Using Return-On-Investment Analysis To Guide Purchasing Decisions For Electronic Medical Recordkeeping Systems:

Transcription

1 Using Return-On-Investment Analysis To Guide Purchasing Decisions For Electronic Medical Recordkeeping Systems: A Model For Assessing The Financial Return Of Behavioral Health & social service Agency Clinical Data Systems Prepared By February, 2002

2 Executives of organizations in the behavioral health and social service fields are faced with immediate and critical decisions about the purchase, implementation, and deployment of electronic medical record keeping (EMR) systems. The need to automate duplicative data recording processes is drive by increased competition and declining revenues. Concerns about HIPAA are also increasing interest in EMR as a compliance strategy. EMR systems offer many advantages to consumers and the professionals serving them real-time comprehensive patient data, reduction in duplicate testing and treatment errors, and decreased administrative burden for clinical professionals, among others. But, two critical questions remain: How much does purchasing an EMR system cost? What return-on-investment (ROI) can an organization expect to see from an investment in an EMR system and when will that return be realized? Until recently, executives could easily answer the question about EMR system cost, but had no tools or framework to estimate ROI. Discussions of cost savings from EMR have been largely focused on the clinical reasons (which are quite compelling) for implementing an EMR system. To address this issue, the teams at Creative Socio-Medics (CSM) and OPEN MINDS mounted an initiative to assess the financial implications of EMR systems and to develop a modeling tool for estimating the financial return from EMR investments. As a result of the initiative, the CSM/OPEN MINDS team has developed an ROI modeling process for EMR system investments along with a multi-variate analytical tool. This white paper describes the current technology-related issues in the field, the use of ROI in assessing technology, and the specific factors and functions in the CSM/OPEN MINDS EMR return-oninvestment analysis model. 2

3 Technology Is Reshaping The Global Economy And The Delivery Of Behavioral Health & Social Services We can expect a significant increase in interest among executives in the behavioral health and social service fields in the deployment of new technology for managing and delivering consumer services. This is not the focus on automating "existing services and processes of years past. Rather, the technology focus ahead of us is likely to be one of strategy of organizations choosing from the wide array of available new technologies that facilitate organizational reengineering in order to accomplish their mission and objectives. This strategic deployment of technology is not one that most organizations will relish. We're talking about a market-driven change necessary to respond to competitive threats and the new demands of payers. The strategic question is what are the customer-preferred, appropriate, and costeffective uses of technology in our field? To answer that question, technology planning has become an essential ingredient in overall organizational strategic planning. This planning process needs to incorporate market research and product portfolio analysis with a customer orientation. Organizations also need to include an assessment of the capital requirements to implement and maintain the technology infrastructures to support this new functionality. To maximize the benefits of technology, most organizations will need workflow restructuring that will change the day-to-day responsibilities of both administrative staff and clinical professionals. In most of these environments, workforce members at every level will be required to use new technologies on a daily basis. This development will demand innovation in corporate structure and human resource management. A Model For Analyzing The ROI Of EMR Systems Executives of many organizations in the behavioral health and social service fields are faced with immediate and critical decisions about the purchase, implementation, and deployment of electronic medical record keeping (EMR) systems. EMR systems offer many advantages to consumers and the professionals serving them real-time comprehensive patient data, reduction in duplicate testing and treatment errors, and decreased administrative burden for clinical professionals, among others. But, two critical questions remain: How much does purchasing an EMR system cost? What return-on-investment (ROI) can an organization expect to see from an investment in an EMR system and when will that return be realized? 3

4 There are many approaches to technology purchase decisions in general, and to answering these specific questions. But, only ROI analysis can provide a true picture of the financial impact of a new technology system. Until recently, executives in behavioral health and social service organizations could easily answer the question about EMR system cost, but had no tools or framework to estimate ROI. Discussions of cost savings from EMR were typically theoretical with a focus on the clinical reasons (which are quite compelling) for implementing an EMR system. To address this issue, the teams at Creative Socio-Medics and OPEN MINDS mounted an initiative to identify the financial implications of EMR systems for behavioral health organizations and to develop a modeling tool for estimating the financial return from EMR investments. In developing this model, a simple definition of ROI was used: ROI = net benefit / total cost where net benefit is the financial savings realized through decreased labor costs, fewer errors, or increases in productivity. The first step in an ROI estimation tool is to understand the costs and benefits of EMR systems. Our research revealed three major EMR cost and benefit components in evaluating new systems: Technology system costs, including implementation, installation and maintenance; Quantifiable financial savings and benefits of technology; and Intangible and non-quantifiable financial benefits of new systems. For the purposes of the ROI analysis, the intangible and non-quantifiable benefits of the EMR system are not considered. That is not to say that these benefits are not compelling reasons to purchase a clinical record keeping system. In fact, these nonquantifiable enhancements in clinical service are often the very reason that EMR systems are implemented -- improved treatment due to professional s access to complete patient record; fewer treatment errors due to centralized access to patient information; rapid access to consumer information; improved ability to monitor treatment plans; improved clinical reporting capabilities; and increased professional satisfaction by decreasing time spent on administrative activities. But nonquantifiable benefits do not have a place in answering questions of financial benefit and financial return to the organization. Technology system costs considered in the ROI analysis model include hardware (required capital investments in workstations, printers, networks, etc); software licenses; installation costs; staff training costs; software maintenance; system upgrades and customization; user support and IT staff costs; data migration costs; 4

5 and hardware maintenance. These system costs fall in a few major categories. The vendor costs hardware, software, installation, software maintenance are straightforward and a function of the size of the organization and the number of EMR system users. Estimates of the amount of user support and staff training required, as well as additional technology staffing levels, require more study. Finally, decisions about data migration (what and how much data to move to the new system, format of current data, etc.) need to be made in estimating total system costs. There are a defined set of quantifiable financial savings and benefits of EMR systems that can be included in ROI analysis. The financial benefits of EMR considered in the ROI analysis include: Reduced record transcription time and records access costs Increased professional productivity and net billing (due to reductions in record search and manual recording time) Reduced administrative and professional staff time correcting chart deficiencies improved collections rate (due to improved documentation) Decreased payment lag time Reduced compliance cost, and Reduced costs of accreditation and licensure. Our testing of ROI modeling with a number of behavioral health organizations revealed that the greatest financial returns of EMR systems are realized in three areas: Reduced administrative costs for record transcription and medical records staff Improved collections for services provided due to fewer chart deficiencies Increased professional time available for client service Cost savings realized by reduced record transcription and medical records costs are a function of the size the organization, the current structure for administrative support for clinical records, and compensation for those staff. The ability to improve collections (the number of claims filed, the percentage of claims paid, and the speed with which claims are paid) is a function of the efficiencies of the current system. The value of reducing the administrative burden of clinical professionals and increasing the time available for client service is a function of many external and internal factors and the area requiring most analysis is estimating ROI for record keeping systems. 5

6 CSM and OPEN MINDS are now making this new return-on-investment model for electronic medical record keeping systems the organizational service assessment, the process analysis, and return-on-investment estimation -- available to organizations in the behavioral health and social service field. Interested executives should contact either organization for more information. Creative Socio-Medics, the human services subsidiary of Netsmart Technologies, is the leading provider of professional services and software products to the human services industry. For more information, contact Creative Socio-Medics, 146 Nassau Avenue, Islip, New York, toll-free telephone: , web site OPEN MINDS is a research and management consulting firm that specializes in the behavioral health and social service fields. For more information, contact OPEN MINDS at 163 York Street, Gettysburg, Pennsylvania 17325, telephone: , facsimile: , openminds@openminds.com, web site: 6