After you make the case for the healthcare innovation in terms of patient and facility benefits, anticipating possible risks, and demonstrating efficacy, the final step is to put all that data into financial terms. To calculate return on investment, you will need to determine, to the best degree possible, the costs of implementation, the potential costs of not implementing, and make connections to the facility and/or system plan for the future. In today's post, we will guide you to resources to help you accomplish these tasks.
First, it's important to know that a business case, even a return on investment, does not need to show profit by the facility. Of course, some business cases will have increased revenue as a goal, but not every healthcare innovation requires it. Because patient lives are at stake, healthcare innovations can often require increased costs, while still demonstrating a positive return on investment in terms of lives saved or quality of life preserved. (For more on this, see this post.)
Now let's look at what you do need to demonstrate in your business case. If your innovation does not increase revenues, it should either reduce costs, address a healthcare imperative, or provide a strategic advantage to your facility. It is a rare (but not impossible) situation when adopting an innovation can do all of these things. Let's unpack those terms.
- Reduce costs: Healthcare cost reduction comes by preventing unnecessary spending or finding ways to accomplish the same care with lower costs. The key here is being cost-effective, such as bundling services or supplies, increasing efficiency, and value-based care. Some preventive programs, such as disease screening and care for chronic conditions, can also reduce care by keeping patients healthier. Preventing hospital-associated infections is a huge way to reduce unnecessary costs (costs that are also not reimbursable by Medicare), so an investment in preventive biocidal surfaces that kill bacteria can have long-term cost reduction ability.
- Address a healthcare imperative: While addressing every illness, disease or injury more effectively is the goal of the healthcare industry, there are imperatives that are causing the most harm now or that are needlessly draining funds due to poor logistics or planning. Solving these imperatives come as a greater priority than others, so innovations that address them would have a greater, more immediate, return on investment. For example, if a hospital sees increased need for diabetes care in their community and do not have the infrastructure to meet those needs, they may see sicker patients as a result. Investing in an expansion of preventive care would address this need and have long-term benefits.
- Provide a strategic advantage: Hospitals, like any other industry, are affected by competition. A hospital that does not stay up-to-date with technology, innovations and improvements will suffer in an environment where patients have a choice in their care. More than just marketing gimmicks, these updates help a facility position itself favorably in the market through better patient outcomes. Examples of the innovations that can provide a strategic advantage are specialized services, seamless integration between services, partnerships, reputation, and ease of access. Investments in these areas can lead to sustainable growth and long-term financial stability.
The hard part is certainly getting your business case to demonstrate how your innovation meets one or more of these requirements, so now we will look at some of the data sets you will probably need for a healthcare innovation, in this case, to reduce hospital-associated infections.
- Your facility's infection rates. You will want to get the most up-to-date infection rates as well as historical data to show trends. You can use publicly-available data such as that from Hospital Compare or Leapfrog Group, but those will only include the infections tracked by state and federal agencies.
- Your facility's cost per infection. This might be difficult to secure, especially if your facility does not track that data point specifically. You can also use estimates provided by the Healthcare Cost and Utilization Project or peer-reviewed research studies such as this one.
- The cost of implementation of the innovation. This includes initial costs, ongoing costs, anticipated costs (such as for repairs or supplies), and training as well as staff time, physical space or infrastructure changes required, marketing and educational outreach, and any other possible cost in both actual cash and time. Your vendor can help you generate this list of possible costs, but you should also reach out to facilities that have already adopted the innovation to find even more.
- The potential costs if you do not invest. Your business case should show the kinds of costs anticipated if no change is made, that is, if you remain as you are right now. You should also show alternatives to your chosen innovation and demonstrate how your choice compares favorably.
- Other financial benefits of the innovation. When making the business case, use conservative estimates for both the possible costs and the benefits. Demonstrate the financial benefits, but also include nonfinancial (or indirectly financial) benefits such as patient satisfaction, since they can lead to direct financial benefits such as increased market share.
One example of the rare innovation that checks all of the boxes is a Preventive|Biocidal Surface. Presenting its full business case is equally important but the diligence reveals powerful support for its implementation. (See blog post here).
Creating a business case for a healthcare innovation is a long process, best accomplished by a team that can divide up the research and analysis. In some facilities, a special committee is assembled for just these situations, while others have a standing product-review committee with rotating membership. However, at times, it will come down to the one person who is "on fire," driven to bring the innovation to their facility and taking a leadership as well as motivational role. If you are that person, our hat is off to you. We hope this series has helped guide your efforts as you trailblaze your way to better patient outcomes!
