ROI Analysis Critical for Clinics

Physician leaders at clinics, particularly independently owned facilities, have similar hopes when they roll the dice with information technology. They want I.T. to improve patient care, but they also would like at least to break even on the investment-and wouldn't mind boosting revenue along the way.

Clinics, like their hospital counterparts, typically conduct their own ROI analysis and combine it with vendor projections. But they often have fewer resources in-house than hospitals for making such calculations. They usually also have completely different management structures.

Clinics, a term that here includes group practices and other ambulatory care facilities, often are headed up by physician decision makers. They rely on both hard ROI analysis, such as dollar-to-dollar cost/benefit ratios, and soft, such as "more efficient" staff, to determine whether they will come out financially ahead or behind with technology investments.

While they tend to use the same ROI measures as larger facilities, clinics often are more cautious when making large investments, and place more importance on some returns that play a lesser role in a hospital's calculations, experts say.

Suspiciously good news

ROI analysis, as presented by vendors, tends to arouse suspicion among clinic leaders. As a result, they often develop their own yardsticks.

Gaudy ROI projections and six-figure investments-or more-can strike fear into physicians' hearts, observers say. At Arlington, Texas-based Omega OB/GYN Associates, a five-physician practice with three locations, investing in an electronic medical records system in late 2003 was a frightening proposition, says Steven Seligman, M.D., vice president and one of two managing partners.

"I might have been na‹ve, but I felt electronic medical records could be a catastrophe," he says. "I wanted to at least break even. I've been doing this 26 years and bought enough medical equipment to be a little skeptical when a sales rep makes ROI promises."

When Omega managers put pen to paper and compared old paper-based chart codes and codes assigned through the electronic records system, Seligman's fears subsided. "The improved coding on a couple of diagnoses basically paid for the system."

Soft ROI evades up-front projection and can be confusing for buyers and risky for sellers, but can produce measurable results after the technology has been in place awhile.

"You take out the extraneous stuff, like the vendor saying `you'll save $10,000 due to nursing efficiency,' because you don't know how they come up with it," Seligman notes. "But seeing the code difference and multiplying it by the number of patients we see each month made it an obvious choice."

Omega bought both electronic records and practice management systems from Greenway Medical Technologies, Carrollton, Ga.

Dare to dream

For some clinics, coming out ahead financially while improving patient care in the bargain has been a pipe dream. But today's electronic medical records and practice management systems, among other applications, are yielding dollar-positive results.

Still, comparisons between most clinics and hospitals diverge sharply when it comes to valuing hard ROI analysis. That's because hospitals have capital budgets to fund I.T. projects and if they fail, no one takes a personal financial hit.

At independent clinics, however, I.T. often is funded out of physicians' wallets. That means I.T. projects must have serious potential for ROI to justify costs, says Jim Fisher with PricewaterhouseCoopers, a New York-based consulting firm.

Because hospitals have different funding sources, it's sometimes enough to show that spending is fiscally responsible, he says.

"In hospitals, there is more of a focus on fiduciary responsibility and on providing the best, safest patient care," he says. "ROI is quantitative and more about delivering hard-dollar savings to the bottom line, and a reasonable investment return."

Clinic leaders, however, tend to have more skin in the game. "In physician group practices, it's more about hard-dollar return," Fisher says. "Much less weight is given to cost avoidance for such things as savings from malpractice insurance premiums. The biggest difference stems from the fact that in the group setting, physicians are writing personal checks to buy the technology."

When Omega OB/GYN began looking for an electronic medical records system in late 2003 the practice was struggling to track paper charts among its three locations and a local hospital. ROI analysis was done from several perspectives, says Gail Burdine, practice administrator.

First, a Greenway sales rep calculated ROI on both electronic records and practice management systems. Then the vendor commissioned an outside consulting firm to conduct pre- and post-installation measures.

Finally, Burdine developed her own assessment tool, partly to keep the measures realistic. "The vendor came in and assessed things like chart pools and personnel time to be saved and other little things, but going in I was a bit cynical that would happen."

Her fear was that while savings might occur in one area, something else would arise to draw on personnel resources. So Burdine performed her own ROI on "hard costs I knew we could get out. But I valued both."

She anticipated savings in terms of potentially eliminating supplies, such as file labels, and equipment, including a system for faxing partial patient chart notes to other locations.

The group practice implemented Greenway's practice management application in February 2004 and the vendor's electronic medical records system was in place by July 2004.

Omega's physician decision makers were keenly aware of potential cost factors for such an I.T. project, but their chief criteria lay in the softer side of ROI. "Their primary interest was whether they liked it based on the way they practice medicine and if the technology did what they needed it to do," Burdine says. "But they also had to weigh the expense."

Seligman, one of Omega's managing partners, notes that he had been looking at electronic medical records systems for years, in light of growing problems managing patient charts among multiple locations. "I felt we were on the brink of a medical records disaster," he says.