The digital transformation of healthcare is being fueled by the increase in novel and greatly appealing digital experiences from e-commerce sites. The shift noticed in patients that are now paying more money out of their pocket for their care is another factor contributing to the transformation.
The expectations of today’s patients are much higher than before, with them expecting to receive extra value, quality, service and of course, an overall better patient experience, from their care provider, according to Cognizant. The experience these patients expect is very much alike the experiences offered by top online retailers.
The system in place in healthcare has also shifted, from a fee-for-service system to a value-based one. This shift, along with the rise of the empowered patient, is the best time for healthcare executives to invest in digital transformation.
A survey by McKinsey, however, shows that a mere 30% of healthcare executives are ready to welcome digital transformation, whereas a PwC survey reveals that the number of prepared CEOs on a global scale reaches 51%. The current cirumstances might have paved the way for healthcare’s transformation, however, the industry is considered to be a decade behind others, such as banking and retail, especially when it comes to customer engagement technologies and of course, digital transformation.
The main reason for the massive gap is the high-cost of digital transformation. $2.1 trillion was the predicted number by IDC, that would be spent by 2019 on worldwide digital transformation initiatives. Organizations question the ROI of their digital initiatives, not only because of the high costs but also due to the difficulties surrounding the definition and measure of value.
To reach the goal of long-term success, in a value-based environment, it is essential to invest in technologies that aim to improve the outcome of a patient’s health meanwhile decreasing the operating costs.
How to measure the ROI of your digital health investment? Consider this your guide!
Step 1: Establishing appropriate benchmarks
You can’t evaluate progress unless you have a standard of comparison.
As applied to healthcare, benchmarking is the process by which a company is able to measure its own progress by comparing itself to other relevant and leading organizations.
Included in the benefits of benchmarking are:
- – Motivating your organization towards making improvements.
- – Helping stakeholders comprehend in what ways their performance falls short in comparison to the competition
- – Providing a clear picture and understanding of your patients and competition.
Internal, competitive, functional and generic are the four types of benchmarking:
Comparing functions within an organization is internal benchmarking whereas comparing functions with direct competitors is competitive benchmarking.
Comparing similar business functions with those of organizations belonging to other industries is functional and generic benchmarking.
As you are comparing your processes against the processes of similar industry standards and organizations it is important to align on appropriate benchmarks. These could include:
The comparison of patient satisfaction scores within your organization, but between different clinics. Another option is comparing your scores with those of leading competition in the same industry.
The comparison of similar business functions with those of different organizations, a method which is useful for examining operational data. This is what functional benchmarking involves and a good example is the average time it takes to collect payment or reconcile bad debt.
When trying to come up with innovative ideas for improving an important business process generic benchmarking is extremely useful. Comparing the check-in times of patients to the check-in times of clients at a hotel is a good example of generic benchmarking.
Lesson Learnt: Although there are clearly many ways to establish your organization’s benchmarks, the most important aspect is making sure you are comparing ”apples to apples”.
Step 2: Defining costs
Digital strategy involves defining value and establishing the right metrics upfront.
Due to the rise of consumerism, healthcare reform legislation and the movement towards a value-based business model, healthcare is evolving continuously. Taking into consideration the increasing costs of equipment, aging facilities and the shortage of clinicians, the healthcare industry can only continue to increase its complexity. All healthcare executives, especially those in the IT field, are increasingly facing the tricky task of clearly communicating the value of IT, towards both the bottom line and clinical outcomes.
Hard costs, soft costs and savings must all be taken into consideration when aiming to determine the ROI of your digital health initiatives.
The ultimate dollar figures that are applied for the implementation of a solution are the hard costs. The questions surrounding these costs include:
- – How much will I be paying for this solution versus another?
- – How much money will I be saving by implementing this solution versus doing nothing at all?
Soft savings are harder to measure but they will have a remarkable impact on the ROI of your organization, although they are less tangible, they are equally paramount to hard costs. Using task automation in order to lower the stress levels of your employees or having better customer service leading to increased patient satisfaction, are all included in soft savings.
Lesson Learnt: When measuring the ROI of your digital health initiatives it is essential to take into account both hard costs and soft savings.
Step 3: Determining potential benefits and attaching the right KPIs to improvement areas
Examine your digital ROI from the perspectives of patients, providers, and communities by tying the right metrics to the right goals.
Patients, providers and communities are the three groups HIMSS assigns the value of health IT to.
PwC suggests that in order to determine the ROI of your investment in these three groups you should measure accross six strategic areas. These areas include: customers, employees, operations, safety and soundness, infrastructure and disruption and innovation. Also, tied to each area of focus should be the key performance indicators (KPIs) or the corresponding metrics.
KPIs are metrics used to measure key business processes and strategic performance against benchmarks. KPIs can aid in tracking the improvements made over time and improving the speed and quality of decision making for healthcare providers. Each KPI should undergo the SMART test: Specific, Measurable, Achievable, Result-oriented and Time-based, according to Infosys.
It is absolutely paramount for correct measurement to tie the right KPIs to the right goals. However, KPIs must be validated against multiple souirces of data and constantly examined to further define the specific business goal that they are aiming to measure, before being accepted as reliable metrics.
How can we measure the value of health IT across patients, providers, and communities? Let’s take a closer look!
Patient Benefits
The focus of the transformation of healthcare should be on delivering value to the patient, while minimizing costs in the meantime, Harvard Business Review and Medtronic claims. This value can be represented by the following equation:
Value = Health outcomes that matter to patients / Costs of delivering the outcomes
In short, the goal is maximizing value, an increase in the outcomes that matter to patients, as well as a decrease in the costs involved in delivering those outcomes. Providing incentive towards that focus, the Centers for Medicare and Medicaid (CMS), are offering bonuses to the hospitals that give high-quality but low-cost care to their patients. When trying to determine ROI from the patient’s perspective, metrics to consider are patient experience and the quality of care.
The Hospital Consumer Assessment of Healthcare Provider and Systems Survey (HCAHPS) was created by the U.S. Agency for Healthcare and Quality, in 2006. The HCAHPS is a standardized survey that measures patients’ perceptions of hospital care and allows for direct comparison of the patient experience in hospitals across the United States.
Even after examining various hospital characteristics that can influence performance, a Deloitte study recently indicated that there is a high degree of interrelation between patient experience and financial performance. An average of 4.7% net margins was reached by hospitals that have ”excellent” HCAHPS ratings, whereas hospitals with ”low” ratings achieved 1.8%.
The organizations that achieve high customer satisfaction scores are also the most important drivers, according to McKinsey research. These organizations constantly measure ongoing perfomarnce, uncover operational insights, and attach those improvements with their desired business goals.
A patient’s experience encompasses the complete patient journey, from initial scheduling all the way to follow-up care and providers must acknowldge the complete process. Providers must act on those insights and not remain complacent simply by influencing scores on the HCAHPS survey.
Safety, effectivenes, person-centric, equitability and efficiency are the five key areas that make up the second metric, quality of care.
How safe a treatment is for a patient and minimizing the risks and impact when things go pear shaped is what safety is all about. Effectiveness can be described as achieving the best possible health outcomes and person-centric care’s focus is the extent to which the needs, rights, values and preferences of patients are met and addressed. Equitability is ensuring that all patients have fair access to care and efficiency describes the delivery and maintenance of the best quality of care.
Provider Benefits
Looking into lowering the costs of care delivery is important when examining ROI from a provider’s perspective. Increasing operational efficiencies and optimizing financial resources are part and parcel in considering the denominator of the value equation.
Inpatient flow and revenue cycle are the two broad categories that business process KPIs can be broken down into, according to Becker’s Hospital Review.
When narrowing inpatient flow, consider the following metrics: bed turnover, readmission rate, occupancy rate, average length of stay, average cost per discharge and patient satisfaction.
These metrics are important at a high level as they attest for a provider’s quality of care and efficiency, and will provide insight on the level of a provider’s perfomance against their benchmarks.
When addressing revenue cycle some metrics to examine include: total cost to operate; accounts receivable days due to coding; total days outstanding in accounts receivable and accounts payable; cash to bad debt; claims denial rate and days of cash on hand.
Driving efficiency and productivity is what measuring ROI from the provider’s perspective comes down to and it should always incorporate substantial fincancial components.
Community Benefits
Lastly, have you considered the domino effect of the benefits to your community when investing in healthcare technologies? The implementation of a telehealth platform could have a postitive effect across your entire ecosystem!
Lesson Learnt: Transforming healthcare should involve delivering value to patients by increasing their outcomes while reducing costs. Each focus area can be refined to granular metrics and should be continuously evaluated and acted upon to make improvements against key benchmarks.
Step 4: Align cross-functionally to determine measurement
Measuring ROI is everybody’s business.
A paramount factor in measuring ROI is that there needs to be collaboration between the executives and the different departments. This is because ROI can fluctuate depending on which value or cost metric is included and although the equation is passably simple, it can be steered in favor of who is calculating it.
Calculation of your ROI and what adds value to it does not have a clear-cut set of rules. Different departments will usually focus on different aspects of the calculation, for example clinicians might focus more on patient outcomes or the finance department might focus more on the bottomline. This is the reason it is crucial to include all departments when determining what value means to your organization — and how to measure it.
Final thoughts
The healthcare industry is getting a digital makeover and it is being fueled by the rise of consumerism in the industry, and the shift towards a value-based service model. In a sector worth trillions of dollars where digital investment costs are so high, quantifying ROI is crucial.
In order for the providers to flourish they must direct their focus to delivering the outcomes that matter most to patients while minimizing costs. When quantifying the return on your digital investment it is critical to firstly define the costs, benefits and benchmarks, and secondly to attach the right KPIs to them.
Pioneering health executives need to come up with innovative ideas in order to compete in the race to digital transformation which is oficially on! Digital health investment carries its risks, however, if healthcare organizations take a diligent approach to measuring ROI the rewards will surely be there.