DNRS 6211 Week 5 Cost-Benefit Analysis Example

Cost-Benefit Analysis: Nurse Follow-Up Calls After Discharge From Inpatient Rehabilitation, Over One Year

Student Name

College of Nursing, Walden University

DNRS 6211: Finance and Economics in Healthcare Delivery

Instructor Name

Month Day, Year

Cost-Benefit Analysis: Nurse Follow-Up Calls After Discharge From Inpatient Rehabilitation, Over One Year

This paper asks whether a nurse follow-up call program for patients discharged home from a composite 18-bed inpatient rehabilitation unit pays for itself. The horizon is the first 12 months of the program, including its start-up costs, and it does not change anywhere in the analysis. The perspective is the hospital's: costs are what the hospital spends, and benefits are costs the hospital avoids. The program would call each patient discharged home at 48 hours and again at 7 days to review medicines, symptoms, equipment, and follow-up appointments, and would route problems to the rehabilitation physician or the patient's primary care clinician.

Cost Inventory

Costs are separated into one-time items, incurred to start the program, and recurring items, incurred every month it runs. Each amount points at the record that supplied it. Hourly costs for nurses use the unit's average registered nurse rate of $45.00 plus the 30% benefit rate from the human resources memo, or $58.50 an hour.

One-time costs. Writing the call protocol and script: 40 nurse hours, $2,340. Training 18 registered nurses for 2 hours each: 36 hours, $2,106. Building a call template in the electronic record: 12 hours of information technology analyst time at $70 an hour from the department's internal billing rate, $840. One-time total: $5,286.

Recurring costs. The unit discharged 447 patients last year, and 80% went home, according to its discharge disposition report, giving 358 patients. Two calls each at an average of 25 minutes, including documentation and failed attempts, from the pilot month's time log, is 298 hours, or $17,452. Manager review of flagged calls, 2 hours a month at $74 an hour, is $1,776. Recurring total: $19,228.

Total first-year cost: $24,514.

Benefit Inventory

Each benefit is paired with the method used to value it. The analysis uses the avoided cost method, in which a benefit is valued at the cost to the hospital of the event the program prevents, which is standard for cost-benefit work from a provider perspective (Drummond et al., 2015).

Avoided readmissions. The unit's quality report shows an 11% 30-day readmission rate for patients discharged home, or about 39 readmissions a year. A retrospective study of a commercial health plan found that members who received a follow-up call within 14 days of discharge had 23.1% lower odds of a 30-day readmission (Harrison et al., 2011). Because that study was observational and in a different population, this analysis assumes a smaller effect, a 15% reduction, or about 5.9 readmissions avoided. The hospital bears the cost of a readmission only for patients in its bundled payment and accountable care contracts, 60% of the unit's discharges according to the finance office's payer report. For the rest, paid fee-for-service, a readmission brings revenue, so avoiding it is not counted as a benefit. At an average cost of $14,000 per readmission from the hospital's cost accounting system, the benefit is $49,619.

Avoided emergency visits without admission. The same report shows an 8% rate of emergency visits within 30 days. With the same 15% reduction and 60% share, and an average cost of $1,100 per visit from the cost accounting system, the benefit is $2,835.

Total monetized benefit: $52,454. Net benefit: $27,940. Benefit-cost ratio: 2.14.

Sensitivity

Two assumptions drive the result more than any others: the size of the effect on readmissions and the share of patients whose readmissions the hospital pays for.

If the effect is half as large, 7.5%, the benefit falls to $26,227 and the program still covers its cost, with a net benefit of $1,713. The break-even effect is a reduction of about 7%.

If the share of patients in risk-bearing contracts is 40% rather than 60%, the benefit falls to $34,969 and the net benefit to $10,455.

If both move against the program at once, a 7.5% effect and a 40% share, the benefit is $17,485, and the program loses $7,030 in its first year. The conclusion therefore holds under either assumption alone but fails if both are pessimistic. Because the share of risk-bearing contracts is expected to rise, the analysis leans toward adopting the program, while measuring the readmission effect from the start so that the most uncertain assumption is replaced by the unit's own data within 6 months (Reiter & Song, 2021).

Benefits Left Out on Purpose

Several benefits are real but are not converted into money. Patients and families often feel anxious in the first days at home, and a call from a nurse they know may reduce that anxiety. Medication discrepancies found on the call may prevent harm that never leads to a hospital visit. Caregivers may feel more confident. Each of these could be given a dollar value using methods such as willingness to pay, but the values would rest on assumptions far weaker than those behind the readmission figure. Adding them would raise the total and lower its credibility, because a reader who doubts one soft number tends to doubt the whole analysis. They are reported here as reasons to adopt the program beyond the financial case, not as part of it.

Recommendation

The program should be adopted for one year as a measured trial. Its first-year cost of $24,514 is small beside the unit's $2.3 million operating budget, most of it is nursing time that can be scheduled into lower-census days, and the analysis shows a net benefit unless both key assumptions turn out pessimistic at the same time. Three measures will be tracked monthly from the first call: the 30-day readmission rate for patients discharged home, split by whether they were reached; the rate of emergency visits within 30 days; and the share of discharges in risk-bearing contracts. After 6 months, the unit's own readmission effect will replace the assumed 15% and the analysis will be run again. If the recalculated benefit-cost ratio falls below 1.0 and the contract share has not risen, the calls will be narrowed to the patients at highest risk, such as those discharged on anticoagulants or with new feeding tubes, rather than stopped outright.

References

Drummond, M. F., Sculpher, M. J., Claxton, K., Stoddart, G. L., & Torrance, G. W. (2015). Methods for the economic evaluation of health care programmes (4th ed.). Oxford University Press.

Harrison, P. L., Hara, P. A., Pope, J. E., Young, M. C., & Rula, E. Y. (2011). The impact of postdischarge telephonic follow-up on hospital readmissions. Population Health Management, 14(1), 27-32. https://doi.org/10.1089/pop.2009.0076

Reiter, K. L., & Song, P. H. (2021). Gapenski's healthcare finance: An introduction to accounting and financial management (7th ed.). Health Administration Press.