ROI on clinical IT systems—beyond the numbers: finance professionals know the importance of determining ROI for significant capital expenditures

Healthcare Financial Management, April, 2005 by Richard L. Clarke

Every organization must ensure that invested assets produce an ROI that at least covers their cost of capital. But what about clinical IT systems? How is their return calculated?

In mid-March, HFMA convened a meeting of 31 CFOs from around the country to examine this issue. The meeting was generously supported by Cerner Corporation and included a presentation by Robert Brook, MD, vice president of the BAND Corporation and director of RAND Health. The meeting also included a panel discussion of leading CFOs and roundtable discussions by participants.

Throughout the discussions, it was clear that evaluating the ROI in clinical IT systems is difficult. After all, if it were straightforward, little debate would be necessary. But the discussions did produce important learning on how to think about these investments, their benefits, and their returns.

Based on the roundtable discussions, quantifiable financial considerations should include:

> Increased productivity and throughput of underlying clinical technologies, potentially increasing revenue or reducing the need for redundant systems

> Improved recruitment and retention of key staff, including nurses

> Improved charge capture and documentation

> Potential reduction in professional liability risks and costs

Financial effects in these areas can be estimated and help support the financial rationale for an investment in clinical systems. But many other important benefits must be considered. Dr. Brook urged the participants to consider the benefits of improved clinical decision-making, reduced medical errors, and hence improved patient safety. These benefits are at the core of the caring mission of all healthcare provider organizations.

Just as important is the increasing demand for transparency in the inputs and outcomes of medical interventions. Transparency reflects demands of consumers and government for more information about care provision, processes, and alternatives. Increasingly, healthcare providers must be able to provide this information--and, more important, act on it. Without an infrastructure investment in clinical decision support systems, computerized physician order entry, and other IT investments, it is impossible to develop and act on key service area issues. According to Dr. Brook, early adoption can be a competitive advantage. Over time, these systems will be an expected standard of practice. Although these benefits are hard to quantify, some estimates can be made (usually related to competitive advantages in physician recruitment and market share gains).

Ultimately, clinical IT investment decisions must be made within the context of the mission of the organization, and the evolving standards of transparency and safety. Though difficult to quantify, these areas are important benefits. Financial managers should go "beyond the numbers" in building the case for investment in these technologies.

Richard L. Clarke, FHFMA

President and CEO, HFMA