study and thorough business planning process for EP services will determine the best strategy for moving forward, and if so, to what degree, with what resources, and in what time frame. Focused attention on these important decisions will best position a hospital to achieve clinical and financial success with EP program design and implementation.