Administering immunizations to patients in your practice is a service and a convenience. And for many primary care offices, it’s a huge part of their business—albeit one fraught with economic challenges. Nonetheless, physicians who spoke with Medical Economics say that ceasing to provide vaccines is not an option since immunizing patients is the right thing to do.
For practices to be able to serve patients, the business case for providing vaccines is as important as the moral one.
"In our five-physician office, we spend close to a half-million dollars a year buying vaccines. It is far and away our biggest expenditure, second only to physician salaries,” says Jesse Hackell, MD, FAAP, vice president and chief operating officer of Pomona Pediatrics, PC, in Pomona, New York. “If we were any other business, we would expect to make a 50% to 100% profit on that expenditure. But ‘profit’ is a word with dirty connotations when you’re dealing with children’s health and medical care. We don’t get treated the way other businesses do and yet our reporting requirements and safety requirements are probably a lot more intense than a whole lot of other businesses.”
“This is such an important service to patients—and without being too grandiose—to the country and the profession,” says Charles Cutler, MD, FACP, chair of the American College of Physicians’ Board of Regents and a practicing internist in Norristown, Pennsylvania. “If you get a vaccine, you’ll very likely prevent an illness down the road, and that is really one of the most important things that a doctor or medical profession can do.”
Making the numbers work
According to the American Academy of Pediatrics (AAP), viable payment for vaccine services accounts for not just practices’ cost of purchasing the products themselves, but also the overhead associated with stocking and properly administering immunizations.
In a position paper revised in March 2012, the AAP sets forth separate payment recommendations for the purchase and administration of vaccines.
As part of The Business Case for Pricing Vaccines, the AAP states: “When the direct and indirect expenses are totaled for the vaccine product, estimates range from 17% to 28% depending on the practice.” Therefore, appropriate payment for vaccine purchases should account for not just the purchase price of the vaccines, but also indirect expenses including personnel costs, storage costs, insurance against loss, allowance for waste and nonpayment, as well as the expense of having funds tied up in inventory. And by the AAP’s calculations, this means that practices should strive for vaccine-purchase payment of “at least 125% of the current CDC vaccine price list for the private sector.”
But while this is a helpful benchmark to guide practice negotiations with private payers, the advice is moot for vaccines practices receive at no cost as part of the Vaccines for Children (VFC) program, which is federally funded but controlled by individual states. “There are a lot of costs involved with the VFC that are not included [reimbursed] because the physician can’t mark up the vaccine,” notes Edward Zissman, MD, FAAP, of Altamonte Pediatric Associates in offices north of Orlando, Florida.
Both sets of vaccines—state provided and privately purchased—are eligible for separate payment for administration, however. This fee is intended to cover the expense of supplies such as syringes, cotton swabs, rubbing alcohol, etc., as well as the time required to educate patients/parents, follow safety procedures, calm the child if necessary, and complete required documentation for the patient’s chart and state vaccine registries. Although VFC administration fees used to vary greatly from state to state, Zissman notes, the Affordable Care Act mandates that it be equal to Medicare rates.
When it comes to practice-purchased vaccines, the AAP also states that administration payments need to “adequately cover those costs to the practice which are separate from the direct and indirect costs associated with the vaccine product” and “be at least 100% of the current Medicare Resource Based Relative Value Scale (RBRVS) physician fee schedule.”
But in reality, Zissman says that “the administration [payment] of a vaccine is whatever you can negotiate with the company, and negotiations are very difficult.”
Not all physicians paint quite so bleak a picture.
For example, James Loehr, MD, a family doctor in Ithaca, New York, who serves as the American Academy of Family Physicians’ liaison to the CDC’s Advisory Committee on Immunization Practices, says that while practices do have the potential to lose money on the purchase of vaccine product, he contradicts the idea that providing immunizations costs more than it pays. “The administration codes [for vaccines] are a huge revenue generator—absolutely huge,” he says.
This earning opportunity for practices expanded in 2012 with a rule change spearheaded by the AAP that increased the payment for each component of a combination vaccine, Loehr says. “So in 2011, if I was giving a combination vaccine with five components, I might get paid $40 for the administration plus the cost of the vaccine. After [the rule change], I might get paid over $100 for the same amount of work. That was huge in making immunization viable and cost-effective,” he adds.