PRACTICE MANAGEMENT: The real cost of immunization

Part of Contemporary Pediatrics’ coverage of the 2015 AAP Annual Conference. For more coverage, click here.

Many pediatricians believe that if they pay $30 for an immunization, as long as a payer reimburses them more than $30, they’re OK, said Chip Hart. The fact is, that’s not the case, he explained during his presentation “The Business of Immunization: Protecting Kids without Destroying Your Practice.” 

Recommendation: Vaccine refusal

Many physicians don’t realize they are not paid for carrying costs that make the vaccine’s true retail cost much higher than what they paid for it. Unreimbursed carrying costs include everything involved with getting the product into a refrigerator, into a child, and accurately accounted. Physicians are also not paid for any wasted vaccines. Practices have lost more than $50,000 worth of product because someone failed to close a refrigerator door. They’re not reimbursed for credit card handling fees; the time nurses spend entering the patient data into an immunization registry; or the manpower required to dispute an unpaid or improperly paid vaccine claim. All this overhead carries a cost, which the American Academy of Pediatrics (AAP) has estimated at 17% to 28% more than the actual vaccine cost.¹

And until current procedural terminology codes 90460 and 90461 debuted in 2011, vaccine reimbursement had fallen as an increasing number of antigens were combined into multivalent vaccines. New vaccines such as Pentacel (diphtheria and tetanus toxoids and acellular pertussis adsorbed, inactivated poliovirus and Haemophilus b conjugate [tetanus toxoid conjugate] vaccine; Sanofi Pasteur) would reduce the number of administrations from 2 or 3 to a single administration, although the combined vaccine often costs a pediatrician as much in labor, counseling time, and carrying costs as it did to administer 3 separate vaccines. Fortunately, the AAP’s effort to recognize the number of antigens, rather than actual shots, has had a profound positive effect on pediatricians’ bottom lines.

Further boosting one’s immunization business requires negotiating these payments with payers and understanding where one’s practice is efficient and inefficient. Frequently, physicians themselves spend a tremendous amount of time accounting for vaccines. However if a pediatrician spends 30 minutes daily doing immunization inventory, he or she could have seen a patient or 2 in that time. For that amount of revenue, one could easily pay someone to handle this function and still more than break even.

Reference

1. American Academy of Pediatrics. The business case for pricing vaccines. www.aap.org/en-us/Documents/immunizations_thebusinesscase.pdf. 2011. Revised March 2012. Accessed October 20, 2015.

Chip Hart is director of Pediatric Solutions (Physician’s Computer Company), a pediatrics-specific electronic health record and practice management system vendor, Winooski, Vermont.

NEXT: Commentary

Commentary

It’s reasonable for physicians to consider all costs associated with vaccinations, not just physician time. However even before this, physicians must make 2 decisions: will they provide any vaccinations, and if they’re providing some level of vaccinations, how much reimbursement do they need per vaccination to be profitable? Those are very different decisions.

Next: Spreading out the vaccine schedule in spite of concerns

Much of the data Mr Hart presents address the first question: vaccinations, yes or no? Costs such as negotiating time, temperature control and monitoring, and exam table costs factor into this decision. However once the decision is made to provide vaccinations, one will spend that money whether undertaking 1 vaccination or 10,000 vaccinations. For the second question, consideration must be given to only the costs associated with giving the shot itself, which vary as one gives more shots; for example, the costs of sharps and waste management, gloves, paper, syringes, and nurse time for drawing and preparation.

Costs associated with setting up the infrastructure for providing immunizations are fixed and do not vary based on how many shots are given. That money is spent. Then the question becomes, what’s the marginal cost of each shot, and is the payment covering the costs associated with actually giving the shot?

Let’s say one has already spent $10,000 on fixed costs. If by providing immunizations one can make perhaps $2000 profit, the choice is between losing $10,000 and losing $8000. Long term, it’s probably wise to get out of the immunization business. Short term, it’s better to lose less money than more.

And I’m not suggesting anyone should get out of the vaccination business. With the data presented, it’s hard to tell whether people are truly suffering economic losses from giving immunizations. A staff nurse would get paid whether she gives vaccinations or not. The question is, could that slot be filled with another type of visit that paid more? These are exactly the right types of questions to ask. Think about the total cost of vaccination, beyond the physician time, and whether or not the revenue covers these costs. Because every practice will have different components to that cost, it’s up to each practice to answer this question for itself.

Adam Atherly, PhD, is an associate professor and chair, Department of Health Systems Management and Policy, Colorado School of Public Health at the University of Colorado, Denver.