From the Consultant’s Corner 10/21/12

Are You Getting the Full Benefit from your EHR Investment? Calculating the ROI of an EHR

Before buying something big—a new car, a high-tech household appliance, or even a tricked out smart phone, for example—you may consider whether the item is going to be "worth it." You ask yourself whether it will save you money, make life easier, improve your productivity, and so on.

After making the purchase, you may revisit your original thinking to double check whether the item was indeed worth the expense. By engaging in this two-pronged assessment process—even informally—you are in a sense determining the purchase’s return on investment (ROI).

Although this view of ROI is somewhat simplistic, it is not that different—at least conceptually—than the process organizations implementing an electronic health record (EHR) go through when prospectively or retrospectively calculating ROI. Organizations must determine upfront what they hope to "get out of" an EHR and then continuously measure the degree to which they are actually achieving their clinical and financial goals post implementation.

Quantifying goals for an EHR may involve clinical and financial considerations, such as whether the technology will improve the quality of patient care and whether it will lessen clinical costs, decrease operational expenses, and improve overall productivity and financial performance.

I recommend calculating a prospective total cost of ownership as part of the goal-setting process. This involves looking at current costs—such as operating expenses, staffing costs and license costs—and anticipating how those will change after implementation. Additionally, a baseline analysis of key clinical quality measures (ex. CMS Core Measures) should be conducted to establish targets for improvement. Generating these metrics can help you describe the potential hard and soft benefits of the EHR investment and is often necessary to garner support from senior leadership and the board.

Post implementation, an organization should continually monitor ROI progress from both clinical and financial perspectives. Common metrics could include the following:

• Paper costs. Did your organization save money in terms of transcriptions, chart supplies, real estate for storing paper medical records, printing costs, and so on?
• Staffing costs. Was your organization able to reduce or reallocate staff—including medical record staff—to other revenue-generating tasks?
• Physician productivity. Has the new system improved patient throughput?
• Charge capture. Are you capturing all your charges and billing accordingly? Integrated systems can eliminate the problem of lost charges and ensure you bill for all the services you provide.
• Core measures. Has the implementation process, both workflow changes and automation, led to improvements in key quality measures?
• Pharmacy errors. Does the system eliminate errors associated with poor handwriting or potentially dangerous drug interactions?
• Meaningful Use. The financial incentives offered by Meaningful Use and other programs will help offset the costs of the EHR, so they should be factored in an ROI equation.

In my opinion, the main challenge in developing a retrospective ROI is that it is not just a dollar and cents calculation. It involves examining both hard and soft measures and looking at operational, clinical, and financial impacts, as well as the overall impact on the patient experience. Although organizations can certainly calculate an ROI on their own, seeking out expert assistance may be beneficial to ensure your organization is continually realizing benefits from your large-scale investment.

While challenging, spending time calculating an ROI can be a worthy endeavor. It can not only quantify the anticipated benefits of an EHR, but it can also serve as a roadmap for monitoring performance over time. The elements that make up an ROI can serve as a template for what your organization should be measuring to make sure you continue to improve performance and get the most out of your purchase.

Brad Boyd is vice president of sales and marketing for Culbert Healthcare Solutions.