Cost and Reimbursement as Determinants of the Quality of Diabetes Care: II. Indirect Influences on Cost

Abstract

Author’s note: This is the second of a three-part series on the cost and reimbursement issues that influence the delivery of diabetes care. As discussed in the first article of this series,1 the complexity of adequate diabetes care delivery that meets guidelines for care2 renders the direct costs of care higher than those for other forms of contemplative primary or specialty care. For any level of reimbursement, this means that the margin of profit is relatively slim. However, any economic activity, whether rendering a product or a service, also carries with it a set of indirect costs. These costs are inherent in conducting the economic activity; however, they are neither essential nor obviously related to the process of delivering the product or service itself. They are ancillary costs, which are unavoidable. The actions associated with them do not enhance either the cash flow or the profitability of the economic endeavor. Nevertheless, they are costs that must be met as conditions for the constructive economic activity to occur. In diabetes care delivery, these indirect costs are quite significant and, relative to other care delivery activities, fairly numerous. Without careful attention and control, they represent a substantial part of the risk of loss caused by excessive expenditures versus revenue in this area of medicine. In general, there are four categories of indirect costs related to diabetes care. They are: 1. costs related to guidelines for care and office operation; 2. costs of documentation for issues associated with the rendering of care but not directly involved in it; 3. costs related to arrangements for services and supplies to patients; 4. costs of communication for issues not pertinent to the direct care of the patient. For any given patient, many of these costs are reasonable and constitute expected costs of providing care. However, the demand for …