Office spirometry is a standard of care for the diagnosis and management of asthma and COPD, for screening of cigarette smokers, and for the evaluation of a variety of symptoms. Limited available data from payors indicates a small penetration of office spirometry in patients seen with respiratory related diagnostic codes. The penetration is much smaller in HMO plans presumably due to financial constraints. The environment of imploding reimbursement and rising costs appears to represent a barrier to the utilization of office spirometry in primary care. We present a practice administration tool that is useful in determining the financial viability of purchasing an office spirometer to perform basic pulmonary function testing.
We used a managerial concept called cost-volume-profit (or breakeven) analysis. This approach quantitates the relationship among reimbursement, volume, variable cost, fixed cost, and payor mix. The breakeven volume can by calculated by dividing the fixed costs by the contribution margin, which is the difference between receipts per test and variable cost. The standard model was adapted to account for variance in revenue from multiple payors, and for multiple types of tests performed by the instrument.
We created an Excel calculator that facilitates the analysis. The calculator guides the user through the process of inputting data related to fixed costs, variable costs, payor mix, and revenues. The breakeven volume is calculated.
We have developed a tool that utilizes the technique of cost-volume-profit analysis. We believe that it should facilitate the efforts of physicians to evaluate the financial viability of purchasing an office spirometer.
The ability to perform a financial analysis may address one of the barriers that appears to contribute to the low utilization of office spirometry by primary care physicians.
E. Diamond, None.