Is It Essential to Determine ROI for a Health IT Application?

Wednesday, April 1, 2015
Pat Stricker, RN, MEd
Senior Vice President
TCS Healthcare Technologies

Although assessing the impact of a particular care management software application is important, it can also be a complicated endeavor. The classic, and often unanswered, question is this: What is the return on investment (ROI) from a financial and clinical perspective?

The previous two months' articles focused on "Key Functions to Consider When Looking for a Health IT Application" and "Tips on Finding the ‘Right’ Application and Vendor." A logical next step is to examine the ever-important question of ROI. Prospective clients want to know if the software is going to pay for itself, or better yet, increase their revenue. They also want to know how we calculate ROI for our software as well as how the software application will improve quality and clinical outcomes.

As you can imagine, these are very difficult questions to answer. If an application is very structured, and if the processes used are very standard and without a lot of client-specific rules and customized processes, the financial ROI could be calculated without too much trouble. For example, if an application has one or two standard processes that are always done in the same way by all users, and if the new application has been able to automate several of the steps, then it may be possible to show that the application was able to save "x" amount of time in each step. This time factor could be multiplied by the number of processes done per day or week to determine the total amount of time and dollars saved.

The only problem with this scenario is that most care management programs have very few "standard" processes that do not vary depending on the line of business, condition of the patient, client-specific goals (rules), and a myriad of other reasons. As a result, there isn’t a "standard case management process" from start to finish. This is why determining the clinical ROI, in addition to the financial ROI, is a much more nuanced process.

In all my years of experience, I have never implemented the same care management program twice. While the programs have the same overall goals and objectives, they all have different ways in which their programs are delivered and managed. These variances in practice make it very difficult to promise a prospective client that the software itself is going to give them a specific ROI.

In addition, vendors know that their software can streamline and automated processes and documentation, which will decrease workload and increase productivity. However, how the application is used is the most important factor in determining both the financial and clinical ROI. As we know, the vendor does not control that – the client does. The application can provide all the features and functions to improve efficiency and quality, streamline workflows, and automate processes based on client-specific rules, but that is only as good as the workflow processes the client implements. The vendor also cannot control how those processes are managed on a day-to-day basis once the application is implemented, thus reducing the chances of determining ROI.

Here are some factors to consider when thinking about how to calculate ROI:

  • Efficiency: How streamlined are the processes? Are there various workarounds and hand-offs that are done, and if so, are they necessary? Are there numerous manual processes that are part of the normal workflows? Can any of these be automated?
  • Integration: How integrated and interoperable is the software? Does the staff need to use numerous other systems in order to complete core transactions or case management processes?
  • Automation: Does the staff need to complete duplicate documentation in multiple applications? Is the reporting automated or does it require a lot of manual calculation?
  • Clinical Workflows: Does the software improve care management interventions and related clinical goals? Does it support the right evidence-based practices?
  • User-Friendliness: Is the technology user friendly? Does it enhance or hinder the practice of case management?
  • Outcomes: Does the IT platform improve the quality and outcomes of the targeted population?

Of course, it makes sense that workflow processes need to be re-examined and revised when implementing a new application. Although it is faster and easier to just implement the same workflow processes and hope the new application will magically make them more efficient, that just doesn’t happen. It is important to spend time rethinking and revising processes in order to allow the application to streamline and automate as much as possible. This will provide increased efficiency, productivity and quality, which in turn will provide a positive ROI – but exactly how much is hard to determine.

There is an excellent article in the January/February 2014 issue of HealthLeaders magazine by Scott Mace entitled "In Search of EHR’s ROI." While it focuses on electronic health records (EHRs), the concepts are also applicable to other health IT applications. The health care leaders interviewed for this article agreed that it is not the EHR software itself, but the types of processes that are implemented that allow the EHR to provide value and efficiencies. They discuss the importance of process redesign and give specific examples of what they were able to achieve.

For example, one leader said, "When we redesigned the system around (a workflow process)... it streamlined so much, and from a quality point of view it also took out a huge number of errors and potential errors." Another joked that "if you don’t (re-design workflows first), you’re just moving garbage at the speed of light, and you’re magnifying inefficiency and accelerating it..." A third expert noted, "Our IT projects are really only 20% technical, and the other 80% is adaptive change and integrating the operational systems with the technology." Another said they focus on what an investment is going to do for their business, not on the economic return.

Overall, many organizations feel that calculating ROI is important; however, there are many different formulas that are used. This includes both traditional "direct" financial ROI calculations and newer "indirect" quality-based ROI models. "Five Easy Steps to Calculate the Return on Investment (ROI) for Quality Management Software" points out that organizations that calculate ROI before and after software implementations end up with more successful operations. This is probably because of the old adage "if you don’t measure it, you don’t manage it." Focusing on what the costs and inefficiencies are will make you pay more attention to reducing costs and finding efficiencies. This article also points out that we should incorporate a more holistic approach to assessing the ROI, which includes the costs associated with the poor quality of care.

Organizations that have not measured and tracked time and effort statistics for workflow processes "before" purchasing a new application will have a very difficult time trying to determine ROI afterwards. The workflows would be significantly changed, streamlined and automated in the new application, so the workflow comparisons would be so different that it would be like comparing apples and oranges.

However, some of these methodological challenges can be addressed by maintaining transparency and documenting how the ROI figures are ultimately calculated. This will allow for an open discourse on the assumptions and variables that were used in any particular ROI model, which, in turn, will allow for any necessary adjustments.

As you can see, finding the specific return on investment for care management software is elusive; in fact, some feel it is not even necessary. However, health care leaders do seem to agree that it is imperative to spend time redesigning workflows before implementing an application. Otherwise, you are only adding outdated, inefficient workflows into your new application and automating an inefficient process.

Now that you have chosen a software and vendor and have thought about the ROI and how to redesign your workflows, next month we will discuss ideas and suggestions for implementing your new application.