NU708 Unit 6 Business Case and ROI Example

Thirty-Five Returns Avoided, and Where the Money Lands: A Unit 6 Business Case for Spreading an Insulin Discharge Bundle Hospital-Wide

[Student Name]

Purdue University Global

NU708: Advanced Systems Leadership: Transforming the Health Care Organization

Unit 6 Business Case

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[Date]

The hospital, its costs, volumes and savings are composite and illustrative; the studies cited are real.

The Problem and Its Cost

Patients with diabetes return to hospitals more often than most. A review of readmission research put 30-day rates for hospitalized patients with diabetes at roughly 14 to 23 percent, compared with about 9 to 14 percent for hospitalized patients overall (Rubin, 2015). At the composite hospital, 31 of 214 patients starting insulin on two medical-surgical units returned within 30 days last year, about 14.5 percent. Across all ten inpatient units, the finance office estimates about 600 patients a year go home on insulin that is new to them. At the same rate, about 87 would return within 30 days.

The finance office puts the average variable cost of a readmission for a glucose problem at about $9,800, illustrative for this case, and the average length of such a stay at 3.4 days.

The Proposed Change

On the pilot units each patient started on insulin gets five things: one observed self-injection, a short plan in everyday words, the take-home pen from the first insulin day, someone checking in by the third day at home and a booked class seat. Spreading it requires a second diabetes educator, a change to the electronic record, pharmacy technician time to move dispensing earlier, protected time for unit champions and a small fund for bridge supplies for patients with no other source.

Costs

First-year costs are estimated as follows:

1. Second diabetes educator, salary and benefits: $104,000.

2. Electronic record build for a return-demonstration field, a readiness flag and a monthly report: $21,000, one time.

3. Pharmacy technician time for early dispensing, 0.25 full-time equivalent: $14,500.

4. Champion time, 16 nurses at two hours a month: $12,700.

5. Bridge supply fund for about 20 patients a year: $6,000. A predischarge delivery program that subsidized medicines for uninsured and underinsured patients lowered readmissions at less cost per point of reduction than delivery alone (Stedge et al., 2023), which supports including the fund.

6. Training materials and the vial-and-syringe teaching cards: $3,800, mostly one time.

7. Evaluation and data analyst time: $5,000.

The first-year total is about $167,000. Excluding the one-time items, ongoing annual costs are about $142,000.

Benefits

The central assumption is how much the bundle lowers returns. The pilot showed 9 returns among 104 patients in six months, about 8.7 percent, but the sample is small and the pilot units had an engaged project lead. Published evidence supports a real but smaller effect: in a large retrospective cohort, 11 percent of educated patients with an A1C above 9 came back within a month, against 16 percent of those never seen by an educator, and the association held after adjustment, with an odds ratio of 0.66 (Healy et al., 2013).

Two scenarios are used. In the expected scenario, hospital-wide returns fall from 14.5 to 8.7 percent, the pilot rate, so about 35 returns a year are avoided. In the cautious scenario, returns fall to 11.5 percent, about a fifth below baseline, closer to the published effect, and about 18 returns are avoided.

A business case is only as honest as its least favorable scenario, so the cautious one is the one this case is built to survive.

Where the Savings Land

Avoided readmissions do not all become cash. For patients whose return would have been paid under a new diagnosis-related group payment, an avoided readmission also avoids revenue, so the hospital saves the variable cost but loses the payment. The true gain then depends on whether the freed bed is used.

At this hospital, it is. The emergency department boards an average of six patients a day waiting for inpatient beds, and the bed management office estimates the contribution margin of a filled bed-day at about $1,250. Each avoided return frees about 3.4 bed-days that can be filled by a boarding patient.

The case therefore counts two kinds of benefit. Variable cost avoided for returns that would have been unpaid or bundled into a penalty or a value-based contract, which finance estimates at one third of returns, is counted as cash at $9,800 each. Freed capacity for the other two thirds is counted at the contribution margin of the bed-days used by other patients, about $4,250 per return.

In the expected scenario, 35 avoided returns yield about $114,000 in avoided cost and $99,000 in capacity value, about $213,000 in all. In the cautious scenario, 18 avoided returns yield about $59,000 and $51,000, about $110,000.

Return on Investment

The calculation divides what remains of the benefit, after costs are paid, by the costs themselves.

In the expected scenario, the first-year return is ($213,000 minus $167,000) divided by $167,000, about 28 percent. In later years, with ongoing costs of $142,000, it rises to about 50 percent.

In the cautious scenario, the first year loses money: ($110,000 minus $167,000) divided by $167,000 is about minus 34 percent, and later years are about minus 23 percent. The break-even point, using ongoing costs and the blended benefit of about $6,100 per avoided return, is about 23 avoided returns a year, a fall in the return rate to about 10.6 percent.

Benefits Not Counted

Several benefits stay off the ledger because nobody can price them with confidence: fewer emergency visits that do not lead to admission, fewer severe lows at home, better use of the outpatient diabetes class, nurse satisfaction and retention linked to the moral distress findings in the ethics course, and the hospital's standing on quality measures. Each would strengthen the case; none is needed for the expected scenario to break even.

Risks

The main risk is that the pilot effect will not hold on units without an engaged lead. A second is that the second educator position is hard to fill, as the first has been vacant twice. A third is that bed-day value depends on continued boarding; if boarding falls for other reasons, capacity value falls too.

Recommendation

The case recommends phased approval. Approve the electronic record build, pharmacy technician time, champion time and bridge fund now, about $63,000, and spread the bundle to three more units over six months using existing educator time with trained follow-up nurses. Approve the second educator when those units reach 300 patients a year under the bundle or show a return rate below 11 percent for two consecutive quarters. That approach limits the loss in the cautious scenario while keeping the expected gains within reach.

References

Healy, S. J., Black, D., Harris, C., Lorenz, A., & Dungan, K. M. (2013). Inpatient diabetes education is associated with less frequent hospital readmission among patients with poor glycemic control. Diabetes Care, 36(10), 2960-2967. https://doi.org/10.2337/dc13-0108

Rubin, D. J. (2015). Hospital readmission of patients with diabetes. Current Diabetes Reports, 15(4), 17. https://doi.org/10.1007/s11892-015-0584-7

Stedge, B., Xu, J., Kubes, J. N., Han, E., Russie, C., Woods, L., & O'Donnell, C. (2023). Meds to beds at hospital discharge improves medication adherence and readmission rates in select populations. Southern Medical Journal, 116(3), 247-254. https://doi.org/10.14423/SMJ.0000000000001532