ROI Analysis Critical for Clinics
October 2005
A popular comedian from the 1950s named Joe E. Louis once used an ironic one-liner to illustrate his penchant for gambling: "I hope I break even today, I need the money."
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.
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