Estimating the Cost of Your Vaccine Business

Update: with the help of some excellent test subjects and some real-life data, I have significantly updated the Immunization Cost Comparison Calculator.  Try it now, tell me what you think!

I am preparing my 2019 AAP NCE talk about the Business of Vaccines and I've decided to revamp the entire concept.  It needs conceptual face lift and I think this discussion can be so much easier.  Why?

Those who know me know I'm a nerd, so no surprise that the original goal of the presentation was to walk through all of the deep details of what goes into the expense of getting vaccines into your fridge and then administering them to patients.  The "carrying costs" (such as lost inventory, wastage, unpaid claims, time spend ordering and distributing, etc.) are not covered in your payments from the insurance companies.

The problem with the presentation, however, is that I've never seen anyone actually do all the detailed work to estimate the costs for their practice.  People talk to me about it and agree that it's a great idea, but in the one I know has ever figured it out.  [Someone please prove me wrong in the comments!]  Furthermore, the AAP's supporting documentation on this issue has improved a LOT in the last few years and continuing to give a talk that is better articulated by content you can read from the AAP isn't a great use the the audience's time.  I'm funny, but not THAT funny.

The new presentation is still going to walk through the process of how to properly measure the cost of your vaccine product and administration, but then we're just going to skip all that and make some 10 second estimates.  I would rather that 500 practices take some quick guesses and catch a few people in trouble than to have another 500 people attend the seminar, nod their heads in agreement, and then do nothing about it.

And, thus, I have a new spreadsheet tool for practices who want to work on the business side of administering immunizations.  Introducing the Immunization Cost Comparison Calculator.

Immunization Cost Comparison Calculator

The Immunization Cost Comparison Calculator is designed to help any independent pediatric practice make a quick and dirty estimate of the profitability of their immunization business.  There are effectively two tools here - one designed for someone who goes through all the detailed effort to determine the cost of each vaccine from purchase through administration, the other designed for someone who wants to take a fast guess to see if this is something to worry about.

For the purpose of today's blog, we're going to look at the fast and furious side to this tool.  I want to walk through it and hope that a couple of you will do the homework and give me feedback in time for the NCE.

Instructions below.  This only takes 5-10 minutes to do if you can run a simple report on your system.  Really, no work at all!

  • Pick a payor to dig into.  Run a report on your system showing your volume and payment for all the relevant vaccines and admins for that payor.  If you are using the tool to compare to a potential fee schedule, use those numbers instead.  Note: you can use this tool to quickly estimate if you are losing any money with vaccines across your entire practice, it just gets tricky when mixing VFC and adult vaccines.
  • Download the tool and make sure you are on the tab labeled "MASTER." 
  • Everything in dark-pink is something you need to fill in by doing a small amount of homework
    • Cell B4: The name of the payor you want to look at (makes it easy to follow later);
    • Cell B6: Your estimated administration cost; (1)
    • Cells C6-C11: the actual payments you receive from the payor for each of these codes.  Note that we are only looking at multi-antigen admins right now; (2)
    • Column E: the units for each immunization you give; (3)
    • Column F: the per-unit invoice cost for each immunization you give; 
    • Column K: the per-unit recorded payments for each immunization you give. (3)
    • Cell G13: Adjust this %age to somewhere between 115-140% (4)
    • That's all your homework!
  • Once you have completed this information, the tool should populate all kinds of interesting information:
  • Cells G15 and lower: the tool will add the adjustment from cell G13 to the invoice cost of each vaccine - by default, it will be 125% of the invoice cost;
  • Cells H15 and lower: the estimated administration costs (carried from cell B6);
  • Cells I15 and lower add the estimated adjusted invoice costs to the estimated admin costs to calculate the overall estimated cost for the vaccine - huge time saver!
  • Column M then calculates your average overall payment for each vaccine based on your data - it adds the product payments to the administration payments.
  • Finally Columns O and P show the difference, positive or negative, between your overall estimated costs for each vaccine and what the payor pays you based on your admin code choices.  Column O is on a per-unit basis and Column P adjusts based on your volume.  The Bottom Line is then shared in P10.

Important notes from above:

  1. In cell B6, you want to estimate what it costs you to administer each vaccine.  On one hand, there are a lot of expenses that are associated with vaccine administration ("1) clinical staff time (RN/LPN/MA blend, including time for vaccine registry input, refrigerator/freezer temperature log monitoring/documentation, and refrigerator/freezer alarm monitoring/documentation); 2) medical supplies (1 pair non-sterile gloves, 7 feet of exam table paper, 1 OSHA-compliant syringe with needle, 1 CDC information sheet, 2 alcohol swabs, 1 band-aid); and 3) medical equipment (exam table, dedicated full size vaccine refrigerator with alarm/lock [commercial grade], and refrigerator/freezer vaccine temperature monitor/alarm).").

    On the other hand, there are a lot of expenses that aren't counted, like non-payment of claims, missed coding, time spent managing inventory, etc.

    The AAP published data showing that the average vaccine administration costs a practice $11 and change back in 2009. I helped in the tiniest way with a time-motion study from the Verden Group years ago that supported a similar result (with a LOT more data).  So I figure...let's use $13.  Costs have gone up a little since then.  Of course adjust accordingly - if you are really efficient, maybe you lower it.  If you have high expenses, aren't efficient, or if you think $13 isn't enough, adjust accordingly.

  2.  I am a big fan of using actual payments in my analyses, because it's been years since I worked with an accurate fee schedule.  Moreover, fee schedules don't reflect coding and payment problems, they reflect a mirage presented by an insurance rep.

  3. Many of you will chose to enter the data by hand in this report.  However, you can drop a spreadsheet of your vaccine data into the second tab ("Data") and the spreadsheet should auto-fill.  Note that you will need to delete lines on the MASTER where vaccines that share CPT codes create duplicates - just delete the line you don't need.  
  4. Use the AAP's own guidance to estimate that you need to clear at least 25% on each of your vaccine products to break even.  Common sense and any understanding of retail sales will tell you that this is a conservative estimate.  Rather than monkey around with deep analysis, start with a 25% markup to cover costs.  Again, if you are amazing at managing inventory, drop it to 20%.  If you've never looked at your efficiency and you think it's a train wreck, maybe raise it to 30%+ (and fix the train wreck).   But 125% of your costs is a good place to start.

Some notes about the spreadsheet itself:

  • This is draft 1.5.  Beat it up.  Play with it.  See what works, what makes sense, what doesn't.  Please send me feedback!  Do you think I need little pictures in the instructions, for example?
  • I tried to make it cool and assign the nasal flu and rota to the 90473 when using non-antigen coding.  You can adjust that, of course (if you know what I'm describing, you understand - if you don't, don't worry about it).
  • I'll get to the Calculated Costs tab shortly.  It's not much different, really.  My notes so far:
    • Calculating the different admin possibilities (90460 vs. 90471 vs. 90472) is really tricky so I'm really focusing on just 90460/1 vs. 90471.
    • When calculating your admin costs, you should really only have 2 categories: 90460 and 90471.  The presumptive difference is that the 90471 takes less physician time.

Download it here.