Running head: BUSINESS Plan 1

Business Plan

Elaine Dean

Jacksonville University

November 25, 2017

BUSINESS Plan 2

Table of Contents

Executive Summary………………………………………………….. 3

Product and Need Identification……………………………………… 5

Product Definition……………………………………………………. 8

Market Analysis……………………………………………………… 10

Budget Estimates…………………………………………………….. 13

Additional Financial Details…………………………………………..16

Timeline……………………………………………. ………………...18

Conclusion and Feasibility Statement………………………………... 19

Appendices and Supporting Documents……………………………… 22

BUSINESS Plan 3

Executive Summary

The expansion of the current nephrology program is being proposed to facilitate the

increased number of veterans requiring life-sustaining end-stage renal disease care at the Bay

Pines VA Hospital (BPVAMC). Additionally, the plan will include strategic planning

methodologies to decrease the high incidence of admission and readmission rates in this

population. The BPVAMC performs over 12,000, dialysis treatments each year plus

approximately fifty peritoneal dialysis treatment, and multiple CRRT treatments in the surgical

and medical intensive care units. Renal disease means that the kidneys are damaged or is unable

to perform their functions due to genetic abnormalities. The kidneys remove excess water and

waste from the body, however, the kidneys also performs other important functions such as it

releases a hormone that regulates blood pressure, it controls the production of red blood cells,

and it produces an active form of vitamin D. Kidney damage can cause waste to build-up in the

body, prescribed dialysis treatments prevents a build up of these highly dangerous toxins that can

be debilitating and ultimately fatal.

BPVAMC is one of the nation’s largest VA hospitals. It serves the healthcare needs of America’s

veterans in west central and southwestern Florida. There is currently an increase in the number of

veterans newly diagnosed with renal insufficiency. In addition, veterans returning home from

theaters of conflict are being diagnosed with kidney injury. The mission of the VA is to “honor

America’s veterans by providing exceptional healthcare that improves their health and well-

being”. This is integrated with the mission of the Veterans Health Administration (VHA) kidney

program to consistently improve the quality of healthcare services delivered to veterans with

renal disease. Additionally, it coincides with the National Kidney Foundation philosophy to

improve health and well-being of individuals and families affected by kidney disease. According
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to VA policy, all eligible veterans are entitled to the timely care of acute and chronic kidney

disease and renal replacement therapy. Additionally, all initial management, evaluation, and

treatments are provided including timely referral for kidney transplant. These services are

provided to the veteran whether or not the veteran has a service-connected or non-service

connected status. Renal Care is a covered benefit for veterans enrolled in VA care. This also

extends to veterans who have been previously diagnosed with chronic kidney disease (CKD). All

therapies are extended to each veteran to choose what best suits their lifestyle. Veterans can

submit to be evaluated for disability under the kidney condition disability benefits. Veterans can

also qualify for mileage reimbursement or special mode of transportation in connection with

receiving dialysis.

Executive oversight of the BPVAMC renal program is under the chief of ambulatory

care, the Dialysis Nurse Manager, Nurse Educator, and Charge Nurse provide combined

coordination under the functional structure of the program (See Appendix E).
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Product and Need Identification

The first dialysis unit at BPVAMC was started in a regular patient room comprising of

three chairs and individual reverse osmosis units (RO). After three years in that location, it was

moved to a renovated unit with a central RO and loop to supply twelve regular dialysis stations

and an isolation room. The dialysis program serves eligible veterans with reversible or

irreversible symptomatic renal failure.

The current dialysis program dialyzes forty-eight patients per week each receiving

dialysis three times per week. The unit is opened six days per week Mondays through Saturdays

to facilitate these treatments. The proposed expansion will increase the number of veterans

served to seventy-two per week a 50% increase. As an integral part of this proposal, the

nephrology care coordinator will address the high incidence of admission and readmission within

30 days of discharge with the same diagnosis. For the patients, it means accessing the care they

need within the VA system on a seamless continuum and lower out-of-pocket cost. For the VA,

it means improving access to this vital service for a greater number of veterans. The expansion

will decrease the number of veterans out-sourced into the community and reduce the amount of

VA dollars paid to private entities for this service. Data collected in 2012 shows that

approximately 52,172 veterans enrolled in the National Health Administration have ESRD

(USRDA, 2015). A research of the last two decades showed that while overall outpatient

expenditure for VA dialysis increased only 10% between 1993 and 2003, the payments for VA-

outsourced dialysis grew 348% (from $135 million to 60.7 million) during the same period of

time. In 2011 national payments for VA-outsourced dialysis cost $432 million (Wang,

Maciejewski, Patel, Stechuchak, Hynes & Weinberger, 2013).

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The nephrology program supports 305 dialysis patients. Because of the inability to serve

all these veterans, the BPVAMC has outsourced dialysis care by purchasing private sector

dialysis for over 85% of its end-stage renal disease population, on an alternative payment method

(APM). Over the past year hospital data has shown a significant increase in admission and

readmission rate in the outsourced patient population averaging seven to ten patient days and

$25,636 per admission (See Appendix A). The initial group will consist of patients who have

been admitted 3 or more times during the last twelve months. Hospital data shows that 30% of

this cohort falls into this category. There are currently 232 patients in the community. Of the

305, twenty-five patients are currently on peritoneal dialysis.

One in every three Americans or approximately thirty million American adults have

CKD. However, it is estimated that the prevalence is 34% higher in the veteran population. The

VA currently cares for approximately 600,000 veterans with CKD (USRDS, 2015). This can

progress rapidly into ESRD requiring acute or chronic dialysis. In 2012, the VA and the

University of Michigan created a national kidney disease registry to monitor kidney disease

among veterans. The research found that 52,000 veterans develop ESRD during the period 2007-

2011 and the cost to the VA for the care of these patients was estimated to be more than $16

billion. In another research, the VA nephropathy in diabetes trial found that high blood pressure

in proteinuric diabetic kidney disease is associated with the worse kidney outcome, and that

control of blood pressure can prevent progression into renal failure and dialysis (Starzi, 2013).

Additionally, a new law signed in 2012 incorporated veterans and family members of active duty

veterans living near Camp Lejune, North Carolina between 1957-1987 for greater than thirty

days can be eligible for renal care through the VA renal program for renal toxicity due to

potential exposure to contaminated water. Family members of these veterans will be eligible to
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receive renal care under a special fund appropriated by Congress. All these elements in addition

to other variances have created a scenario where the ongoing need for maintenance dialysis has

outpaced the VA’s ability to directly provide this care.

BUSINESS Plan 8

Product Definition

The health, stability, and survival of the ESRD patient depend on accurate clinical

management by a trained and experienced interdisciplinary team. A full spectrum renal program

consisting of diagnostic, therapeutic, and rehabilitative services are important in the care of the

ESRD patient. Early referral to dialysis need to be promoted as the clinical status of the patient is

a factor that is vital in the functional prognosis of the patient. It remains all too frequent that

dialysis is initiated in an emergency situation such a pulmonary edema, fluid overload, and

severe uremic state. According to the Kidney Disease Outcome Quality Initiative (KDOQI), the

process of dialysis should be initiated when renal kt/v (urea) fall below 2.0, this corresponds with

a serum creatinine of 9-14ml/min and a residual glomerular filtration rate (GFR) of 10.5.

(KDOQI, 2015). However, with the advent of new technologies in dialysis care and advanced

research BPVAMC nephrologists are taking a practical approach to the process of initiating

dialysis. They have determined that the initiation of dialysis cannot be based solely on numerical

data but should be decided in tandem with the patient’s clinical presentation to his or her

advanced stage of uremia. Additionally, consideration is given to important parameters such as

blood pressure control and nutritional status. Therefore, initiating dialysis is individualized and

patient-centered A critical component prior to dialysis is for the patient to have a mature

surgically created access. There are three types of accesses: catheter, arteriovenous fistula (AVF)

and arteriovenous graft (AVG). The arteriovenous fistula is the gold standard of vascular

accesses. The National Kidney Foundation, Centers for Medicare and Medicaid (CMS), and the

renal networks are among the organizations that recommend an AVF. This is because it yields

better blood flow rates (BFR), lower risk of infection, a lower risk of clotting, more cost

effective to maintain and provide longevity. AVFs and AVGs are created by a surgical procedure
BUSINESS Plan 9

in the arm or leg to join an artery and a vein under the skin creating a new vessel. If available

vessels are not adequate a soft plastic is used to join the vein and the artery this is known as an

arteriovenous graft. The best treatment modality for ESRD is transplantation requiring a donor

match, but there is an acute shortage of donor organs national wide. According to 2014 data from

the United States Renal Data System approximately 100,000 ESRD patients were on the wait list

for kidney transplantation yet only 17,105 kidneys, came available. The only other alternative to

transplantation is dialysis. There are two main types of dialysis hemodialysis and peritoneal

dialysis. Hemodialysis is the most used treatment. Approximately 90% of ESRD veterans are on

hemodialysis. Hemodialysis involves pumping the patient’s blood through an external filtration

circuit then returning clean blood to the body. The artificial kidney or the dialyzer removes the

waste and extra chemical from the body lasting 3-5 hours per treatment for three times per week.

Access is gained into the dialysis shunt by using two large bore needles placed in a ladder or

button-hole technique.
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Market Analysis

Across all branches of the armed services, there are approximately 22 million veterans.

Of this number nine million are enrolled in Veteran Health Administration (VHA). Between

fiscal years 2007 to 2011 52,172 veterans transitioned to ESRD (USRD, 2015), and 90% of that

number receives hemodialysis as the therapy of choice (Watnick & Crowley, 2013). This uptick

in the incidence of ESRD prompted VA researchers teamed up with the University of Michigan

in 2012 to establish a national kidney disease registry to monitor kidney disease among veterans.

It was during this process VA researchers found that the rate of CKD was significantly higher

among veterans than the general population. The researchers determined that this was due to the

growing epidemic associated with the high frequency of chronic disease. Wang et al) this

concurred with the statistics of CKD among veterans been as high as 34% averaging 604 versus

187 per 100,000, when compared to the general population. USRDS also reported a 5% annual

increase in the diagnosis of ESRD

A study of two VA regions found that only 27% of the veterans who required chronic

dialysis care were actually receiving this care through the VA. 47% were outsourced and 25%

received dual care. This stands to reason that outsourcing this large percentage of care is a source

of increased cost to the VA system. The outsourced cost of dialysis grew 348% over a decade

(1993-2003) alone signaling the need to change the VA’s reliance on purchased dialysis care.

Once dialysis care is outsourced the VA cannot exert any cost containment measures, clinical

oversight or accountability for the quality of care provided by these private entities to the veteran

(Wang et al, 2013).

According to the USRD, there has been a 47-fold increase in patients receiving dialysis

over the last four decades. In 2013, 468,000 Americans received dialysis treatments accounting
BUSINESS Plan 11

for a significant portion of the Medicare budget. The two leading for-profit providers of dialysis

services are German-based Fresenius Medical care (FMC) and Colorado-based Davita

Healthcare Partners together these two companies account for 70% of the dialysis market

creating a solid competition in price growth. In 2015 Davita reported net income of 828 million

while FMC netted 1 billion in after-tax profits this all stems from dialysis services (See

Appendix B) (Shinkman, 2016).

Ultimately, the renal market is driven by the continuously increased prevalence of kidney

disease, and the high cost of treatment. The complications attributed to the disease have also

contributed to the push in the growth of the market. Hemodialysis cost an average of $89,00 per

patient per year. This averages approximately $618 per treatment for private insurers, however,

Davita have quoted at high as $1450 per treatment to some insurance plan. Medicare pays 80%

at a contracted rate of $296. However, under Medicare, the patient is responsible for 20% unless

they are declared indigent in which instance Medicaid picks up the tab bringing the total

treatment cost to $370. In addition, dialysis-related medication cost the patient an average of

$110 per month out-of-pocket. If what is required is not in the bundled plan the patient is sent to

the hospital costing an expensive emergency room visit and treatment at a cost of up to $10,000

in some hospitals. The VA pays $306 per treatment to its contracted providers. This came about

after Davita Healthcare successfully sued the VA in a litigation that lasted six years. The lawsuit

settled in 2017 claimed that the VA underpaid for dialysis services. The VA has not announced

its new contracted rate with Davita. The VA can perform dialysis treatment at a cost of $226 to

itself and the veteran receives all the other integrated care. This has causes veteran to favor the

VA system in addition to the copayment exemption and the standard cost of medication of $12

per month.
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Labor cost is a large portion of the operating cost for any dialysis unit. According to the

Department Public Health (DPH) regulations, a dialysis unit should have an administrator, a

medical director, medical staff, nurse manager, nursing staff and additional personnel. Additional

personnel includes patient care technicians (PCT) these are trained dialysis personnel who

participates in the care of the ESRD patient. The recommended dialysis-staffing model requires 1

PCT to 4 patients and 1 RN to 12 patients. However, these large facilities are violating the

recommended dialysis center staffing models possible in an attempt to curtail cost (See

Appendix D).

The existing dialysis unit at BPVAMC will be used for this expansion eliminating the

need for renovation cost. Fixed cost including the salary of each RN assigned to the dialysis will

remain unchanged. The unit has ten RNs at a patient ratio of 1:5. Adding the third shift will

increase this ration to 1:7 this is still below the recommended staffing requirement. The program

will need seven additional PCT to facilitate a ratio of 1:4. The salary will vary depending on

dialysis experience. The range will be 32,600 to 40,500, including benefits. Calculation of the

salaries at the maximum tier = $283 500 per year. RNs and PCT will work a compressed tour of

ten hours four days per week. There is one full-time unit clerk, the unit will need additional

social work hours and additional dietician hours. Other support services will be budgeted for

under different services.

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Budget Estimates

Site Selected BPVAMC

Planned Dialysis Stations 12
Planned Occupancy 100.00%
Default Assumptions
Maximum Annual # 156.00
Treatments Per Patient
Beneficiary Travel 0.42
Reimbursement Per Mile
Nominal Interest Rate 3.00%
Overhead Factor 12.00%

Lease Construction Cost 10.00

Amortization Period
Equipment Cost Amortization 5.00
Period (years)
Renovation Construction 40.00
Cost Amortization Period
(years)
Civilian Position Full Fringe 36.25%
Benefit Cost Factor
Non-Pay Inflation Rate 2.00%
Lease Escalation Factor 4.00%
Real Discount Rate 0.90%
% of Annual Savings Realized 90.00%
(Year 2-9)
% of Annual Savings Realized 75.00%
(Year 1)
Standardized Values
Total SF 7,402.50
Supply Cost Per Treatment $30.87
Pharmacy Cost Per $17.11
Treatment
Laboratory Cost Per 7.52
Treatment
Total Medicare Dialysis $256.35
Payment
Contract (National Average) $321.29
Payment
Nephrology Oversight 21.67
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Treatment Cost
National Overhead Cost 2.31
Local Overhead Cost $13.04
Calculations
Average Beneficiary Travel $1.96
Cost per Treatment
Total Medicare Cost per $295.33
Treatment
Total Contract (Facility- $337.86
Specific) Cost per Treatment
Total Contract (National $360.27
Average) Cost Per Treatment
2 Patient Shifts Per Day
# Patient Shifts per Day 2
# Patient Shifts per Week 4
Maximum Patient Capacity 48
(any point in time)
Maximum Annual # 7,488
Treatments
3 Patient Shifts Per Day
# Patient Shifts Per Day 3
# Patient Shifts per Week 6
Maximum Patient Capacity 72
(any point in time)
Maximum Annual # 11,232
Treatments
Annual Recurring Costs
BPVAMC Dialysis BPVAMC Expansion
Patient Shifts per day 2 shifts 3 shifts
Lease $0 $0
Operating $157,747 $157,747
Service Contracts $5,759 $6,495
Personnel $1,022,010 $1,284,715
Supplies $231,155 $346,732
Pharmaceuticals #128,120 $192,180
Laboratory $56,310 $84,465
Preventative Maintenance $68,480 $68,480
Beneficiary Travel $14,679 $22,019
Overhead $122,641 $154,166
Total Recurring Cost $1,806,900 $2,316,998
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Comparison Cost
Max patients (2 Max patients
Shift) 48 (3 Shift)
72
2 Shifts 3 Shifts
Make Scenarios Annual Per Treatment Annual Per
Treatment
VAMC Expansion $2,065,209 $276 $2,575,307 $229
2 Shifts 3 Shifts
Outsourced Annual Per Treatment Annual Per
Treatment
Medicare $2,211,430 $295 $3,317,145 $295
Contract (Facility $2,529,878 $338 $3,794,816 $338
Specific)
Contract (National $2,697,701 $360 $2,046,551 $360
Average)

Cost Savings Annual Per Treatment Annual Per

Treatment
Medicare $146,221 $20 $741,838 $66
Contract (Facility $464,669 $62 $1,219,510 $109
Specific)
Contract (National $632,492 $84 $1,471,245 $131
Average)
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Additional Financial Analysis

Break Even (% Capacity)

Shift 2 Shift 3

Internal Rate of Return

Shift 2 Shift 3
BUSINESS Plan 17

Payback Period (Years)

7

0
Payback Period Years

Shift 2 3 Shifts Column1

Chart Title

Net present Value (NPV)

$0 $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000

Column1 Shift 3 Shift 2

 BUSINESS Plan 18

Timeline

Year 1
Q1 Q2 Q3 Q4

Design expansion plan Submit budget Request leadership Hire and train the new
with direct input from proposal for the approval for third shift staff.
all services involved project expansion

Submit business plan Secure funding for the

for expansion of the expansion
renal program

Year 2
Q1 Q2 Q3 Q4

Have mock third shift Modify or refine Monitor patient Perform dialysis
roll out using in- necessary process to outcome, reduce specific patient
patient end-stage correct deficiencies inpatient admission, satisfaction survey
renal disease patients reduce cost, and other
Initiate third shift indicators to Report to agency
dialysis demonstrate
expansion success to
stakeholders
BUSINESS Plan 19

Conclusion and Feasibility Statement

This business plan is also in compliance with the T21 plan advocated by the Secretary of

the Department of Veterans Affairs which is aimed at expanding services, creating veteran-

centered delivery models and anticipated complex care with an emphasis on coordinated care

(Watnick & Crowley, 2013). This multi-facet approach is significantly important is renal care.

The goal of the program is to reduce the number of purchased dialysis care in the private sector

by moving as many veterans as possible into the VA system. Secondly, collaborate effectively

with the community outpatient clinics in the management of complications and comorbid of

dialysis example infections and anemia thereby decreasing avoidable hospitalizations and

ultimately promote efficient use of resources. It is anticipated that the improvement of effective

communication between VA and non-VA care providers, a coordinated effort and prompt

attention to abnormal laboratory parameters, and the continuation of antibiotic therapy started in

the hospital upon return to the community dialysis outpatient unit will yield positive patient

outcome and improved cost containment. The dialysis currently has only twelve chairs and there

is no space in the current area to expand therefore a new area needs to be renovated. While that is

proposed in a future budget my proposed expansion will be concentrated to a shift system. This

can be up and operational a lot faster. It is not effective or cost efficient to only provide dialysis

service to 17% of the total dialysis population. If the shift is expanded to include a third shift,

services will be provided to seventy-two veterans, a 50 % increase in the total number of

veterans currently been dialyzed. After this first phase of expansion, a fourth overlap shift could

be considered which would bring the total number to 96 a 100% increase. Thus, this writer

proposes that the expansion of the dialysis program to increase service, decrease the wait list,
BUSINESS Plan 20

and absorb some of the outsourced veterans in the community will inherently fulfill the mission

and vision on the VA. However, the project will need annual review and possible further large-

scale expansion to accommodate the continued increase in service needs. Additionally, a VA

financial auditor will need to do a feasibility study to show the expected profitability of the

expansion program.

.
BUSINESS Plan 21

References

Flythe, J. E., Katsanos, S. L., Kshirsagar, A. V., Falk, R. J., & Moore, C. R. (2016). Predictors of

30-day hospital readmission among maintenance hemodialysis patients: A hospital

perspective. American Society of Nephrology.

KDOQI (2015). KDOQI clinical practice guidelines for hemodialysis. Retrieved from

https://www.kidney.org

Shinkman, R. (2016). The big business of dialysis care. Retrieved from

https://catalystst.nejm.org/the-big-business-of-dialysis-care

Starzi, T. (2013). VA research on kidney disease. Retrieved 2017, from

https://www.research.va.gov/topics/kidney_disease.cfm

USRDS (2015). CKD in the United States. Retrieved from

https://www.usrds.org/2016/view/v1_08.aspx

Wang, V., Maciejewski, M. L., Patel, U. D., Stechuchak, K. M., Hynes, D. M., & Weinberger,

M. (2013). Comparison of outcomes for veterans receiving dialysis care from VA and

non-VA providers. BMC Health Services Research, 13(26).

Watnick, S., & Crowley, S. T. (2014). ESRD care within the US department of veterans affairs:

A forward-looking program with an illuminating past. American Journal of Kidney

Disease, 63(3), 521-529.

BUSINESS Plan 22

Appendix C

Machines/Seats Patient Employees Medical Annual Revenue

18 80 17 1 4 million

5 RN

Techs (8)

Biomed (2)

Clerk (2)

Source Massachusetts Medical Society

Typical Davita Unit
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Appendix D
Position Standard FTE Shifts 2 FTE Shifts 3
Medical Instrument 1 technician per 4 5.00 7.50
Technician (Hemodialysis) patients per shift
Staff Nurse (RN-Nurse II 1 RN per 12 patients per 3.00 3.00
shift. Minimum of 3 FTE
Nurse Manager (Nurse III) 1 FTE 1.00 1.00
MD- Nephrologist 11 hours/patient/year. 0.25 0.38
(Medical Director) Minimum of 0.25 FTE.
Maximum of 1.0 FTE
MD- Nephrologist (Staff 0.5 hours( 30 minutes) 0.14 0.21
Physician) per patient per month
Mid-level provider (nurse 0.2 hours (12 minutes) 0.24 0.36
practitioner/physician per patient per week
assistant)
Social Worker 1 per 100 patients 0.50 0.80
Dietitian 0.45 hours (27 minutes) 0.25 0.37
per visit. 2 visits/month.
Minimum of 0.25 FTE
Supply Technician 0.25 FTE 0.25 0.25
Biomedical Equipment 0.1 FTE 0.10 0.10
Support Specialist
Medical Support Assistant 1 FTE 1.00 1.00
(Clerk)
Pharmacy Technician 0.125 hours (7.5 0.15 0.23
minutes) per patient per
week
Total 11.88 15.19

Recommended Staffing Model (adapted and revised from VA documents)

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Appendix E

Chief of Medicare
MD
Chief of Nephrology
Chief Nurse, Ambulatory Care

Nephrology Care Coordinator

Pharmacy
Assigned to
Coordinator, supervised by Chief Amb Care
Dietitian Pharmacy Service,
Assigned to Patient
dad supervised by Asst.
care Svcs; Nurse Program Chief, Pharmacy
supervised by Chief Manager Assistant ARNP’s
Clinical Dietitian Supervised by chief or
Supervised by Supervised by
Nephrology
Chief Nurse business office

Psychologist
RN’S Assigned to Mental Health &
Social Worker Rehab Therapist Behavioral Sciences Svc;
Assigned to Social Work Assigned to PMRS; supervised by Asst Chief,
Service; supervised by SW MFH supervised by PMRS MH&BSS
Coordinator