Funding
Most health care organizations are either acquiring or considering the acquisition
of an advanced clinical information system (CIS) to improve the quality of care
that's delivered, to help ensure better outcomes for the patients to whom the
care is delivered, and to improve the financial health of the organization that
delivers the care. These organizations almost certainly believe that implementing
an advanced CIS will improve quality, patient safety, and outcomes; but the question
is whether there are enough financial benefits to achieve an ROI and fund the
total cost of ownership of the new CIS. A new CIS is a significant capital expenditure,
at a time when other needs (replacements, new technology, bricks and mortar) compete
for scarce capital. To justify this large capital expenditure, an organization
needs to construct a compelling business case that shows a return on investment.
There are significant opportunities for real financial benefits associated with redesigning core clinical processes while implementing an advanced CIS. Our experience shows that the actual return on investment could be as much as 3-to-1.
Optimally, health organizations should build a business case and ROI as part of the discovery process or the first phase of their clinical transformation initiative. The goal of this initial phase is to develop the business imperative that justifies the clinical transformation initiative and to construct a business case that includes quality and outcomes improvement, as well as an ROI that quantifies the financial benefits to the organization.
Opportunities for Improvement
There are opportunities to improve processes throughout the clinical enterprise. Potential for improvement exists in physician practice management, pharmacy/medication safety, care management, patient access, departmental support services, clinical documentation, and health information management. Organizations may not be able to realistically address all of these opportunities at the same time, but they should be able to prioritize opportunities and focus on those areas that offer the greatest opportunity for improvement. From this prioritized list of opportunities, the business case can be constructed.
Quantifying the Opportunity
Though each organization will evaluate where the best opportunities for financial improvement can be found, experience in implementing CIS initiatives has shown that they exist in each major process area. Figure 1 is an example of a $500 million health system and the potential benefits that could be achieved in each process area through process redesign and implementation of an advanced CIS. It is based on CGE&Y's actual experience with clinical transformation projects for a number of health care organizations.
Actual benefits vary across specific health care organizations, but the overall order of magnitude for total benefits is typically in the 3 to 5 percent range. Demonstrating an annual financial benefit of $23.5 million in a $500 million health care organization as shown in Figure 1 for example, goes a long way toward building a strong business case for a CIS implementation project. Sustaining these cost savings throughout the seven-year expected lifetime of the system, and comparing them with the total cost of ownership of the system (hardware, software, implementation/transformation, and support) over the same length of time could result in an ROI of about 2- or 3-to-1. Spending the time to look for the best financial opportunities is time well invested.
Figure 1: Example for $500 million health care system: Experience shows there are significant finacial benefits in each process area.
Don't Look to Technology Alone for ROI
Some of these benefits could be achieved through process improvement and without technology (implementing a CIS), but it is very difficult for an organization to sustain the benefits over time without the use of technology. As shown in Figure 2, a clinical information system, taken by itself, delivers a modest, or even disappointing, ROI.
Figure 2: Representative Contribution to Goal Achievement
The most significant gains come from the associated redesign of clinical and business processes and redeployment of resources that information technology makes possible. As the pie chart suggests, approximately 75 percent of the value derived from a clinical information system occurs not when IT is purported to be the entire solution, but when it enables and sustains transformational changes in core business and clinical processes.
Sadly, the technological solution has been the norm in the health care industry. Only recently have health care organizations begun to leverage technology that enables and sustains transformed clinical and business processes to yield a measurable, significant ROI that can make a project of this magnitude "self-funding."
Self-Funding
Clinical transformation projects take time, perhaps as much as two years or longer. Waiting until the new CIS is fully implemented diminishes the business case and ROI. Fortunately, based on our experience, there are typically opportunities to reduce operating costs or enhance revenue long before the initial live phase of clinical transformation. These opportunities are often referred to as "quick results," and identifying, quantifying, and achieving them are part of CGE&Y's approach to clinical transformation.
Some of the benefits that are identified during the discovery process can be achieved before the enabling technology is fully implemented. They are the result of improving clinical processes before automating them. As Figure 3 demonstrates, process transformation can begin to deliver benefits long before the technology transformation. Process improvements are difficult if not impossible to sustain without enabling technologies that integrate information and spread leading practices throughout the enterprise. But there's no reason that redesigned processes can't be put into place ahead of the technology that will sustain them and enhance their effectiveness. The earlier these improved processes can be implemented, the sooner they can begin to deliver value to the organization. The improvement in the organization's financial performance realized by implementing these interim process improvements, or quick results, helps to fund the clinical transformation initiative and contributes to a more attractive overall return on investment.
Figure 3: Clincial transformation must integrate both technology and process improvement for maximum benefit.
The Benefits of Partnership
Achieving financial benefits early in the implementation process and enhancing and sustaining them throughout the system implementation and beyond doesn't happen without expert guidance. It requires a partnership among the health care enterprise, the system vendor, and third-party consultants. Financial results like these demand a close collaboration among business partners, in which:
- The desired benefits are identified and agreed to.
- Each partner's incentives are aligned around achieving the desired benefits and outcomes.
In the case of the health care provider, aligning incentives might mean tying bonuses or incentive compensation to measurable milestones congruent with achieving the desired benefits. For the vendor, it may mean tying payments to achievements. Consultants with confidence in their methods are often willing to accept a risk-based arrangement where at least a portion of fees are tied to achieving measurable outcomes.
Summary
A clinical transformation initiative is a complex and expensive undertaking. When adequate effort is invested up front in identifying and quantifying opportunities for financial improvement and a partnership with incentives aligned with achieving these improvements goes to work, a clinical transformation project can quickly begin to deliver value. Looking for opportunities for the project to pay its own way makes taking the first step much more sure-footed.
