NORTHWESTERN UNIVERSITY
MEDINF 403-DL: MEDICAL INFORMATICS
Business Case: Virtual Colonoscopy
Professor Vikram Sheshadri
Eric Abbott, Marla Kouche, Chris Davis and Jeremiah Rothschild
5/9/2010
Contents
Project / Investment Description ................................................................................................................... 3
Business Need ........................................................................................................................................... 3
Alternatives ............................................................................................................................................... 3
Business Risks/Impacts If Not Performed ................................................................................................ 4
Business Sponsor and Stakeholder Expectations .......................................................................................... 5
Alignment to Strategic Objectives ............................................................................................................ 5
Executive Sponsor and Stakeholders ........................................................................................................ 5
Expected Benefits ..................................................................................................................................... 6
Purpose and Acquisition Strategy ................................................................................................................. 6
Technology Acquisition ............................................................................................................................ 6
Risks and Dependencies........................................................................................................................ 8
Resources .............................................................................................................................................. 8
Table 1.
Estimated Costs ................................................................................................................. 9
Risks / Issues ......................................................................................................................................... 9
Benefits Realization .................................................................................................................................... 10
Economic Benefit.................................................................................................................................... 10
Patient Care ............................................................................................................................................. 12
Quality .................................................................................................................................................... 12
Market Value .......................................................................................................................................... 12
Industry Standards .................................................................................................................................. 12
Financial Analysis....................................................................................................................................... 13
Recommendation ........................................................................................................................................ 14
Works Cited ................................................................................................................................................ 15
Project / Investment Description
Business Need
A colonoscopy is an invaluable procedure used in the early detection, intervention, and treatment of colon
abnormalities such as lesions and polyps that may degenerate into deadly cancerous growths. While there
are less invasive procedures (such as sigmoidoscopy and fecal occult blood tests), colonoscopies are
considered the optimal method for the aforementioned clinical evaluations (Northwestern University
MED INF 403, 2010). In the U.S., there are an estimated 130,000 new cases of colorectal cancer and
60,000 deaths from it each year (Northwestern University MED INF 403, 2010). Furthermore, the cancer
risk increases with age, a family history of colorectal cancer, and the size and age of colon polyps (if
present). Given that early detection and treatment has a 90% cure rate, the intrinsic value of a
colonoscopy is self-evident (Northwestern University MED INF 403, 2010).
Traditionally, there has been only one way to perform a colonoscopy. Inserting an optical colonoscopy
(OC) consisting of a long, flexible tube that has an integral camera in a sedated patient’s rectum to inspect
the colon. This approach, while still considered the ‘gold-standard’, has many drawbacks and potential
complications that are enumerated in subsequent sections below. More recently, a new method called
virtual colonoscopy (VC) is available that instead uses sophisticated imaging processing software to
construct a three-dimensional visualization of a patient’s bowel using hundreds of images obtained from a
computed tomography (CT) scanner. The inherent advantages of this method are many, but none is more
fundamental than promoting and encouraging pertinent demographics (i.e., “at risks patients”) to elect to
undergo a colonoscopy.
Alternatives
As explained above, the closest alternative to a VC is an OC. While the comparative efficacy of the two
approaches has been heavily debated, most investigators are satisfied that VC is clinically comparable to
that of an OC in terms of the detection of colon abnormalities (National Institutes of Health, 2010). That
said, each procedure has advantages and disadvantages. VC predominately eliminates the need to sedate
a patient, thus greatly shortening the duration of a clinical visit and reducing overall costs. Importantly, a
VC minimizes the risk of a bowel perforation compared to an OC procedure. On the other hand, the OC
alternative is necessary for visual confirmation and polyp removal if the VC procedure detects
abnormalities. Furthermore, an OC procedure is less costly than a VC procedure (by approximately $300
per procedure), and unlike VC, it is covered by Medicare and most private insurance health programs
(Northwestern University MED INF 403, 2010, Inview, 2010). As well, it does not expose the patient to
consequential radiation (from the CT scanner), and has the capability of removing any found polyps
concurrent with its discovery. There is much evidentiary disagreement about the comparative
effectiveness of detecting small polyps (especially those that are less than 6mm in diameter) by either
method. Some researchers claim that the OC method misses as many as 18% of polyps 6mm and larger
(Northwestern University MED INF 403, 2010). Conversely, others claim that the VC method is
unreliable in detecting polyps of 6mm diameter and smaller (National Institutes of Health, 2010, UCSF,
2004, Pfau, 2007). If polyp size (and its corresponding proportional relevance in terms of cancer risk
potential) were solely the decision criteria based on the above claims, then the OC method would
seemingly be at a disadvantage relative to the VC method. Nonetheless, the OC procedure remains a
much more popular choice with clinicians for the primary reasons above and the fact that the VC is a
relatively new, higher-cost procedural option not widely covered by government medical insurance plans.
Business Risks/Impacts If Not Performed
There are two ways to view the business risks of not offering VC as an alternative to OC procedures. The
clinically-based argument is that VC is a viable option to certain categories of patients for whom an OC
procedure either is not palatable or medically possible (i.e., a herniated bowel). Moreover, given that the
VC procedure may be used as a filter for the more complicated OC procedure, it represents a reduction in
risk from a medical liability standpoint associated with complications arising from a poorly-performed
OC procedure. Examples of the latter include bowel perforation, missed polyp detection, and incomplete
bowel analysis.
The business-based argument is that since the VC procedure has been shown to be clinically comparable
to that of an OC, its availability gives a healthcare facility a clear marketing advantage over other
facilities that don’t offer VC as a choice. This is especially relevant as educated patients seek alternative
and advanced care options, and a facility that doesn’t offer VC as an option may be deemed or judged as
antiquated or deficient in terms of its approach to the delivery of modern healthcare.
Business Sponsor and Stakeholder Expectations
Alignment to Strategic Objectives
In a leading health system, patients must be offered the latest and most effective options for colon cancer
screening. Despite limited reimbursement from insurance providers, it has been shown that competitors
have adopted this modern VC as an elective option. Many patients who would not ordinarily be screened
for colon cancer are now opting for the VC procedure, as it is faster and less invasive. While the VC has
limitations in comparison to the optical colonoscopy, it allows a healthcare provider to attract a different
market segment that would not traditionally undergo a colonoscopy. As a private health system with a
responsibility to the community, offering VC as an option, on a trial basis, allows a healthcare provider to
test the market and phase in the technology based on demand.
Executive Sponsor and Stakeholders
Although the Food and Drug Administration has approved use of the VC as an alternative for detection of
colon cancer, public insurance plans such as Medicare and Medicaid do not currently provide
reimbursement. However, there are private insurance companies that reimburse for VCs in an effort to
encourage patient screening. Primary stakeholder groups affected by the introduction of this new
preventative testing option include:

Patients

Patients seek the most convenient and effective testing options to
maintain quality of life near their place of residence

Hospital Administrators

Administrators seek to provide effective testing options that meet the
needs of their patients where revenue for the procedure exceeds the cost
of offering the option

Clinicians,
Gastroenterologists,
Radiologists

Clinicians seek to have access to the latest technology that advances the
ability to diagnose and treat colorectal cancer.
As with any new technology, adoption takes time. Given the near equal effectiveness to the gold standard
colonoscopy, it is only a matter of proving success before all the stakeholders embrace the VC option. As
volumes increase, then insurance companies will be forced to reimburse for the option and the cost for the
procedure will approach the cost for the traditional option. Hospital administrators and clinicians are
eager to use new technologies that improve health outcomes. The VC is a great screening tool for
patients that eliminate the need for an invasive procedure except in cases where polyps are detected.
Expected Benefits
To be considered a Center of Excellence in the diagnosis and treatment of colorectal cancer, a leading
healthcare facility must have the latest technologies to maintain the level of care expected from such a
facility. The benefits of offering this testing option is not just associated with the test and treatment itself,
but also the marketing awareness of how advanced such a hosting facility is perceived compared to
competitors. Further, having such an option serves as input in the decision process of a prospective
patient, when evaluating care facilities for their health needs.
Purpose and Acquisition Strategy
Technology Acquisition
The purpose of VC is to provide an effective, minimally invasive, rapid, and more comfortable way to
screen for colon cancer without the need for sedation. This procedure is less embarrassing for the patient
and relieves some of the anxiety of having a colonoscopy. Studies have shown that patients prefer VC
over OC for routine screening which may improve compliance with repeat exams (Svensson, et al, 2002,
Angtuaco, et al, 2001, Gluecker, et al, 2003). VC is able to provide more information about the proximal
side of a lesion that is not visible with OC. Additionally, the use of CT technology also allows for the
detection of other intra-abdominal pathology not seen with OC. The scope of this acquisition is to add
one VC workstation to the hospital radiology department for use with an existing high resolution 64 slice
CT scanner.
The technology employed will be the Viatronix V3D Colon turnkey system (Viatronix, Inc., 2010). This
includes all hardware and software components needed to interact with existing CT scanners to capture
the images. The V3D Medical Imaging Workstation consists of a 3D processor which receives the 2D
DICOM images from a medical image acquisition device (CT) and generates a 3D model of the scan.
The V3D viewer receives this 3D model created by the processor and utilizes advanced graphical
algorithms to display both the 3D model and the original 2D images in different anatomical imaging
planes. The V3D viewer allows the user to interactively fly through the organ of interest and provide
task-specific 3D medical imaging, analysis and measurement tools.
Additional equipment includes a CO2 insufflator to dilate the colon during the exam.
Figure 1.
Medical Image Acquisition Device
Source: (Viatronix, Inc., 2010).
Risks and Dependencies
A key dependency includes being able to schedule additional studies on the existing CT equipment. If CT
exam times are not available, or if demand of this new technique exceeds capacity, an additional CT
scanner may need to be purchased. A policy must be in place in the endoscopy lab to ensure OC can be
performed on patients with abnormal findings on the same day in order to prevent repeat bowel prep for a
future exam. The time available to schedule the CT resource for VC must be early morning to
accommodate this workflow for patients with abnormal exams to provide OC on the same day.
Resources
Resources for implementation include IT installation and testing, training for CT technologists to perform
the exam and training for radiologists to interpret the exams. Fewer staffing resources are needed to
perform VC. Conventional OC requires a nurse for pre-procedure check-in and prep, a nurse and/or tech
to assist during the procedure including administering sedation, and a post-procedure recovery nurse to
care for the patient until the sedation has worn off. VC only requires a CT technologist to perform the
exam. No sedation is required for VC; therefore, no recovery time is required after the exam is
completed. A high resolution 64 slice CT scanner is an additional resource required to perform the exam.
Table 1.
Estimated Costs
Equipment Type (Hardware / Software)
Unit Price
One Time Cost
Viatronic V3D software and hardware:
$100,000 (estimated)
CO2 Insufflators:
$15,000
Training
Included in the price of software for both CT techs
and radiologists
Maintenance and Operations
Service contract/maintenance:
18%
Additional maintenance on CT scanner:
None – included in CT service contract.
Risks / Issues
Medicare does not routinely cover the cost of VC for screening purposes (Centers for Medicare and
Medicaid Services, 2010). While both Tricare and MediCal will not cover for routine screening
regardless of risk factors (with prior authorization), VC is covered for diagnostic reasons where OC is
medically contraindicated, such as patients on chronic anticoagulation therapy that cannot be interrupted
or where OC cannot be completed due to a known colonic lesion, structural abnormality, or other
technical difficulty that prevents adequate visualization of the entire colon (Tricare, 2010, MediCal Policy
Department Clinical Affairs Division, 2010). According to an article published on PR Newswire, March
2, 2010, private insurance companies are starting to cover the cost for VC, including CIGNA, United
HeathCare, and Anthem Blue Cross Blue Shield. Those with Flexible Spending Plans can also use this
money to cover (PR Newswire, March 2, 2010).
Benefits Realization
In order to evaluate the benefits derived from the adoption of this procedure, a benefits analysis has been
performed in the following areas: Economic Benefit, Patient Care, Quality, Market Acceptability and
Industry Standards.
Economic Benefit
1. Revenue/Reimbursement Impact: The net annual projected benefit of shifting procedures to VC
from a standard of OC indicates a potential growth of $900,000. Annually, the hospital performs
~7,100 colonoscopies (hypothetical) with a net recovery rate of $2.8 mm under the traditional OC
method (represents reimbursement less costs of complication). (Refer to “Notes” within
Financial Modal, Pg14). Although VCs are only reimbursed partially (not through Medicare, but
certain private and managed care companies will reimburse under the right circumstances and
proper CPT coding mechanisms (Payer Mix and the Adoption of HIT, April 2007), the actual
reimbursed cost of a VC is higher ($1,200 versus $900 for an OC). (Virtual Colonoscopy Shapes
the Future, MedInf 403). Additionally, VC rarely has the number of complications due to
perforation (creating costs that must be absorbed by the hospital). VC implies a generated “net”
reimbursement of $3.8 mm under like conditions.
The following table delineates the calculations of the Revenue/Reimbursement Impact:
Table 2.
Revenue/Reimbursement Impact
Procedural Cost Recovery (Nationwide):
Medicare cost
# of Colonoscopies Performed
OC
$
Annual Cost of Procedure
12,780,000,000
Cost of Complication
Annual Complications
50,000
142,000
Annual Cost of Complication
Secondary Procedure: Therapeutic C
Cost of Procedure
Incidence of 2ndary procedure
Cost of secondary procedure
Total Healthcare Cost
VC
$
900
14,200,000
Variance f(u)
300
17,040,000,000
4,260,000,000
-
1.000%
7,100,000,000
-
n/a
1,100
1,420,000
1,562,000,000
-
$ 19,880,000,000
1,200
14,200,000
$ 18,602,000,000
1,278,000,000
Not considered: Reduction in cost over time…
Impact on JEMC Hospital:
# of Colosopies Performed
Annual Pricing
Expected Reimbursement
7,100
6,390,000
8,520,000
100%
Cost of Complications
35% VC partially covered
3,550,000
Cost of Secondary Procedure
Estimated JEMC Cost Recovery
7,100
-
$
2,840,000
Assumed not covered by insurance
781,000 Assumed to be covered by insurance
$
3,763,000
Net Top Line Benefit of VC over OC
$
923,000
(Refer also to “Notes” within Financial Modal, Pg14)
2. Increase in number of procedures performed: A VC takes 10-15 minutes to perform, versus an
OC that will take procedural resources and clinician involvement more than an hour (American
Cancer Society website). As a result, a VC is 4 times more efficient to perform than an OC.
Changing to VC will free resources (people and equipment) to perform other value added
services. Assuming a conservative 10% improvement in efficiency, this could add the potential
of $280,000 of incremental annual billable activity.
3. General volume increase of colonoscopies: Since VC has not been adopted by competitors within
our community, volume could grow to achieve a 20% shift of market share. This would increase
this hospital’s volume by ~2,800 or $1.6mm in annual new reimbursement.
Patient Care
Colorectal cancer is the second leading cause of cancer death in the United States with 130,200 newly
diagnosed cases and 56,300 deaths in 2000. 152,000 newly diagnosed cases and 57,000 deaths in 2002
are predicted. Since it takes up to 10 years for a colonic polyp to grow to a size with a high likelihood of
invasive cancer, timely and accurate patient screening with subsequent polyp removal can prevent over
90% of malignant colorectal cancers. Early detection of colorectal cancer can reduce mortality by over
50%. Early detection can reduce by 30 incidences annually. (American Cancer Society Website)
Patient Friendliness: As opposed to the invasive approach, VC is a much less invasive procedure without
the need for sedatives and is relatively shorter than an OC. This patient friendly technique in turn helps to
convince patients to undergo the procedure regularly. It is noted, however, that patients will continue to
have to undergo the preliminary “bowel cleansing” as a preparatory measure.
Quality
VC not only can cover a greater area of the colon (typical VC misses roughly 15%), the technique renders
the colon a green color for examined areas and red as missed path. These qualitative measures greatly
improve the ease of testing. (Virtual Colonoscopy, MedInf 403)
Market Value
VC aligns to a strategy of being perceived as on the “cutting edge” acute care facility. As we build out a
marketing campaign, VC gives this hospital a chance to take a progressive approach within the
community. Demonstrating the adoption of incremental new technologies help this hospital gain
community appeal, recruit top-tier clinical resources, and drive strategic long-term objectives.
Industry Standards
Due to its effectiveness, VC has been approved by the U.S. Food and Drug Administration as a screening
tool for colon polyps and cancer. It is quickly becoming a mainstream technology in many markets.
Financial Analysis
Table 3.
Financial Analysis
Project Name: Virtual Colonoscopy
A) Investment Detail ($)
Description
Capital Item
1
2
2
3
4
5
6
Hardware/software: Viatronix*
CO2 Insuflator*
Development interface engine
Development storage
Maintainence & Support
Subtotal
Sales Tax/Shipping
Investment
100,000
15,000
20,000
25,000
6.58%
Amount
Year 2
Year 1
Total
Year 3
Year 4
100,000
24,300
24,786
25,282
25,787
20,000
25,000
100,155
-
160,000
10,528
24,300
1,599
24,786
1,631
25,282
1,664
25,787
1,697
245,155
17,118
170,528
25,899
26,417
26,945
27,484
262,273
Other Capitalizable Cost (installation, testing, preparation for use)
Total Investment
-
* Obtained from Viatronix, VC vendor. Pricing range $50-150k, depending upon options.
B) Investment Impact on Operations ($)
Year 0
Year 1
Year 2
Year 3
Year 4
Year 5
1) Revenue Enhancement (Incremental Sales)
1
2
Revenue Reimbursement
Incremental Market Capture
Net Sales Increase (driven by investment)
-
92300
160000
230750
400000
461500
800000
461500
800000
461500
800000
252,300
630,750
1,261,500
1,261,500
1,261,500
Assumes a 10% adoption in Year 1, 25% in Year 2, 50% in Year 3 and 100% in Years 4 & 5.
2) Incremental Cost Change
(a) Incremental Savings/Cost Avoidance
1
Efficiency Savings
Total
28,000
70,000
140,000
280,000
280,000
28,000
70,000
140,000
280,000
280,000
(b) Incremental Expenses
1
2
3
Depreciation
Labor/Direct Costs of Testing
Maintenance/Support
4
Training & Implementation Costs
5
Market Awareness Launch
6
7
Physician Advocacy Program
Parallel/Pilot Considerations
8
Facility/Space Needs
-
9
Malpractice Insurance
-
Total
(c) Total Incr. Savings/(Expense) -- (a)+(b)
Net Financial Impact
-
(56,843)
(56,843)
(56,843)
(56,843)
(56,843)
(300,000)
(300,000)
(300,000)
(300,000)
(300,000)
(25,899)
(26,417)
(26,945)
(27,484)
(262,273)
(50,000)
(40,000)
(25,000)
(25,000)
(20,000)
(100,000)
(100,000)
(75,000)
(75,000)
(74,999)
(30,000)
(30,000)
(30,000)
(30,000)
(30,000)
(200,000)
(100,000)
-
-
-
-
-
-
-
-
-
-
-
-
(762,742)
(653,260)
(513,788)
(514,327)
(744,115)
-
(734,742)
(583,260)
(373,788)
(234,327)
(464,115)
(482,442)
47,490
887,712
1,027,173
Base Case Worst Case
Best Case
797,385
Range
Net Present Value (3 Year)
$315,237
$252,190
$378,285 $200-400k
Net Present Value (5 Year)
Payback Period
$1,667,387
2.5
$1,333,910
2.0
$2,000,865 $1.4-2mm
3.0 2-3 Years
Years
Notes on Financial Analysis:
1.
In order to provide quantifiable benefits, we needed to make assumptions about a hypothetical
hospital that is looking to purchase this solution. We assumed that the hospital was a typical, standalone, 250 bed acute care facility operating in a competitive community.
2.
It is assumed that the community in which this hypothetical hospital resides also has two other
competing hospitals.
3.
Equipment data is obtained from a VC vendor, Viatronix Systems.
Recommendation
The evaluation team recommends investment in the VC technology to differentiate this hospital’s health
system by providing an effective option for colorectal cancer screening. The business case indicates a
likely return on investment, and the pilot approach will mitigate organizational risk during adoption. The
next steps are to initiate a project team to support the sourcing process and begin development of an
implementation and deployment plan.
Works Cited
American Cancer Society. Retrieved May 1, 2010 from http://www.americancancersociety.org
Angtuaco TL; Banaad-Omiotek GD; Howden CW. (March 2001). Differing attitudes toward virtual and
conventional colonoscopy for colorectal cancer screening: surveys among primary care
physicians and potential patients. Am J Gastroenterology, 96(3):887-93.
Centers for Medicare and Medicaid Services. Retrieved April 25, 2010 from
http://www.cms.gov/mcd/viewdecisionmemo.asp?from2=viewdecisionmemo.asp&id=220&
Gluecker TM; Johnson CD; Harmsen WS; Offord KP; Harris AM; Wilson LA; Ahlquist DA. (May
2003). Colorectal cancer screening with CT colonography, colonoscopy, and double-contrast
barium enema examination: prospective assessment of patient perceptions and preferences.
Radiology, 227(2):378-84.
InView Imaging. Virtual Colonoscopy. Retrieved April 20, 2010 from
http://www.inviewimaging.com/virtual-colonoscopy.htm
Kim, D, Pcikhardt, P., Taylor, A., Leung, W., Winter, T., Hinshaw, L., Gopal, D., Reichelderfer, M.,
Hsu, R., Pfau, P. (Oct. 4., 2007). CT Colonoscopy versus Colonoscopy for the Detection of
Advanced Neoplasia. The New England Journal of Medicine, 375:14, 1401-1412.
Medical Policy Department Clinical Affairs Division. Virtual Colonoscopy (CT Colonography).
Retrieved April 25, 2010 from
https://www.medicalcardsystem.com/NR/rdonlyres/AE4768DD-0B5D-4066-A46674A13B4B0720/3774/VirtualColonoscopy1.pdf
Virtual Colonoscopy Shapes the Future, MedInf 403, Handout from Dr. Shesadri
National Institutes of Health. Computer-Aided Polyp Detection Software in Combination with Virtual
Colonoscopy is as Effective as Traditional Colonoscopy. Retrieved April 20, 2010 from
http://nih.gov/news/pr/dec2005/cc-01.htm
PR Newswire (March 2, 2010). President Obama Gets Virtual Colonoscopy (CT Colonography) But
Medicare Denies CTC Coverage to Seniors. Retrieved April 25, 2010 from
http://www.prnewswire.com/news-releases/president-obama-gets-virtual-colonoscopy-ctcolonography-but-medicare-denies-ctc-coverage-to-seniors-85954667.html
Svensson MH; Svensson E; Lasson A; Hellstrom M. (February 2002). Patient acceptance of CT
colonography and conventional colonoscopy: prospective comparative study in patients with or
suspected of having colorectal disease. Radiology, 222(2):337-45
Tricare. Covered Services. Retrieved April 25, 2010 from
http://www.tricare.mil/mybenefit/jsp/Medical/IsItCovered.do?kw=Colonoscopy&topic=Men
Viatronix. Products: V3D-System. Retrieved April 25, 2010 from
http://www.viatronix.com/3d-medical-imaging.asp
Virtual Colonoscopy. Retrieved April 20, 2010 from
http://digestive.niddk.nih.gov/ddiseases/pubs/virtualcolonoscopy/
Vosmer, Corrine, Payer Mix and Adoption of HIT, Georgetown Pub Policy Inst, Washington, April 2007.
Wong, K. (2004). Study finds virtual colonoscopy not ready for widespread use. University of
California at San Francisco. Retrieved April 20, 2010 from
http://news.uscf.edu/releases/study-finds-virtual-colonoscopy-not-ready-for-widespread-use/