Return on Investment Methodologies Make the Business Case for AT Reuse. Sara Sack, Ph.D. Director, Assistive Technology for Kansans

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1 Return on Investment Methodologies Make the Business Case for AT Reuse Sara Sack, Ph.D. Director, Assistive Technology for Kansans

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3 Moving beyond anecdotal evidence to make the business case for reuse The beginning: tracking volumes and equipment values Adding business analysis: return on investment Considering the value of avoided outcomes Calculating societal impacts Working toward a more comprehensive calculation 3

analysis: return on investment Considering the value of avoided outcomes

4 Basic: Tracking Volumes Reuse projects track: Number of usable devices donated Value of donated devices based on MSRP or some percentage thereof Number of devices reassigned Number of individuals served Value of reassigned AT Most helpful tool: a good inventory system with flexible reporting capabilities (Kansas, Paraquad, Project MEND and others) 4

Number of individuals served Value of reassigned AT Most helpful tool: a good inventory

5 Using Business Analysis Kansas led the way in recommending that programs apply a standard business practice and calculate Return on Investment. This calculation requires only the total program expenses and the value of equipment made available for reuse. Calculation: Divide NET value (value of reused equipment minus total program expenses) by expenses to derive return percentage or return for each dollar invested. 5

This calculation requires only the total program expenses and the value of equipment made available for

6 Example of Simple ROI Application of business model of return-oninvestment analysis to Kansas AT reuse program in 2010: ROI: (Value of donated equipment minus program expenses) divided by program expenses Example: $960,004 - $271,487 = $668,517 divided by $271,487 = 2.46 or a return of $2.46 for each dollar invested 6

minus program expenses) divided by program expenses Example: $960,004 -

7 Using ROI to make program decisions: Collection Drive ROI 7

8 Collection Drive Adjusted ROI 8

9 Collection Drive: Complex ROI Intangible benefits of the collection drive: Increased DME provider and network partner involvement. Increased public awareness of the program resulting in increased donations and requests. ROI-based program decision: Accept only lightly-used, high-cost or bariatric DME. 9

Increased public awareness of the program resulting in increased donations

10 ROI is a Useful Tool for: ROI is a useful tool for making program decisions: pickup and delivery, shipping, collection drives, methods of cleaning and sanitization (volunteers, paid staff, contractor, purchase of sanitizing equipment) ROI is a powerful measure of the use of taxes and public donations for reuse. 10

sanitization (volunteers, paid staff, contractor, purchase of sanitizing

11 Identifying Avoidable Healthcare Costs What does the availability of an AT device avoid? FREE Foundation examined what the availability of an AT device avoided in healthcare outcomes. (More about that methodology shortly) Healthcare costs related to avoided falls: Physician office visits, ER visits Stays in skilled nursing or assisted living facilities 11

12 FREE Assesses Avoidable Outcomes Problem 20% of Virginians were uninsured persons, no access to healthcare or needed AT Some insured persons unable to get needed equipment or get in a timely manner Consequences Unable to recover fully Falls Repeated hospital stays, Dr. visits ER visits Stays in SNFs and ALFs Lost wages of patient and caregivers Measurable Costs Typical office visit Average daily cost of hospital stay Average cost of an ER visit Cost of typical stay in SNF for recovery Financial impact of a job loss 12

13 FREE s Methodology Objectives in collecting data: Show equipment donors the therapeutic and financial impact Show financial supporters the impact of funding Test and monitor the service model Surveyed AT recipients to determine if they: Had become more independent Had fewer falls Reduced number of medical visits, services Been able to remain at home 13

the service model Surveyed AT recipients to determine if they: Had become more

14 Identifying Avoidable Societal Impact What other costs does reuse of AT avoid? Lost income due to missed work for customer or caregiver Landfill costs for disposal 14

15 Exploring a better measure of ROI Quantitative outcomes measures use numerical data under standardized conditions Volume tracking (donations, devices assigned, value of donated devices) AT Act Programs Use of business tools, from cost-benefit to ROI analysis (Kansas) Calculation of avoided costs (e.g., lost work time avoided, healthcare expenses avoided, environmental impact minimized) based on customer follow-up: FREE Foundation/VATS Combining those and more to identify a more accurate calculation of the financial impact of reuse 15

(Kansas) Calculation of avoided costs (e.g.

16 Expanding ROI analysis to include more than the value of reused equipment Calculation of an Approximate Value of Investment in AT Reutilization CAVIAR Value of Reusable Equipment Value of Avoided Healthcare Costs Environmental Impact Savings Economic Value of Work 1. Sum values 2. Subtract program expenses 3. Divide result by program expenses Improved ROI KS: ROI VA KS, GA VA 16

Avoided Healthcare Costs Environmental Impact Savings Economic Value of Work 1. Sum values 2.

17 Compiling Values for CAVIAR Value of Reusable AT Track value of donated AT devices in a standardized manner (e.g., MSRP or a percentage thereof) Value of Prevention Use specific healthcare costs for customer population Collect survey data to show avoided expenditures 17

, MSRP or a percentage thereof) Value of Prevention Use specific

18 Compiling values for CAVIAR Environmental Impact Savings Track the weight (use some standard tables for simplicity and ease of calculation) of AT diverted from landfill (that is, reused) Determine cost (per ton) of landfill disposal in program area Economic Value of Work Determine number of lost work days avoided Use minimum wage for the state or use federal poverty guideline to be conservative 18

cost (per ton) of landfill disposal in program area Economic Value of Work Determine number of lost

19 Recalculating for Kansas Original ROI Using only the value of the donated equipment: FY 2011 data resulted in a Return on Investment (ROI) of $3.49 for each dollar invested. Adding avoided healthcare costs For FY 2011, assuming that only one percent of Kansans who received DME delayed or avoided a move to assisted living (versus 8% in Virginia), the ROI increased to $4.13 for every dollar invested. 19

Adding avoided healthcare costs For FY 2011, assuming that only one percent of Kansans who received

20 Calculating Environmental Impact Determine average weight of items kept from landfills Identify landfill costs in your area Calculate savings for tonnage kept from landfills Add the landfill savings to the value 20

costs in your area Calculate savings for tonnage kept

21 Recalculating for Kansas Original ROI Using only the value of the equipment: FY 2011 data resulted in a Return on Investment (ROI) of $3.49 for each dollar invested. + Avoided healthcare costs, using a conservative assumption For FY 2011, assuming that only one percent of Kansans who received DME delayed or avoided a move to assisted living (versus 8% in Virginia), the ROI becomes $4.13 for every dollar invested. 21

22 What we need: More programs engaged in systematic data collection related to outcomes Research-based analysis of the proposed CAVIAR 22

Making the Business Case for AT Reuse

Making the Business Case for AT Reuse Sonja Schaible, FREE Foundation Barclay Shepard, VATS Sara Sack, AT for Kansans Joy Kniskern and Trish Redmon, PIOC Webinar March 29, 2011 Download learning package