Healthcare administrators should keep informed of new, cost-effective treatments that can reduce healthcare costs and improve outcomes. 

At a Glance
  • Hospital finance leaders should perform economic analyses of emerging treatments for chronic conditions that could provide cost-effective alternatives to generally accepted standards of care.
  • One such treatment for diabetic foot ulcers (DFUs) is noncontact low-frequency ultrasound, which has been shown to reduce both costs and healing times associated with these conditions. 
  • By reviewing results of clinical trials to understand the costs and treatment considerations for DFUs and other chronic conditions, finance leaders can engage in informed conversations with physicians on how best to manage costs.

Managing the costs of care associated with chronic conditions is of primary concern for hospitals and health systems responding to reform-driven pressures to lower their overall costs of care. To be able to contribute meaningfully to discussions of how best to control these costs, finance leaders and other administrative executives should understand the clinical challenges posed by these conditions and the treatment options that are available to physicians. 

Consider, for example, treatments for complications associated with diabetes, which is among the most prevalent chronic conditions in the United States. Nonhealing diabetic foot ulcers (DFUs) are particularly severe complications of diabetes that can pose difficult treatment challenges for healthcare providers. A look at treatment alternatives for these conditions can provide a basis for demonstrating the role hospital finance leaders and other administrative executives can play in promoting cost-effective care. 

Diabetic ulcers can affect any of a patient’s lower extremities, but to simplify the discussion, the term DFU is used here in reference to all such conditions. The number of patients with diabetes in the United States who require treatment for DFUs has grown substantially in recent years.a DFUs often lead to amputation, and decisions about how best to heal them are largely subjective. Healthcare administrators should be well informed about these conditions and the treatment options, because the costs associated with them are significant.

A Team Approach

To effectively manage care for patients with DFUs, hospitals require dedicated multispecialty wound care teams that cut across practice silos. (Such teams generally consist of general surgeons; infectious disease, dermatology, vascular, and wound care specialists; and nutrition counselors.) As part of their stated purpose, these teams should embrace a shared vision with the organization, based on the Triple Aim, to deliver value through high-quality medical care that promotes improved patient outcomes while reducing costs.

Although clinical leaders bear the primary responsibility for assembling and managing such a team, hospital administrators can play an important role by communicating and collaborating with the team to help rein in costs and deliver value—for example, by facilitating the team’s review of essential clinical and cost data and establishing a shared decision-making process related to treatment protocols. 

Administrators can more effectively participate in analyses of protocols by having an informed understanding of cost-effective alternatives. Such an understanding can enable them to engage in meaningful conversations with physicians about treatment choices, including emerging new treatments that hold the promise of improving outcomes while reducing costs. The choice of treatment will always be up to the physician, but physicians can be persuaded by compelling data. 

Economic Analysis

Incorporating advanced wound care technologies into best-practice protocols for treating DFUs is critical to controlling costs associated with these conditions and achieving a positive ROI. Economic analysis of such treatment alternatives provides a basis for illustrating the impact of a shared vision, team communication, and effective use of data to support an informed decision-making process involving both clinicians and administrative leaders. Administrators should employ cost and clinical outcome models to aid informed, data-driven communication with the wound care team and enable a shared decision-making process that is consistent with regulatory guidelines and fiscal responsibility. 

Developing an understanding of a hospital’s at-risk patient population, the associated comorbidities typically expressed by this population, and the associated treatment costs for these conditions offers a baseline for the analysis. At-risk patients may be identified by searching for records with a series of relevant diagnosis codes rather than analyzing records with a specific discharge MS-DRG. Having a hospital system capable of querying the number of patients admitted to the hospital with diabetes could aid the clinical team and would support monitoring the hospital’s daily or monthly incidence. 

Once the specific population has been identified, it is helpful to stratify the patients by their anticipated healing time. Wounds of certain etiology take longer to heal; therefore, it is important that the clinical team understand which patients have comorbidities that make it more likely that their wounds may break down and reverse the healing phase. The clinical team should focus primarily on these patients, promoting improved management of the recalcitrant wounds and their healing.

A Focus on NLFU

The focus of our sample analysis is on the financial impact of supplementing standard-of-care (SOC) treatment of DFUs with noncontact, low-frequency, nonthermal ultrasound (NLFU), an advanced, FDA-approved wound treatment, versus use of SOC alone. In many ways, NLFU exemplifies the types of new treatments that hospital administrators should become acquainted with if they are to play an effective role in managing their organizations’ costs. 

The effectiveness of NLFU is supported by clinical evidence established in prospective randomized controlled clinical trials to reduce the time to healing for patients with DFUs. NLFU has been demonstrated to significantly reduce the time to healing minimizing direct patient care expense, to help reduce hospital-acquired conditions, and to lower the probability of 30-day readmissions for diabetic patients with DFUs.

Before engaging in discussions with physicians about any new treatment alternatives such as NLFU, finance leaders should be fully informed about the extent to which the treatment is covered by payers. In the case of NLFU, the Centers for Medicare & Medicaid Services (CMS) reimburses for the application of NLFU therapy for hospital outpatient, surgical settings, and in skilled nursing facilities, and for physician payment for ongoing care, per day, under CPT code 97610, low frequency, non-contact, non-thermal ultrasound, including topical application(s), when performed, wound assessment, and instruction(s). In the hospital outpatient setting, CPT code 97610 cross walks to APC 0013. The national average payment is $83.73. 

Although CMS and other payers cover NLFU, there remain a few payers that do not provide coverage of the treatment option and regard it as “investigational.” In the case of NLFU, physician objections to the use of the procedure on these grounds can be fairly simply countered by focusing on the importance of selecting treatment modalities that provide an improved patient outcome bringing the patient to a higher level of health. 

Indeed, when data for a noncovered treatment modality is tracked relative to quality, outcome, and net patient benefit, the data may be used to obtain reimbursement from the payer. Where a promising new treatment still faces significant hurdles for obtaining coverage, however, the conversation with physicians should be less about advocating for the treatment’s adoption and more about raising questions about its potential for improving outcomes and reducing cost. Such conversations can, in the very least, encourage physicians to investigate the treatment’s future potential on their own.

Model to Estimate Cost Savings per 1,000 patients with DFUs

To compare the costs of different treatments of DFUs, our cost-effectiveness model is based on well-established published data on DFU treatment costs, healing rates, and predictors of failure to heal. The model references data from clinical trials comparing standard of care (SOC) treatment with treatment using SOC plus NLFU.
Patients presenting for treatment for DFUs have differences in their degree of disease severity. Our model accounts for these differences across five standard levels of severity:

  • Level 1: superficial ulcer
  • Level 2: deeper ulcer without bone involvement
  • Level 3: deep ulcer with bone involvement
  • Levels 4 and 5: gangrene or amputation

Using predictive measures of the percentage of patients having a reduction in wound size greater than 50 percent, we estimated the number of ulcers that would not heal in each severity category. The continued weeks and cost of complications resulting from the longer duration of the ulcer to achieve healing were factored into the cost model. SOC case-mix adjustment was used to generate weighted SOC costs per 1,000 patients. 

Exhibit 1


DFU Treatment Costs Using SOC Versus SOC Plus NLFU

A two-year trial published in the September 2004 issue of Diabetes Care provided a basis for assessing costs of treatments for DFUs. In this trial, treatment costs for 2,253 patients included direct costs (including direct labor) related to the treatment of DFUs across inpatient, outpatient, nursing facility, and home care settings.b The average duration of the DFU episode was 87.3 ± 82.8 days. Amputations occurred in 682 (30.3 percent) patients, and ulcers resulted in about 24 percent of patients being admitted to a hospital. The incidence of hospitalization was lowest (11 percent) among patients with the lowest severity level and was highest (49 percent) among patients at the highest severity level. 

Incremental costs for NLFU treatment factored into our analysis were based upon three treatments per week. NLFU treatment costs includes the ultrasound generator, a device applicator, dressings, and staff time for three NFLU treatments per week, for an incremental cost of $180 per week. Revenue from reimbursement was not added to reduce the cost to the hospital. Reimbursement would be revenue in addition to the cost savings. 

Relying on published representation of DFUs, we calculated the number of patients that would be expected to heal in 12 weeks using SOC alone and using SOC plus NLFU. A well-accepted expectation of DFU healing using SOC alone, cited in the September 2004 study, is 30.9 percent of patients healed, on average, in 20 weeks.

Meanwhile, a prospective randomized controlled study reported 40.7 percent of patients with DFU treated with NLFU plus SOC were healed at 12 weeks compared with 14.3 percent of DFU patients treated with the sham device using SOC alone.c And another study of NLFU reported 69 percent of patients with a DFU healed in seven weeks, reducing the healing time by 60 percent compared with the SOC time to healing.d Based on results of these two studies, we determined that the more conservative finding of 40.7 percent healed at 12 weeks would be a valid measure to compare costs and outcome of NLFU plus SOC.

To compare costs to 12 weeks of healing reported with NLFU and SOC, the 20-week SOC finding of 30.9 percent was prorated to 12 weeks, assuming linearity, for a projection of 19 percent of patients healed within that narrower time frame. Next, we compared the cost to achieve healing with SOC plus NLFU with the cost to achieve healing in the SOC population within each severity level. We found that over a 12-week episode of care, the weighted cost per 1,000 patients was $10,351,324 for SOC, compared with $8,335,000 for NLFU (including the cost to provide NLFU therapy), for a relative cost savings of 19.5 percent. This cost savings is due to reduced time to heal, reduction in the costs of subsequent medical care and the chance for costly complications. Thus, by reducing the time to heal by at least 50 percent, the use of NLFU could result in estimated savings over 12 weeks of $2,016,324 per 1,000 patients. 

The exhibit below replicates our findings, estimating the number of patients at each presentation severity level and projecting the number of patients that will worsen and continue on to subsequent weeks of treatment.

Exhibit 2


Overall, findings of our economic analysis suggest NLFU significantly reduces the time to heal DFUs, resulting in a cost savings to the hospital and healthcare system.

The cost differences we identified point to substantial savings to the U.S. healthcare system if DFU treatment were to routinely include NLFU.

Given that the lifetime incidence of a DFU for patients with diabetes is 15 to 25 percent, and that each year, on average, the U.S. healthcare system treats an estimated 3.9 million to 6.5 million patients presenting with DFU, adopting a protocol that includes the use of NLFU for diabetic patients presenting with DFU could produce an estimated overall savings of $7.8 billion to $13 billion. For hospital systems that are a part of an accountable care organization, these are the types of savings needed to meet fiscal objectives. 

The savings associated with NLFU result from the greater proportion of ulcers that heal or progress toward healing within the first 12 weeks. The exhibit above shows, based on results of the clinical trials previously cited, that 91 percent of patients treated with NLFU heal or progress toward healing by 12 weeks compared with 70 percent treated with SOC. Only 9 percent of ulcers treated with NLFU are deteriorating at 12 weeks, whereas 30 percent of ulcers treated with SOC are deteriorating and may need additional care at the end of the 12-week period. Thus, for every 1,000 patients, only 89 who have been treated with NLFU are likely to move to the most expensive treatments or therapies, while 301 of those treated with the SOC would require these more costly treatments. 

The cost-effectiveness of NLFU treatment for DFUs results in net cost savings to the hospital, is consistent with quality standards of the National Committee for Quality Assurance (NCQA), reduces the probability of a 30-day readmission of an infected DFU, and can positively support the cardiovascular, orthopedic, and general surgery service lines. Integrating NLFU in the patient protocol to reduce the time to heal the wound has been shown to be cost effective. A wound progressing to healing is less likely to become infected and a closed wound avoids the path to amputation. 

An Important Role for Healthcare Administrators

With Medicare closely tracking 30-day readmission rates, hospital leaders should understand how treatments such as NLFU not only are cost effective, but also can improve medical care, contribute to reduced readmissions, improve patients’ overall well-being, and support efforts to meet key quality measures. A wound care intervention that can prevent even a small percentage of wounds from progressing to the stage requiring inpatient care can benefit patients and improve a hospital’s operating margin, while helping to reduce overall costs to the nation’s healthcare system. By developing cost-effectiveness models like the one presented here, hospital administrators will have the tools needed to work collaboratively with their organizations’ dedicated care teams to improve the quality of outcomes for complex patient populations while reining in costs.

Hospital executives can support the clinical decision making undertaken by their medical teams by keeping apprised of trends in treatments and use of clinical technologies and establishing an environment in which physicians and other clinicians feel free to discuss these new technologies or treatment options with them. 

Finance leaders can create structured opportunities to exchange information about new treatment modalities and discuss their ramifications for improved outcomes and reduced costs through regular meetings with physicians and other key members of the clinical team. The challenge for the finance leader is to build a culture and provide a forum in which clinicians are encouraged to identify and explore new treatment options that increase quality and reduce the cost of care.

Leah Amir, MS, MHA, is executive director, Institute for Quality Resource Management, St. Louis. 


a. Sen, C.K., Gordillo, G.M., Roy, S., Kirsner, R., et al., “Human Skin Wounds: A Major and Snowballing Threat to Public Health and the Economy,” Wound Repair and Regeneration, Nov. 9, 2009.

b. Stockl, K., Vanderplas, A., Tafesse, E., and Chang. E., “Costs of Lower-Extremity Ulcers Among Patients with Diabetes,” Diabetes Care, September 2004.

c. Ennis, W.J., Foremann, P., Mozen, N., Massey, J., Conner-Kerr, T., and Meneses, P., “Ultrasound Therapy for Recalcitrant Diabetic Foot Ulcers: Results of a Randomized, Double-Blind, Controlled, Multicenter Study,” Ostomy/Wound Management, August 2005.

d. Ennis, W.O., Valdes, W., Gainer, M., and Maneses, P., “Evaluation of Clinical Effectiveness of MIST Ultrasound Therapy for the Healing of Chronic Wounds,” Advances in Skin & Wound Care, October 2006.

Publication Date: Thursday, May 01, 2014

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