Commentary: Want to save $500K? Here's how one provider did it

Thursday, October 22, 2009

In September 2008, four months before the 36-month cap on Medicare reimbursement kicked in, University of Michigan Home Care Services decided to aggressively explore reducing costs associated with the delivery of oxygen. With an average cost of $75 per delivery and some patients receiving upward of five deliveries per month, we knew there was great potential for cost savings.

After analyzing our monthly deliveries, we identified that the patient population that was receiving the majority of the deliveries were portable tank users. Continuing to deliver tanks on a weekly basis was no longer an option; we had to find an alternative.

Advancements in the size, mobility and reliability of portable concentrators looked to be a possible solution to decrease costs associated with tank delivery. Up to this point, we primarily used portable concentrators to accommodate traveling patients; however, we wanted to expand their use. Portable concentrators are financially advantageous, both for the University of Michigan and our patients, and they’re preferred by the vast majority of patients.

Our approach was simple: Target our top portable tank users. Our criteria: level of tank usage, distance from the warehouse and number of deliveries to the home per month. One hundred and twenty five patients were identified as potential


As a part of this program, we implemented a change to our initial evaluation process and included portable concentrators as an option. Our team of respiratory therapists devised criteria based on patient mobility, activity and acuteness of illness. This provided added challenges to some staff members performing these evaluations, but with additional education and mentorship, they overcame them. Doing this was critical to preventing the addition of high volume tank users and, in turn, defeating our efforts to decrease tank use.

With this two-pronged approach, we were able to successfully convert more than 90% of the 125 targeted patients and place 80% of our new referral patients to portable concentrators. A small percentage of these patients were sent home with home fill units, which still eliminated the need for tank deliveries.

We then began assessing patients for tolerance to portable concentrators. On average, these patients received three tank deliveries per month. At $75 a delivery, we reduced our annual cost per patient by $2,700.

In September 2009, our organization will realize a savings of about $337,500. Additionally, an unanticipated decrease in oxygen use and static testing will provide an additional savings of roughly $80,000—and this savings should grow as the number of participants in the program increases. Furthermore, we have experienced a decrease in overtime pay related to tank deliveries and rush orders.

The initial investment of buying the portable concentrators was the only substantial obstacle we encountered, but with an ROI of only seven months, it was something we saw as a great opportunity to better position us for the future. Additional obstacles included patients who were opposed to change and patients who experienced trouble carrying the portable device while using a walker.

This program and our aggressive approach to reducing costs may be a viable option for your business. With an annual savings of $417,000 to date and a projected savings of more than $500,000 annually, this is the type of approach that must be considered to survive in these times of decreasing reimbursement and healthcare reform. hme

Aaron Markham is the bio-medical engineering and purchasing manager, home care services, at University of Michigan Health System. He can be reached at 734-975-7419 or