How to Drive ROI in Your Healthcare Improvement Projects (Executive Report)
Today’s healthcare organizations face an unprecedented array of new challenges, many contradictory in nature. As emerging value-based payment models intersect with population-based care, healthcare organizations must find ways to increase the quality of care while decreasing costs; ensure better outcomes despite caring for larger numbers of patients; and become more efficient at preventing many services, such as readmissions, that once contributed to their bottom line.
To help solve this Gordian knot, healthcare organizations of all kinds and sizes are accelerating their efforts to improve quality, streamline operations and reduce costs. Simultaneously, they are increasing their investments in “business intelligence” (BI) technologies such as enterprise data warehouses (EDWs), and analytics to assist in this transformation. According to the research firm KLAS, a “tidal wave” of healthcare BI purchases is expected by 2015, with more than half of the providers in the U.S. looking to buy or replace their BI solutions in that period of time.1
These data extraction, prediction, forecasting and trending technologies promise not only to help manage the regulatory and reimbursement challenges ahead, but also to reap the benefits of healthcare’s investments in earlier technologies such as enterprise resource planning (ERP) systems and electronic medical records (EMRs). Still, many healthcare finance executives have long harbored doubts about the return on investment (ROI) from those earlier systems.
At a time when the average hospital’s margins are stagnating at two percent,2 the prospect of investing in yet another new wave of “indispensable” technologies has them asking some tough questions about ROI. Will the new technologies prove their worth? Are the ROI predictions of vendors to be trusted? With the answers to these questions unclear, a growing number of healthcare finance managers are engaging in the complex and time-consuming process of developing their own ROI estimates for technologies and programs intended to improve clinical quality and streamline operations – both prospectively to justify an investment and retrospectively to prove its value.
In doing so, they are confronting one of the most basic questions in healthcare finance: How do you measure the financial ROI from improvements in outcomes that affect a complex and interdependent matrix of quality, patient satisfaction and operational efficiency?
The Evolving Value-Based Model of ROI
In the past, the ROI of technically-driven outcomes-improvement projects was relatively straightforward. The analysis tended to focus on measurements such as on-time under-budget implementations, lack of system downtime, the speed of user training and similar IT-centric measures. Today, this technology-centric view is giving way to a benefits-driven ROI model in which the strategic goals of the hospital are the measure of business value.3
In a value-based environment, operational and clinical quality improvement programs are critical to ensuring an organization’s long-term success. As a result, technology investments are increasingly determined based on their ability to contribute to operational and clinical quality improvement. The Healthcare Information and Management Systems Society (HIMSS) has developed a value suite called STEPSTM that reflects this new perspective on ROI measurement. The STEPS describe HIMSS’s five areas of value benefit to patients, providers and communities, measuring improvements in:
- Satisfaction of patients, providers, staff and others
- Treatment/Clinical including patient safety, quality of care and efficiency
- Electronic Information/Data including use of evidence-based guidelines, data sharing, population health and quality reporting
- Prevention and Patient Education including improvements in disease surveillance and patient compliance with therapies
- Savings from improvements such as reduced days in accounts receivable and increased patient volume.
Figure 1: The HIMSS Health Value STEPS Model
The HIMSS model reflects the growing consensus that IT success and clinical- operational improvement are interdependent and ought to be measured in tandem. Healthcare ROI encompasses more than money saved or earned; it must take into account both qualitative benefits such as improved patient safety and improved relationships with patients, as well as streamlined clinical operations among others measures.4
All of these measures are interdependent. Improvements in the quality of care within an organization cause a ripple effect that can generate secondary financial returns in the form of shorter lengths of stay, fewer readmissions and similar measures closely related to quality. In failing to consider these corollary benefits, standard ROI models fail to deliver a holistic view of the