Spring 2018 Generations

GENERATIONS – Journal of the American Society on Aging

convincing unless the net benefts for the health- care partner are positive. Steps in Making a Business Case There is a logical sequence of six steps that CBOs should take in making its business case to a health sector entity. Step 1: Adopt perspective Before assessing the magnitudes involved, a deci- sion must be made as to whose costs and benefts will be considered relevant in the analysis. While a CBO service may generate benefts to parties other than its medical partner, such as to a health plan, to the client, or to an individual and his or her family, the appropriate perspective should be narrow. Consideration should only be given to those fnancial consequences the invest- ing medical partner would fnd meaningful. Step 2: Determine CBO costs Because a business case will compare the CBO intervention’s benefts with its costs, the fees the CBO is planning to charge the healthcare partner must be considered. These charges to the medical partner might be contingent or cer- tain. They would be contingent if the charges were predicated on actual, realized costs, or if a pay-for-performance system is to be the basis for the reimbursement. They would be certain if the fees were set prospectively—meaning set in advance of services delivery. Regardless of the system, the higher the reimbursement sought by the CBO, the less attractive is the business case from the perspective of the medical partner: the reimbursement paid to the CBO must be netted out against the benefts attained by the partner. Step 3: Estimate benefits to the health partner In the case of CBO services, the primary eco- nomic beneft to the healthcare entity is likely to be the avoidance of medical costs that would have resulted without the CBO’s services. CBOs can reduce medical use by curtailing unwanted, unnecessary, and reactive, expensive care. For

example, frequently when individuals use social services there are reductions in the duration and incidence of hospital admissions and read- missions, as well as in emergency room visits. ‘The CBO must present an attractive ROI (return on investment) to the healthcare partner.’ In addition, any added revenues to the medi- cal partner from CBO efforts should be added to the benefts of cost avoidance to calculate the gross benefts of the service offering. One potentially important source of added revenue is the shared savings accruing to an Account- able Care Organization under the Medicare Shared Savings Program. Another example might be the Centers for Medicare &Medicaid’s (CMS) per member, per month payment for chronic care management under traditional Medicare. (One requirement to receive the pay- ment is for the provider to address the patient’s social needs.) Step 4: Estimate the ROI to the health partner Once gross benefts to the medical partner and the cost it is expected to pay have been separately estimated, benefts and costs must

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