inpatient pediatric rehabilitation services file · web viewinpatient pediatric rehabilitation...

Inpatient Pediatric Rehabilitation Services

August 2016

A project submitted in partial fulfillment

of the requirement for the degree

Master of Arts

Prepared by: Tomasine Marx

This document contains concepts and data that is representative and may not be entirely true and/or accurate but is being used for educational purpose.

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Inpatient Pediatric Rehabilitation Services

Table of Contents Page

Executive Summary……………………………………………………….. 4

I. Project Description…………………………………………………. A. Project Overview………………………………………………… 4B. Details of Project………………………………………………… 4

II. Benefits of Project……………………………………………………A. Support of Mission/Vision/ Values……………………………… 5B. Relationship to SJP Strategic Plan………………………….. 5

III. Description of Operations………………………………………….A. Summary of Services……………………………………………. 5B. Operational Issues…………………………………………..…… 6C. Assumptions & Success Factors………………………………… 6D. Summary of Innovations Included in Project…………………… 6

IV. Market Assessment……………………………………….………..A. Market Trends and Size………………………………………… 7B. Anticipated Market Share………………………………………. 7C. Provider Resources……………………………………………… 7D. Market Capture Strategies…………………………………..….. 7E. Competition……………………………………………………... 8

V. Analysis of Alternatives……………………………………….…… 8A. Experience in Other Markets……………………………………. 8B. Alternative Strategies……………………………………………. 8

VI. Financial Analysis……………………………………….………… 8A. Financial Projections……………………………………………. 8B. Financial Assumptions.………………….……………………… 9C. Financial Impact to SJP………………………………………… 9D. Sensitivity Analysis…………………………………………….. 10E. Risk Assessment…………………………………………….….. 10F. Accounting Considerations………………………………...…… 10

VII. Project Timetable………………………………………….……… 10

VIII. Marketing and Communication Plan……………………………. 11A. Marketing Plan Outline………………………………………… 11B. Outreach Plan Outline………………………………………….. 11

IX. Ownership, Governance and Control………………………...…. 11


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X. Legal Analysis………………………………………….…….…… 11A. Antitrust Considerations…………………………….….……… 11B. Restrictions on Referral Patterns…………………….…..…….. 11C. Conflict of Interest………………………………….…..……… 11

XI. Exit Strategy………………………………………….…..……….. 11

XII. Management Recommendation………………………….……… 11

XIII. Appendix…………………………………………………………… 11

A. References………………………………………………………. 11-12


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Executive Summary

St John Hospital and Medical Center has a strong pediatric services division and is a designated Children’s Hospital. Inpatient rehabilitation services will be a complementary service to augment the services currently provided. Rehabilitation services assist patients that experience trauma, brain injuries, cerebral palsy, spinal chord injuries, muscular disorders, and stroke. Inpatient rehab services require additional therapies and expertise for the pediatric unit however; the skill set exists within SJHMC in other departments. The strategic intent of this program is to retain the hospital’s current patient population that is being transferred out to other competing hospitals and to provide a broader continuum of care for its patients. Capital resource requirements are minor for some additional therapy equipment.

I. Project Description

A. Project Overview

Develop and implement an inpatient pediatric rehabilitation program. Inpatient rehabilitation services complement the existing outpatient pediatric program and it fills a need for the inpatient pediatric population. The combination of IP and OP pediatric rehabilitation services would enhance the continuum of care for the pediatric population served by St John Hospital and Medical Center (SJHMC). These services will expand the existing inpatient pediatric services offered at SJHMC. The hospital would establish a partnership for a pediatric rehabilitation residency and related patient care services to expedite the creation of this service. The rehabilitation residency would leverage an existing rehabilitation residency program via the partnership and would augment the existing pediatric residency programs at the hospital. Minimal capital expenditure is required for minor therapy equipment.

B. Details of Project

SJHMC develops IP Pediatric Rehab services and provides inpatient acute care for approximately 20 patients per year. The referrals would come from our existing pediatric population and from the surrounding metro hospitals. The Pediatric Rehab faculty (Physiatrist trained in pediatrics) and the related residents will provide physician oversight and manage the care of these patients. The Pediatric Rehab faculty physician could be either the primary attending and/or the consulting physician. The protocol and process needs to be developed with the SJHMC Department of Pediatrics.

The Director of Medical Education (DME) will seek partners that have a pediatric rehabilitation residency program and insure that appropriate accreditation and faculty competencies exist. The DME will insure coordination of all activities of the residency program and will coordinate with other pediatric residency programs that currently exist.


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The project would enable retention of existing SJHMC patients that are transferred out to other facilities and has the potential to capture additional market share. Staffing needs to be augmented by additional therapists to provide more therapy hours of care than the current needs of the pediatric unit. Minimal capital investment is needed for therapy equipment.

II. Benefits of Project

A. Support of Mission/Vision/Values The mission statement for SJHMC states “[SJHMC], as a Catholic health ministry, is committed to providing spiritually centered, holistic care which sustains and improves the health of individuals in the communities we serve, with special attention to the poor and vulnerable” (www.stjohnprovidence.org, p. 1).

The addition of IP Pediatric Rehab services supports our mission, vision and values. SJPHS will be able to serve our pediatric patients with severe rehabilitative needs and enables us to retain these patients within our system.

B. Relationship to SJP Strategic Plan

The addition of an IP Pediatric Rehab service will allow SJPHS hospitals to retain its patients that currently are referred outside our health system mainly to Children’s Hospital and/or University of Michigan. This program adds further specialization to SJHMC pediatric services and promotes growth by providing care for patients with muscular dystrophy, cerebral palsy, brain injuries and other neurological diseases.

The program will increase the image and reputation of SJHMC as a Children’s Hospital within a hospital. The program leverages our current space and capacity. Additionally, this program complements the existing pediatric trauma program at SJHMC.

III. Description of Operations

A. Summary of Services

In addition to the standard patient care services provided to pediatric patients, therapists will provide a minimum of three hours of therapeutic intervention per day based upon individual patient needs. The pediatric rehabilitation service requires additional therapeutic, social work and psychological care. Therapeutic intervention may include PT, OT, speech therapy, recreational therapy, school or early intervention, social work and psychology and neuropsychology services. The average length of stay is expected to be 15 days with 95% of the patients being discharged to home. The Medical Director and related care team will monitor the outcomes to ensure program success.


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B. Operational Issues

Therapy services - The provision of IP rehab services can be managed within our pediatric patient care unit. We have the space capacity and most of the pediatric expertise needed to care for these patients. We need to add social work and discharge planning resources and a few new competencies for nursing care. Our existing cadre of acute care therapists and pediatric therapists would provide the necessary therapeutic services. Treatment room space—Space for treatments on the pediatric unit needs to be evaluated for adequacy. There may be renovation needs to accommodate various treatments. It is desirable to have the treatment space located on the IP unit versus transporting patients to the outpatient rehab area.

Health insurance coverage and authorizations – current patient business office functions will be applicable to this patient population. However, further investigation is needed to determine if these services are covered under most or all insurance plans.

Other regulatory issues – The pediatric services currently provided fall under the overall hospital accreditations such as The Joint Commission. We will ask regulatory compliance team if there are specific regulatory requirements related to these new services. Certificate of Need (CON) is not required.

Referral sources- The expectation is that the current SJHMC pediatric patients will be served however, further outreach will occur with our pediatricians to make them aware of the new services available.

Linkage to outpatient Pediatric rehab services-the existing outpatient rehab services will enable a continuum of care for the pediatric inpatients.

C. Critical Assumptions and Success Factors

Key Assumptions:1) Pediatricians will embrace and support this new service with

referrals.2) Patients will be retained at the hospital and not transferred to other

hospitals for these services. 3) Pediatric residency affiliation is achievable and will complement

other existing residency programs at the hospital. 4) Health insurance plans cover these services.5) The creation of this service requires minimal capital outlay.

D. Summary of Innovations Included in the Project

None


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IV. Market Assessment

A. Market Trends and Size (Past, Current, Future)

Using the Michigan Inpatient Data Base (MIDB), the number of pediatric inpatient discharges to rehabilitation generates 32 discharges to 40 discharges for the period of 2011 through 2015 for the St John Providence East Region. The projected future discharges remain flat. Children’s Hospital of Michigan is the market leader by generating 63% and SJHMC generates 28% of the discharges to rehabilitation based upon 2015 data. Children’s hospital has the only inpatient rehab services capability in the east region and therefore, secures 90% of the volume generated.

The primary service line for pediatric rehabilitation discharges is neurosurgery representing 12% of the discharges.

B. Anticipated Market Share

The anticipated market share is 50% if SJHMC develops the program. Currently, SJHMC generates 28% of the discharges and these could be retained by SJHMC and not transferred out. The remaining 22% is expected to migrate from patients currently served by Children’s Hospital.

C. Provider Resources

SJHMC has 99 pediatricians on staff and 40 office locations throughout the service area. This physician base is generally loyal and will support the program once it is in place. Therefore, current referrals going to Children’s Hospital will be shifted to SJHMC.

D. Market Capture Strategies

While the project assumes that seed patients will come from our existing pediatric patient population, there is a need to create market awareness and to grow the volume.

Key Activities to Grow Volume: Marketing promotions Written Materials Introduction of service to area Pediatricians to generate new business Provision of excellent customer service


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E. Competition

Our current competition in this market is the Children’s Hospital and University of Michigan. In addition, a Beaumont Hospital physician has an outpatient clinic located on the eastside in a freestanding ambulatory building.

V. Analysis of Alternatives

A. Experience in Other Markets:

SJHMC is part of a large national healthcare chain, Ascension Health. One of our ministries in Indiana, St. Vincent’s operates the Peyton Manning Children’s Hospital (PMCH) (Peyton Manning Children's Hospital, 2016). I spoke with the pediatric manager, Jennifer Meier, to understand their approach to patient care. PMCH provides inpatient rehabilitation services for its pediatric patients. Pediatric patients requiring rehab services are designated within the plan of care for the patient. Additional data will be requested of PMCH in the event this plan moves forward.

B. Alternative Strategies

An alternative strategy considered is to continue ‘as is’ however, in the future of population health it is important to maintain a broad continuum of patient care services.

VI. Financial Analysis

A. Financial Projections

A five year financial projection was developed using the assumptions outlined below in section B. The resulting pro-forma results in a positive Net Present Value (NPV) calculation of $23,484 and a positive Internal Rate of Return (IRR) of 44.67%.

St. John Hospital and Medical CenterFive Year Pro Forma

DRAFTInpatient Pediatric Rehabilitation Program

Year 1 Year 2 Year 3 Year 4 Year 5

1. Estimated Procedures - - - - -2. Estimated Admissions 20 21 21 22 23

3. Net patient service revenue $240,00

0 $252,00

0 $252,00

0 $264,00

0 $276,00

04. GME Reimbursement $65,000 65,000 $65,000 $65,000 $65,0005. Total Income: $305,00 $317,00 $317,00 $329,00 $341,00


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0 0 0 0 0

6. Expenses:7. Salaries & Benefits - Physician $65,000 $65,000 $65,000 $65,000 $65,000

8.Salaries & Benefits -Patient Care

Staff 132,000 135,300 138,683 142,150 145,7039. Salaries & Benefits -Therapy Staff 48,000 49,200 50,430 51,691 52,98310. Supplies 10,000 10,300 10,609 10,927 11,25511. Professional Fees 40,000 40,000 40,000 40,000 40,00015. Other 3,920 4,038 4,159 4,283 4,41216. Total Expenses

$298,920

$303,838

$308,880

$314,051

$319,353

17. Contribution Margin 6,080 13,162 8,120 14,949 21,647

19. Operating Cash Flow 6,080 13,162 8,120 14,949 21,64720. Capital Spending (20,000) - - - -21. Total Cash Flow (13,920) 13,162 8,120 14,949 21,647

22. NPV (12% discount rate, 5 yrs) $23,48423. IRR 44.67%

B. Financial Assumptions

The following assumptions were used in building the five year pro-forma:

1. Year 1 base volume of 20 patients with growth in years 2-52. Average length of stay is 15 days3. Medicaid will be the primary payer4. Medicaid per diem rate of $800 for net patient service revenue5. Four hours of therapy worked hours per patient day6. Nursing and other ancillary care is $132,0007. Medical resident at 1.0 FTE8. Program Director fees of $40,0009. Supply incremental expense of $10,00010. Miscellaneous expense of $3,92011. Inflation of 2.5% for salaries and wages; 3% for supplies12. Capital outlay in year 1 of $20,00013. Discount interest rate of 12%

Project could yield additional downstream revenue for other procedures however, the analysis conservatively did not include this unquantifiable opportunity. All


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professional revenue related to the care of these patients was appropriately excluded.

C. Financial Impact to SJP

The financial impact to St John Providence is immaterial however, the return on investment is positive as demonstrated by the positive NPV and the IRR exceeds the hurdle rate of 12%. The additional service adds to the overall scope of services offered within the system. Furthermore, retaining patients within the system is preferable for patients, physicians, and administration. Healthcare insurers also desire full service networks for their patients. Philanthropic opportunity exists to name rooms designated for IP Rehab Pediatrics or other designated rehab areas. The philanthropic gifts can help defray the annual operating expenses of the program and help sustain the program.

D. Sensitivity Analysis

The project assumes that the hospital can retain its current patients and expand market share by shifting patients from Children’s Hospital of Michigan. The financial assumptions are built upon a base of 20 patients in year 1. In the event that the hospital does not achieve the shift in market share (approximately 9 patients), the NPV and IRR decline to $(37,426) and -34.7% respectively.

The project also assumes that a residency program is needed and includes assumption of incremental medical education costs for program director/faculty. These costs are fixed and would require incremental volume to offset the investment in the residency. In the event that the residency is not implemented then the financial projections of the project increase due to elimination of these fixed costs. The NPV and IRR increase to $167,675 and 239.09% respectively.

The above sensitivity analyses demonstrate some risk of the project if the market shift does not occur. However, if the market shift does not occur and the residency program is not pursued then the project yields positive return. Not pursuing the residency program mitigates the risk of the volume shift.

E. Risk Assessment

The risks associated with this project are relatively minor. The financial risk is limited to the investment in new therapy equipment which is estimated to not be greater than $20,000. Additionally, the incremental therapy staff hired to provide these services could be re-deployed to other rehab areas within the hospital.

F. Accounting Considerations

None

G. Terms & Compensation of Deal


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None and/or not applicable at this time

H. Covenant Not To Compete

Not applicable

VII. Project Timetable

To be determined upon approval. Estimated implementation lead time 4-6 months.

VIII. Marketing and Communication Plan

A. Marketing Plan Outline

Promotion of service through paper copy and social media Place signage at current location Add to all network brochures Word of mouth communication by physician liaisons and referral coordinators Promote via our website

B. Outreach Plan Outline

Physician liaisons will promote and discuss new service when visiting physician offices especially pediatricians and family medicine physicians

Promotion at sites regarding site’s affiliation with network

IX. Ownership, Governance, and Control

The services will be provided by associates of St. John Hospital & Medical Center (SJHMC) and be part of the St John Providence Children’s Hospital located within SJHMC.

X. Legal Analysis

Legal will review any contractual obligations that may arise from this project. Any future partnership or collaboration with another entity and/or its residency will be reviewed by our legal team.The project should not violate any anti-trust provisions. Referral restrictions and conflicts of interest are not anticipated. However, the organization’s compliance efforts will monitor the potential.

XI. Exit StrategyIn the event that the provision of these services is deemed unsustainable, a review and discussion will occur with the Executive team to determine options that may include terminating the services. The staff costs would be eliminated and/or transferred to other departments where volume supports. The equipment will be used in the OP rehabilitation areas. There is nominal, if any at all, sunk costs if the project is terminated.


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XII. Management RecommendationNot applicable until the proposal is vetted within the organization.

XIII. Appendix

A. References

Michigan Inpatient Data Base (MIDB)

Peyton Manning Children's Hospital. (2016, August 15). Peyton Manning Children's

Hospital. Retrieved August 15, 2016, from peytonmanning.stvincent.org:

http://peytonmanning.stvincent.org/content.aspx?=26


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