This chapter explores the costs of healthcare improvement projects and the steps taken to calculate ROI. Specific costs that should be captured are identified along with economical ways in which approaches for measuring various aspects can be developed. One of the challenges addressed in this chapter is deciding which costs should be captured or estimated. For major projects, some costs are hidden and usually not counted. The conservative philosophy presented here is to account for all costs, direct and indirect. Several checklists and guidelines are included.
The monetary values for the benefits of a project (after converting data to money) are combined with project cost data to calculate the return on investment. This chapter explores the various techniques, processes, and issues involved in calculating and interpreting the financial ROI.
Hometown Care is a senior services organization in rural Pennsylvania. This long-term care facility is a skilled nursing and rehabilitative division associated with a retirement community that offers a continuum of care. The health center offers three levels of skilled nursing care: comprehensive, rehabilitative, and memory support. The facility consists of 90 beds and 168 employees.1
Healthcare organizations such as Hometown Care are constantly looking for ways to improve quality and efficiency through new and innovative initiatives. Along with this movement, return on investment (ROI) has also become a topic of interest across the healthcare system, particularly with top executives in this facility. Executives wanted to see the ROI calculation on three projects that were being undertaken by eight employees at Hometown Care. These projects used the concept of lean technology, which consists of a variety of tools and processes for problem analysis and measurement. These eight employees tackled three projects in the healthcare area. The first project involved dressing change delays and the concerns when a patient required a dressing change. The second project targeted times for short-term rehab discharge to home. The organization was experiencing delays when short-term rehab patients were discharged to home. The third project was a chart-to-go project and addressed the documentation system used by the certified nurse assistants (CNAs) to capture activities of daily living (ADL) for each resident in the long-term care unit.
The individuals explored these three healthcare improvement projects using a conservative approach, the ROI Methodology. Each project captured the impact of the major measures, isolated the effects of the programs on the impact, and converted the data to money to get a total benefit. This figure was then compared to the total cost of the project including the cost of the training to learn how to apply these principles. These projects generated ROI results of 590 percent, 154 percent, and 31 percent, respectively. The results of the studies were communicated to a variety of stakeholders, starting with the senior leadership. The leadership team was impressed to ...