OBJECTIVE: The goal was to determine the net return (gain or loss after costs were subtracted from revenues) to private pediatric medical practices from investing time and resources in vaccines and vaccination of their patients.
METHODS: A cross-sectional survey of a convenience sample of private medical practices requested data on all financial and capacity aspects of the practices, including operating expenses; labor composition and wages/salaries; private- and public-purchase vaccine orders and inventories; Medicaid and private insurance reimbursements; patient population; numbers of providers; and numbers, types, and lengths of visits. Costs were assigned to vaccination visits and subtracted from reimbursements from public- and private-pay sources to determine net financial gains/losses from vaccination.
RESULTS: Thirty-four practices responded to the survey. More than one half of the respondents broke even or suffered financial losses from vaccinating patients. With greater proportions of Medicaid-enrolled patients served, greater financial loss was noted. On average, private insurance vaccine administration reimbursements did not cover administration costs unless a child received ≥3 doses of vaccine in 1 visit. Finally, wide ranges of per-dose prices paid and reimbursements received for vaccines indicated that some practices might be losing money in purchasing and delivering vaccines for private-pay patients if they pay high purchase prices but receive low reimbursements.
CONCLUSIONS: We conclude that the vaccination portion of the business model for primary care pediatric practices that serve private-pay patients results in little or no profit from vaccine delivery. When losses from vaccinating publicly insured children are included, most practices lose money.
Pediatricians in private practice represent one of the cornerstones of successful childhood immunization policies, because they vaccinate the majority of children in the United States.1 In addition to their role as vaccinators, pediatricians are the key communicators of vaccination policy messages to parents.2 As vaccinators and communicators, pediatricians have a strong influence on the economic paradigm of other stakeholders. When pediatricians recommend vaccines, they create purchasing demand for vaccine products, which means increased revenues for manufacturers. By vaccinating patients, pediatricians “produce” the immunized population, which creates an indirect immunity effect for unvaccinated individuals and results in record low levels of disease in the United States. These low disease levels reduce the risk that any public or private insurer, or any employer, will need to pay larger bills for medical care for patients ill with vaccine-preventable diseases.
Private providers also vaccinate publicly insured children. In 2006, private medical offices accounted for 72% of Vaccines for Children (VFC) program providers.3 Approximately 90% of pediatric immunizations are administered by private providers; more than one half of those are publicly funded (primarily through VFC). VFC supplies vaccines to practices free of charge when providers enroll and the practice patient base includes VFC-eligible children, who are in part defined as children who are Medicaid-eligible or uninsured.4 Medicaid vaccination administration fees are set by the states and range from approximately $2.00 to $18.00 per injection. Anecdotal data suggest that, in the past few years, an increasing number of pediatric practices have been losing money delivering recommended vaccines.5–7 These concerns have escalated as more-expensive vaccines have been added to the childhood vaccination schedule. Furthermore, professional organizations such as the American Academy of Pediatrics have reported that the costs to administer recommended vaccines have increased. Although economic analyses of vaccines have shown clearly that childhood vaccination is cost-saving from a societal perspective,8 the purpose of the societal perspective is not to attribute specific costs and benefits (including revenues) associated with vaccination to any particular stakeholder.9,10 Therefore, there is a need to provide economic analyses of vaccination from the perspective of private pediatric medical practices, to address the concerns of this key group of stakeholders.
The main objective of the study was to determine the net return to private pediatric medical practices from investing time and resources in vaccines and vaccination of their patients. Net return is defined as the net financial gain or loss after all costs are subtracted from all revenues. To answer the study question, we surveyed members of private pediatric practices in Georgia. The study survey and analysis incorporated input from multiple stakeholders, including the American Academy of Pediatrics and America's Health Insurance Plans, to construct a study that would be acceptable to multiple stakeholders with potentially different interests. The responses from the survey were used to estimate costs and reimbursements attributable to vaccines and the vaccination process in a pediatric medical practice. These estimates were used to derive a final net financial gain or loss on the basis of weighted proportions of publicly and privately insured patients, to reflect the importance of different revenue streams to practice finances.
A 13-page questionnaire was developed in Excel (Microsoft, Redmond, WA) by the Centers for Disease Control and Prevention and 2 Georgia pediatrician networks and incorporated suggestions from other stakeholders. Questions covered a wide range of topics, including practice expenditures and income; vaccine storage space; vaccine inventory and ordering for both private-purchase and VFC vaccines; private insurance and Medicaid payments (reimbursements); patient copayments; numbers of employees and their salaries; office hours; numbers, types, and length of visits; numbers of newborns; numbers of physicians; and vaccine counseling time (Appendix 1). The study was reviewed by the human subjects coordinator of the Centers for Disease Control and Prevention National Center for Immunization and Respiratory Diseases and was determined to be consent-exempt research.
The questionnaire was distributed, with a cover letter and detailed instructions, to all 35 of the member practices in one financial network, the 139 general pediatric members of another financial network, and 25 volunteers who were not in either financial network but were members of a professional organization. Follow-up telephone calls were made to check the accuracy and interpretation of answers to questions on completed surveys.
Cost and Revenue Categories
The cost and revenue data were taken from the survey, and the following categories were used to determine the final net gains or losses to the practice. Nonclinical labor and overhead costs were calculated from the proportions of survey-reported numbers of visits and visit time the patient population needed to be vaccinated; clinical labor time was an average of published time to vaccinate.11–14 Detailed explanations of all calculations and the method of assigning indirect costs (nonclinical labor and overhead costs) to vaccination are explained in Appendix 2. With respect to labor, providers are physicians and nurse practitioners; clinicians are registered nurses, licensed practical nurses, and medical assistants; and nonclinical refers to all other employees (Appendix 1). Nonlabor overhead includes all reported expenses other than salaries, benefits, and vaccine purchases. Prices paid for vaccine purchases were recorded. Revenues included private insurance payments for vaccine administration and products and for office visits and Medicaid payments for vaccine administration.
We assumed that net financial gains or losses to vaccination for practices with large numbers of private-pay patients might be very different from the net for practices with large numbers of VFC-eligible children, most of whom are also eligible for Medicaid. Medicaid reimburses only a set fee to cover the costs to administer vaccine, because VFC vaccine doses are provided free of charge for Medicaid-eligible children. Conversely, private insurers reimburse for both administrative costs and vaccine products that medical practices must purchase in the private market for privately insured patients. Therefore, we analyzed the net return for vaccination for all responding practices and groups of practices on the basis of proportions of VFC-eligible patients covered by Medicaid and privately insured patients (Fig 1).
Determining Net Gains/Losses for Private- and Public-Pay Patients
The calculation of the final net gain/loss for practices was a complex process that included a number of steps, each of which was repeated for all practices together and then for each analytic group (Fig 1), according to the proportion of VFC-eligible patients. Calculation details are presented in Appendix 2.
The average costs and revenues were used to calculate 2 private-pay nets, referred to as PrivatePatient1 and PrivatePatient2, for each of 10 age-based vaccination scenarios developed by using the ACIP-recommended childhood immunization schedule.16 The scenario template and age-specific vaccines from the childhood schedule used in the scenarios are presented in Appendix 3. To calculate PrivatePatient1 net, average costs of vaccine and vaccine administration were subtracted from average private insurance payments for administration and vaccine products (Appendix 2). PrivatePatient2 net was calculated in the same way except that private insurance payments included a proportion of the office visit charge and patient copayments, calculated by using the same percentage value as determined for nonclinical labor and overhead costs (Appendix 2).
It was necessary to calculate a net for VFC-eligible children, referred to as VFCPatient, by subtracting average practice costs for administration of 1, 2, 3, 4, or 5 doses of vaccine from average Medicaid payments for vaccine administration. Scenarios for VFC-eligible children were unnecessary because there are no vaccine product payments or charges and because we were unable to determine Medicaid visit reimbursements from either the survey or Georgia Medicaid. All practices with Medicaid-enrolled patients reported that they received the standard Georgia Medicaid administration payments of $10.00 for the first dose of vaccine and $8.00 for additional doses given during the same visit; therefore, these values were used in our calculations.
Determining Total Net Gains/Losses
The final 2 steps in calculating total net gain or loss were to create a weighted average of the age-based scenarios for PrivatePatient1, PrivatePatient2, and VFCPatient separately and to weight these results for proportions of private-pay and VFC-eligible (Medicaid-eligible) children (weights and averaging process explained in Appendix 2). The first weighted average of the PrivatePatient and PrivatePatient 2 scenarios and VFCPatient was necessary because children ≤1 year of age account for >50% of vaccination visits. The second weighting according to type of insurance was necessary because Medicaid and private insurers provide reimbursement for different parts of the vaccination process. Therefore, the final net gain/loss to the practice is directly tied to the proportion of Medicaid-enrolled (VFC-eligible) and privately insured patients. The final weighted averages that incorporate the proportions of private- and public-pay patients are referred to as AllPatient1 and AllPatient2 and result in the total net gain/loss to the practice from vaccination.
All practices purchased vaccines that were not included in the net return analysis because the model standardized the vaccine products used for calculation of costs and reimbursements. Most practices reported expenditures for influenza vaccine or other vaccines not used for routine pediatric vaccination during the time this study was conducted. Therefore, to provide a picture of overall practice expenditures on vaccines, we multiplied the reported doses in inventory and on order for each vaccine by the reported per-dose price. This gave us 2 measures; inventory value represents the cost of inventory stored at the practice and inventory/order value represents the cost of inventory and monies promised for new orders.
Thirty-four medical practices responded to the survey, 82% in the greater Atlanta, Georgia, metropolitan area. All practices were physician-owned businesses, not corporately owned practices (eg, Kaiser-Permanente). Sixteen reported employing physicians other than the owners, and 3 reported salaries for temporary or contract physicians. A total of 153 full-time physicians worked in the 34 practices. Survey respondents reported that it took an average of 17 hours to complete the 13-page survey. The average and maximal inventory values were $133644 and $846704, respectively. The average and maximal inventory/order values were $274644 and $1889111, respectively.
Although the sample was not random, the data indicated that the participating practices served patients from a broad range of socioeconomic strata, as measured by the proportions of Medicaid-enrolled and cash-pay (uninsured) patients in each practice (Fig 1). In verifying the accuracy of reported proportions of Medicaid-enrolled and uninsured (VFC-eligible) patients, we found that self-reports of VFC vaccines as a proportion of all vaccines in inventory and on order correlated well with the proportions of VFC-eligible patients (Fig 1). When results were ranked according to the proportion of VFC-eligible patients, the participating practices naturally fell into 4 clusters, that is, 0% to 10% (9 practices), 11% to 30% (7 practices), 31% to 60% (7 practices), and 61% to 100% (11 practices) (Fig 1).
The results for the weighted average VFCPatient represented across-the-board financial losses (Table 1). Specifically, the losses for all practices from vaccinating VFC-eligible patients were −19%. Practice losses according to the proportion of Medicaid-enrolled patients were as follows: 0% to 10%, −23%; 11% to 30%, −90%; 31% to 60%, −38%; 61% to 100%, −55%.
When costs and reimbursements from only private-pay patients were considered, the weighted average net return on vaccination ranged from 16% to 22% for PrivatePatient1 and from 27% to 36% for PrivatePatient2 (Table 1). When the PrivatePatient1 and PrivatePatient2 net returns were averaged with VFCPatient to reflect the proportion of Medicaid-enrolled/uninsured patients in the practice, creating AllPatient1 and AllPatient2, the majority of practices faced a net loss on vaccination (Table 1). When results were calculated for all practices, the average AllPatient1 loss was −19%, whereas the AllPatient2 loss was −7%. The AllPatient1 results for the analytic groups showed that the group with the fewest VFC-eligible children received a net gain from the vaccination process, whereas others suffered a net loss; the 0% to 10% group had an average 18% gain, the 11% to 30% group a −7% loss, the 31% to 60% group a −9% loss, and the 61% to 100% group a −47% loss. The AllPatient2 results for the analytic groups showed that practices with 0% to 10% or 11% to 30% VFC-eligible children received net gains of 31% and 11%, respectively, practices with 31% to 60% VFC-eligible children broke even, and the group with the most VFC-eligible children accrued a financial loss of −44%.
A comparison of the component costs and reimbursements from selected scenarios indicated that private-pay insurance vaccine administration fees do not cover administration costs (labor and nonlabor overhead) unless a child receives ≥2 doses of vaccine during 1 visit (Table 2). In all of the 1-dose scenarios and 1 of the 2-dose scenarios, practices either lose money or break even from billing for vaccine products.
Minimal and maximal reported prices paid for vaccines varied more than twofold (Table 3). There was not quite as wide a reported range of reimbursements for vaccines, but there was at least a twofold difference between minimal and maximal reimbursements in many cases (Table 3). For every vaccine, the minimal reported reimbursement did not cover the maximal reported price; in a few cases, the minimal reported reimbursement did not cover the average reported price.
These data suggest that the vaccine delivery system causes many pediatric medical practices to break even or to suffer financial losses from the vaccination process. On average, there was a positive net return from vaccinating private-pay patients, but the financial losses from vaccinating VFC-eligible patients tended to negate any net gain from private-pay patients. In addition to achieving little or no net gain from vaccinating, pediatric medical practices must finance the gap between purchasing vaccines, which have become increasingly expensive in recent years,16 and receiving payment from private insurers (there is no product payment for VFC vaccines). The sums tied up in inventory and orders, from $250 000 to $1.9 million, would be substantial for any small business but especially for medical providers, who operate predominantly as small businesses.
There also is reason to think that the net return on resources spent on vaccination might be negative for more practices than the study results indicate. The results are based on average expenditures and private-pay insurance reimbursements, but there are substantial ranges of prices paid and private insurance reimbursements for vaccine products (Table 3). Practices that pay higher-than-average prices for vaccines and receive lower-than-average reimbursements would lose money. A recent study by Freed et al17 corroborates our finding that wide ranges of prices are paid and reimbursements received for vaccine products. There is an added burden from inadequate private insurance administration payments when children receive <3 doses of vaccine.
Administration costs are higher than Medicaid reimbursements for 1 to 3 doses of vaccine. Administration costs also are higher than private-insurance reimbursements for all 1-dose and some 2-dose visits. This is partly because physician counseling time varies more with media coverage of controversial issues, such as autism, than it does with the number of vaccines doses.
Our results add to the body of published literature in 2 ways, that is, by estimating the total costs of vaccinating pediatric patients and by deriving a total net gain or loss for the medical practice. Previous studies addressed partial costs associated with vaccination, such as labor and vaccine purchase costs,11 labor and opportunity costs,12 opportunity costs of owner-physicians,18 time burdens of vaccination in medical practices,11–14 and the influence of insurance status and/or reimbursement levels on whether children become immunized.19,20 However, there are no other published estimates of total costs to vaccinate from the provider perspective.
There are a number of limitations. The survey was not sent to a random sample of Georgia pediatricians. The study excluded family physicians, who frequently are the only vaccinators other than public clinics in rural areas.11,21 The complex and time-consuming nature of the survey required practices to gather quite a bit of information, which might have been prohibitive for many practices, especially those in poorer areas without automated record-keeping or adequate staffing.
The results of the study cannot be generalized to other states. Medicaid payments for administration vary according to state, from approximately $2.00 to $18.00; in some states, serving any VFC-eligible children may cause practices to lose money. The danger of inadequate Medicaid payments is that children will be referred from their private medical home to public health clinics for vaccination, and parents may be unwilling or unable to make additional medical visits for vaccination of their children. In the past, referrals for vaccination resulted in missed opportunities for vaccination and, consequently, lower vaccination coverage.22 The results also vary with prevailing wages, real estate prices, and other fundamental business costs. For example, New York State allows only registered nurses and physicians to perform vaccinations, which would increase clinical costs relative to states in which licensed practical nurses or medical assistants are allowed to administer vaccines.23
Although it is not necessarily a limitation, there is no professional agreement among either economists or accountants regarding the best or most-accurate method of assigning indirect costs to a specific medical service. Other methods of assigning indirect costs would change the results. Finally, the weighted average between the PrivatePatient2 and VFCPatient measures, AllPatient2, is not really a combination of equal values because the PrivatePatient2 measure incorporates visit payments and copayments, which are set at 0 for VFCPatient. It is likely that Medicaid reimburses for office visits, but we were unable to determine the amounts from the survey or by querying the Georgia Medicaid program; therefore, we did not apportion part of a visit fee to vaccination of VFC-eligible children. The AllPatient1 measure is a combination of equal values.
The study demonstrates that the financial returns to pediatricians for participating in the vaccination process are not commensurate with the medical importance and social benefits of a highly vaccinated pediatric population. On average, private pediatric medical practices are breaking even or achieving a small gain with privately insured patients. However, practices mostly lose money administering vaccines to VFC-eligible children. When the net returns for privately and publicly insured children are combined, the vaccination process becomes a business loss for many practices. A review should be made of the adequacy of all Medicaid administration payments for VFC-eligible children and the administration payments made by private insurers for the first and second vaccine doses delivered to a child in a single visit. Increases in these payments would mean that pediatricians not only are faced with the costs of the vaccination process but also receive some of the benefits.
This study could not have been completed without the enthusiastic cooperation of the Georgia Chapter of the American Academy of Pediatrics.
- Accepted August 25, 2009.
- Address correspondence to Margaret S. Coleman, PhD, Centers for Disease Control and Prevention, NCPDCID/DGMQ/OD, MS E03, 1600 Clifton Rd, Atlanta, GA 30333. E-mail:
The opinions expressed in this article are those of the authors and not the official position of the Centers for Disease Control and Prevention or the Department of Health and Human Services.
Financial Disclosure: The authors have indicated they have no financial relationships relevant to this article to disclose.
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- ↵Centers for Disease Control and Prevention. VFC active sites 2001 through 2006. Available at: www.cdc.gov/vaccines/programs/vfc/downloads/active-hcp-01-thru-06.xls. Accessed August 17, 2008
- ↵Centers for Disease Control and Prevention. Vaccines for Children program. Available at: www.cdc.gov/vaccines/programs/vfc. Accessed August 14, 2008
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- ↵Haddix AC, Teutsch SM, Corso PS, eds. Prevention Effectiveness: A Guide to Decision Analysis and Economic Evaluation. 2nd ed. New York, NY: Oxford University Press; 2003:15
- ↵Advisory Committee on Immunization Practices. Guidance for health economics studies presented to the ACIP. Available at: www.cdc.gov/vaccines/recs/acip/economic-studies.htm. Accessed July 14, 2008
- ↵Glazner JE, Beaty BL, Pearson KA, Berman S. The cost of giving childhood vaccinations: differences among provider types. Pediatrics.2004;113 (6):1582– 1587
- ↵Fontanesi J, DeGuire M, Holcomb K, Sawyer MH. The cost to immunize during well child visits. Am J Med Qual.2001;16 (6):196– 201
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- ↵Orenstein WA, Douglas RG, Rodewald LE, Hinman AR. Immunizations in the United States: success, structure, and stress. Health Aff (Millwood).2005;24 (3):599– 610
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- Copyright © 2009 by the American Academy of Pediatrics