Dr. Wendy Hauser is the founder of Peak Veterinary Consulting. She writes extensively and speaks frequently about hospital culture, communications, leadership, client relations and operations. She is a member of the AVMA Veterinary Economic Strategy Committee.Read Articles Written by Wendy Hauser
DVM, MS, DACVIM, MBA
Dr. Lucas Pantaleon is a veterinarian specialist who works with companies and individuals in implementing strategies to improve animal health. He focuses on infection prevention, biosecurity, One Health and value-based veterinary care concepts.Read Articles Written by Lucas Pantaleon
During times of financial uncertainty like the COVID-19 pandemic, forward-thinking veterinary hospitals offer financial incentives — wellness plans — to clients so that pets continue to receive basic care. Unfortunately, pets with chronic conditions are overlooked when such programs are designed. What can hospitals do to ease the financial burden on the owners of these pets, drive adherence to medical recommendations and maintain profitability?
We need to look no further than the value-based framework of human health care, which emphasizes and rewards positive outcomes rather than services provided. One component is the bundled payment model, an annual package of all the care that a patient needs to manage a specific chronic illness. How can the model be applied to veterinary medicine?
Bundled Care in Veterinary Medicine
Bundled care already exists in veterinary medicine in the form of wellness plans, puppy and kitten plans, senior care diagnostic packages, surgical neutering and dental treatments. Unlike human medicine, bundled care has not been leveraged for the management of chronic diseases. Creating a package has four major advantages.
- Bundling helps clients understand the specific costs of providing care for a chronic illness during a one-year course of treatment. With many chronic diseases, predicting when a pet will achieve a regulated state is a challenge. The veterinarian’s inability to quantify the cost introduces uncertainty for the owner. Predictability is achieved by calculating the one-year cost of care and then having the client make monthly payments. Chronic care bundles evenly distribute front-heavy treatment costs, which is better for pet owner cash flow and allows clients to make more-informed treatment choices.
- Bundled care improves the value of services. The veterinary team is responsible for achieving the clinical results that matter to patients and their owners, thus improving long-term outcomes and a pet’s quality of life. When bundled care packages are designed, fees for physical examinations, diagnostic tests and re-evaluation appointments can be incorporated along with the cost of medications and food. This translates into better disease management and the opportunity to diagnose comorbidities in a timely fashion, which leads to more proactive care.
- The hospital controls the dispensing of medications and diets as well as the associated revenue streams. This is important because the pandemic shifted consumers’ buying habits. A study of over 2,000 veterinary hospitals, conducted by the American Veterinary Medical Association in April 2020, found that 23% of clients were purchasing their pets’ prescriptions and food from online retailers rather than the veterinary hospital’s online store. Bundled chronic care packages provide a countermeasure to lost sales.
- A final benefit is improved hospital-client bonding, a relationship that is enhanced for a variety of reasons. By providing a bundled chronic care package, the hospital partners with the client to provide needed care for a beloved pet during a frightening time for the pet owner. Including medical examinations in the package creates a pathway for more patient visits, during which time the client’s perspective can be elicited. This further strengthens relationships, resulting in collaborative care. Also, the burden and stress of unexpected expenses are removed. As one client said to Dr. Hauser: “I am so happy. I have been paying for this monthly and will not be facing a big bill at the end of this visit.”
How to Design One
The construction of a bundled service package for a chronic condition might seem daunting, but it’s manageable. We recommend the following approach.
- Not every chronic disease should have an associated bundle. The hospital should choose the two or three chronic conditions it treats most frequently. This small number allows hospital management to fine-tune the development of bundles, receive team and client feedback, and measure clinical outcomes. At some hospitals, the predominant diseases might be feline chronic kidney disease, feline diabetes and canine hypothyroidism. The patient caseloads at other hospitals might have a higher prevalence of feline hyperthyroidism and canine hypoadrenocorticism (Cushing’s disease).
- Once the top two or three diseases have been identified, the components of treating them should be defined. The doctor team should agree on a one-year care algorithm for each disease, including the frequency and timing of physical examinations, diagnostic tests, medications and dietary needs.
Using the diagnostic algorithm, hospital management determines the number and type of services the pet would receive over 12 months (Figure 1). Some pets will receive fewer services as not all owners will fully adhere to the diagnostic algorithm. Other pets, such as difficult-to-regulate diabetics, likely will receive more services than the algorithm predicts. This is another reason to select disease states affecting a reasonable number of pets as it will help smooth the variations.
A bundle’s impact on inventory can be best understood by calculating the amount of product predicted to be used during the 12 months. For ease of administration, canine calculations should start with the amount of product used by a small-breed dog, or those 20 pounds or less. Additional tiered categories should be established for medium dogs (21 to 50 pounds), large dogs (51 to 75 pounds) extra-large dogs (76 to 100 pounds) and giants (more than 100 pounds). Any anticipated drug, nutritional supplement and food amounts should be calculated accordingly and be added to the bundled price. This approach is not as impactful in feline chronic care bundles as most medications don’t vary significantly given the narrow weight ranges of cats.
Pricing a Chronic Care Bundle
Using the information obtained above, prices can be applied as seen in Figure 1. Chronic care bundles are offered post-diagnosis, so initial diagnostics are not included in the cost.
When calculating the bundle price, remember to calculate the hospital’s cost of providing the services. Doing this will help ensure that the pricing is appropriately profitable. Due to the potential variability in the number of services received by a pet, we don’t recommend discounting these packages.
When calculating prices for canine inventory items, make sure the pricing reflects the size of the dog and associated product quantity differences. This will be the only line in the care bundle that varies.
Administering the Bundle
Several steps are involved in administering chronic care plans.
1. Embracing advances in technology, the veterinary care team needs to ensure that patients receive the needed care as scheduled. This is critical to achieving optimal clinical outcomes. Forward-book these appointments.
2. Create a clearly worded contract for each of the chronic care bundles. Consider hiring professional legal counsel when crafting them. Points to consider include:
- Pet owners must understand that the chronic care bundle was designed to provide care for a specific condition and doesn’t cover other care, including preventive medicine, co-morbidities and newly diagnosed conditions.
- The client must understand that the bundle is not pet health insurance. The contract should clearly state so.
- The terms of the coverage, services and inventory should be clearly laid out. Any exclusions should be listed as well. The contract should be valid for one year and does not automatically renew because prices and recommended treatments could change in future years.
- A clearly defined clause about contract cancellation must be included. Decide when and if a cancellation will be allowed and under what circumstances, such as the owner moving or the pet dying. Also, have a clearly worded explanation of how the contract dissolution would occur. For example, the cost of services and inventory received to date will be calculated and the owner will pay for any items not covered by past payments. If the client has paid for more than the value of the services received, the hospital will reimburse the pet owner.
- Clearly state that the contract is non-transferable to other veterinary hospitals.
3. Have a secure, recurring payment option. Credit card numbers and other financial data should not be stored by the hospital due to the risk of theft or abuse. Explore other payment options for recurring payments, such as PIMS-supported recurring payment options and independent solutions such as PaymentBanc, QuickBooks, Gravity, Stripe and PayPal. Some of those providers can accept automated bank transfers while others accept only credit card payments.
Measuring the Results
The outcomes of chronic care bundles must be measured to determine whether they achieved the hospital’s goals and are financially viable. Twelve months after the first pet is enrolled, assess the number of services provided and products used, the cost to the practice, and the profitability.
The evaluation will help determine whether the program is designed and priced correctly before the first contract is ready for renewal. To ease the process, we recommend tracking all pets enrolled in each unique chronic care bundle. Information to be assessed includes the date of enrollment and the services used. The evaluation should be performed every six to 12 months after the initial assessment. As seen in Figure 2, even though scenarios exist in which pets receive additional services (T4 tests) and inventory (methimazole), the program performs well and is profitable.
Other ways to measure program outcomes include comparing metrics for enrolled pets and those with the same chronic condition but not participating (Figure 2). This step will be far easier if diagnostic codes are used for all pets with chronic conditions. Owner satisfaction surveys should be completed at the end of the contract year. Ask what clients liked about the chronic care bundle and request suggestions for improvement. Likewise, the veterinary team should be surveyed annually.
Each year, the care team should reassess whether the identified chronic conditions are still the most common and whether any emergent diseases should be added. Also, the components of each care bundle must be evaluated annually and possibly adjusted. Finally, the price points should be analyzed annually to ensure that they haven’t become financial liabilities to the hospital.
Implementing a value-based care concept using chronic disease care bundles increase cost transparency and introduce financial predictability for pet owners. Patient outcomes will improve when the veterinary team addresses both the pets’ and owners’ needs.
We believe that implementing value-based care, such as chronic care packages, is a strategic way for veterinary medicine to innovate and better serve the needs of our clients and pets.
SAMPLE TREATMENT ALGORITHM
This example covers patients diagnosed with feline hyperthyroidism. Charges for an initial examination and diagnostics are excluded from the bundle, as are preventive care and the treatment of other conditions. The medically managed approach would be:
- Methimazole (oral or compounded) initiated; dosage adjusted and refilled as needed
- 2 weeks post-treatment initiation: medical re-evaluation appointment, CBC, chem panel, U/A, T4
- 4 weeks post-treatment initiation: medical re-evaluation appointment, CBC, renal panel, T4
- T4 evaluated at 6 weeks if therapeutic level is not achieved by Week 4
- 8 weeks post-treatment initiation: medical re-evaluation appointment, CBC, renal panel, T4
- 6 months post-treatment initiation: comprehensive physical examination, CBC, chem panel, U/A, T4
- 12 months post-treatment initiation: comprehensive physical examination, CBC, chem panel, U/A, T4