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DSMT Toolkit

Chapter 24. Business Plan Case Study

Recently in Anywhere, USA, the local AAA had a vacancy for an executive director of the organization. After a long selection process, the Anywhere AAA hired Mrs. Jennifer Sugar to be their next Executive Director. Mrs. Sugar has a passion for seniors and pledged to initiate many new programs to facilitate healthy aging. One thing that Mrs. Sugar noticed is that there are a high number of clients who have significant complications resulting from poorly controlled chronic diseases such as diabetes.

Mrs. Sugar pledged to decrease these preventable complications. To learn what can be done to improve the health of persons with diabetes, Mrs. Sugar attended a diabetes education class at the local hospital. This class was sponsored by a pharmaceutical company as a one-time course offering for persons with diabetes and their family members. During the course, Mrs. Sugar learned that an approved diabetes education program could submit to CMS for reimbursement. Mrs. Sugar became inspired to improve the health of the population with diabetes in Anywhere, USA and decided to start a diabetes self-management education and training program (DSMT).

Mrs. Sugar contacted the U.S. Administration on Aging to identify training resources to help the Anywhere AAA begin providing DSMT to Medicare beneficiaries. Mrs. Sugar received a scholarship to attend the diabetes education program at Stanford University. While attending the training program at Stanford, Mrs. Sugar learned of their lay leader training self-management program.

Upon return to Anywhere, USA, Mrs. Sugar conducted a needs assessment to learn the incidence, prevalence, and current population of persons with diabetes in the area. After identifying the percentage of persons with diabetes in the area, Mrs. Sugar had to make an analysis of the subcategories of persons with diabetes in her area. These subcategories include persons by age, by race, and type of diabetes.

Lastly, Mrs. Sugar went on to make an assessment of the number of diabetes education programs in the region. In order to get the listing of Medicare approved programs, Mrs. Sugar contacted the American Diabetes Association (ADA) and American Association of Diabetes Educators (AADE) to obtain their list of accredited programs.

Mrs. Sugar obtained the information from AADE and ADA because local programs cannot submit for reimbursement from CMS until they achieve successful accreditation of their program by ADA or AADE. Based on the list of accredited programs, Mrs. Sugar realized that there were two programs in her immediate area. Unfortunately, both of these programs are offered through the academic medical center, Anywhere University. Unfortunately, Anywhere U is not on the bus line and is about a 20-minute drive from the senior public housing in the area.

The needs assessment revealed that there is a tremendous need for DSMT services in Anywhere, USA. Mrs. Sugar came to this conclusion after reviewing the results of the needs assessment. The key points are as follows:

  1. The highest incidence rate is among low-income minority groups in the area
  2. There is a large population of African Americans and Latinos that frequent the local community hospital for services and rarely visit Anywhere U for medical care
  3. African Americans with diabetes in the area have the highest rate of diabetic retinopathy and peripheral vascular disease resulting from poorly controlled diabetes

Mrs. Sugar immediately held a meeting with her board of directors to get approval to start a DSMT program. The board ordered that the program can be started but it must be at least cost neutral to the Anywhere AAA budget. Given this mandate, Mrs. Sugar sought to identify a funding mechanism that will allow the DSMT program to operate in a profitable manner.

Mrs. Sugar began reviewing CMS regulations to learn what is required from CMS in order to be reimbursed for providing diabetes self-management programs. After this review she went on to see the best way to maximize the use of the Medicare DSMT benefits for beneficiaries with a diagnosis of diabetes in her area. The Medicare program provides direct reimbursement to Medicare providers that provide DSMT programs using a CMS-recognized program.

The first step was for the Anywhere AAA to develop a business model based on the CMS-approved reimbursement amount. With the anticipated reimbursement, Mrs. Sugar developed a program budget. The program budget included each of the items needed to provide the service annually. The expenses were then compared with the potential revenue.

Mrs. Sugar realized that the program would be budget neutral if they could have 7 full classes per year.

She realized that anything above that would produce an excess of revenue over expenses—a surplus. A full class would be 15 participants. Each person would have to attend all of the training modules to ensure that the program secured reimbursement for all of the services rendered. The course would be taught over 7 weeks to provide all of the required information to meet minimum accreditation standards.

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Mrs. Sugar developed the following expense listings to establish her program budget:

Personnel Expense Listing

Description Itemized Expense Total Project Expense
Program Coordinator—Registered Nurse 0.125 FTE @ $75K/annum + fringe @ 20%
(fringe = benefits, FICA, Health)
Registered Dietitian/Lead Instructor 0.125 FTE @ $70K/annum + fringe @ 20%
(fringe = benefits, FICA, Health)
Lay Leader Stipend Stipend amount is recommended at $200/6-week course per person; 2 lay leaders per class = $400/class @ 7 classes $2,800.00
Lay Leader Training Lay Leader training on the Stanford Model; training will cost $150/person; budget will provide for training for 6 lay leaders $900.00
Continuing Education Staff members are required to participate in annual continuing education; this line item in the budget provides funding for staff and lay leaders to participate in training on diabetes education; included in this line item is the travel for staff to training sites. $2,500.00

Facility Expense Listing

Description Itemized Expense Total Project Expense
Conference Room Conference room 30 sq ft per person in conference-style seating with 15 clients per class paid to housing authority for a flat rate of $4,000/year (classes will also be conducted at the partnering physician practice but will be provided in-kind when on location) $4,000.00

Consultant Services

Description Itemized Expense Total Project Expense
Medicare Billing Service Contractual billing service to submit Medicare claims for DSMT services provided to Medicare beneficiaries—services will be provided if the AAA pays the contractor 10% of collected revenue $4,720.80
Registered Nurse (In-Kind) Provide contract services as a registered nurse providing health education as part of an ongoing DSMT program; the contract rate is $40/hr for a total of 6 hours per month (3 hrs for each class including prep time provided as an in-kind service from partnering physician practice); in-kind services are services that someone donates to your program without charging the program the market rate for the service; this donation has value that should be calculated here. $0.00

Transportation Expense Listing

Description Itemized Expense Total Project Expense
Travel Stipend Funding Stipend to pay participants for minor travel expenses to participate in the classes. Stipend will be made available to low-income participants. $3,000.00

Program Expenses Listing

Description Itemized Expense Total Project Expense
Office Paper Supplies Consumable office supplies including printing and copier paper @ $250/mo $3,000.00

Miscellaneous Expenses Listing

Description Itemized Expense Total Project Expense
Marketing Material, Design Graphic arts production of program marketing materials $1,500.00
Marketing Material, Production Mass production of DSMT program marketing materials $1,500.00
Outreach and Recruitment Community outreach and marketing to recruit new participants in the program $1,500.00

Program Budget Grand Total: $47,170.80

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Once Mrs. Sugar developed an outline of her expenses, she had to project how much income could be obtained from providing the service. The primary payor for the services will be Medicare. Mrs. Sugar went to the Medicare fee schedule to determine what her reimbursement amount would be for providing services. Using the 2011 Medicare fee schedule for her region, Mrs. Sugar looked at the reimbursement amount, and noted that Medicare would reimburse at 80% of the total reimbursement rate for the DSMT benefit—the participant would be responsible for 20% of the cost as a co-pay.

Mrs. Sugar knows that challenged populations often have difficulty meeting the Medicare co-payment, so it may not always be a reliable source of income. To account for this, Mrs. Sugar routinely sets her budget according to the Medicare reimbursement only, since the 20% she will collect from the beneficiary is not guaranteed. Using this budgeting methodology, Mrs. Sugar is assured that her program will meet minimum budgetary requirements, even if none of the beneficiaries can pay the required Medicare co-payment.

According to the Medicare fee schedule, the following reimbursement is provided for diabetes education in Mrs. Sugar’s geographic region:

DSME Program Revenue Projections (2014 Fee Schedule)

Program Code Reimbursement Qty Total
DSME (Individual) G0108 $53.38 Ea/30 min (2 Units) $106.76
DSME (Group) G0109 $14.69 Group/30 min (18 Units) $264.42
MNT (Individual) 97802 $35.82 Ea/15 min (4 Units) $143.28
MNT (Group) 97804 $16.12 Ea/30 min (4 Units) $64.48
Grand Total $578.94
Revenue/15 Participants $8,684.10

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When Mrs. Sugar completed her break-even analysis, she realized that they could easily meet the break-even number. To determine this break-even number, Mrs. Sugar took her expenses and compared these expenses to revenue for each class. Once she understood this, she added the revenue per class until her revenue met her expenses.

The point where revenue meets expenses is the break- even point. Based on her conservative assessment, through the ADRC, Medicaid Waiver program, and nutrition programs, they are seeing about 400 new seniors with diabetes each year. Based on her locally identified incidence rate, Mrs. Sugar realized that she could conduct two classes per month (15 participants/class = 30 participants /month or 360 participants/year). Because her demand easily provides the volume to host two classes per month, Mrs. Sugar listed this number as her program goal. She developed a separate spreadsheet for her program goal that will be shared internally with her staff. Mrs. Sugar was ecstatic about the financial projections and potential for her diabetes program.

Suddenly Mrs. Sugar realized that her diabetes program could serve as a surplus center that could generate revenue to expand her other programs and help more needy seniors. She immediately began an implementation plan to deliver services as soon as possible. With the break-even revenue projections provided, Mrs. Sugar realized that her program would have to provide both DSMT and Medical Nutrition Therapy (MNT). MNT is a billable service under Medicare guidelines. A registered dietitian provides MNT services, with an order from a medical provider. Therefore, Mrs. Sugar made sure that her program utilized the services of a registered dietitian to obtain this additional revenue and ensure program profitability. In addition, Medicare guidelines authorize the provision of both DSMT and MNT services with a valid order from a medical provider, although they cannot both be provided on the same day. If they are, Medicare will not reimburse for them.

Mrs. Sugar calculated that the maximum allowable billable amount for both DSMT and MNT is $578.94, given the base level funding amount. Mrs. Sugar is projecting that she will keep the class size at 15 participants. With 15 Medicare beneficiaries, with traditional fee-for-service Medicare (Medicare Advantage beneficiaries do not have the same fee-for-service DSMT benefit) the projected billable revenue will be $8,684.10. If $8,684.10 will be earned for each class of 15, then Anywhere AAA will have to conduct six (6) classes to meet the minimum revenue required to cover all expenses. In addition, all 90 (15 x 6) participants will have to complete the entire course. Mrs. Sugar realized that was probably unrealistic, so she decided to plan for 7 classes of 15 to account for those who will not be completers.

The benefit covers services provided during one calendar year. After the initial one year of training, the beneficiary can receive additional follow-up training annually, with a medical provider order. Given this information, Mrs. Sugar decided that she should factor in the reimbursement for follow-up training during the year 2 and year 3 projections.

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The table below provides the Medicare reimbursement amount for follow-up DSMT and follow-up MNT services:

Post Initial Calendar Year Training (2014 Fee Schedule)

G0108 $53.38 Individual training in
30 minute increments
2 hours
(4 units)
G0109 $14.69 Group training in
30 minute increments
1 hour
(2 units)
97803 $30.81 Individual training,
in 15 minute increments
1 hour
(4 units)
97804 $16.12 Follow up group training,
in 30 minute increments
1 hour
(2 units)

The follow-up training funding will be in addition to the base level funding for providing the DSMT and MNT to beneficiaries in their first year of training. In addition, Mrs. Sugar projects that during year 2, her program will be able to provide ten classes of initial training per calendar year. Using the same methodology, Mrs. Sugar projects that her program will be able to provide twelve (12) classes during the third year. Twelve classes would mean providing a new class each month. Mrs. Sugar feels confident that she will be able to recruit enough Medicare beneficiaries to conduct a new class each month, because of the high incidence rate among the target population for her program. The high incidence rate reveals that there is a steady stream of newly diagnosed persons with diabetes that could receive a referral to her program to obtain DSMT and MNT services.

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