Cost Justification of New Technology - Measuring ROI

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Session
Financial

Author
David Cowan
Executive in Residence
Georgia Institute of Technology

Description
How do you determine the value of new technology. Our institutions are investing hugh amounts into new information systems with great hopes for success but how can we measure the true results. This presentation will present a model used in evaluating the success of the implementation of an elegant patient management/flow system. Costs and Benefits include both the obvious as well as many indirect or hidden ones.

Abstract
How do you determine the value of new technology. Our institutions are investing hugh amounts into new information systems with great hopes for success but how can we measure the true results. This presentation will present a model used in evaluating the success of the implementation of an elegant patient management/flow system. Costs and Benefits include both the obvious as well as many indirect or hidden ones.

Costs and benefits were determined on several levels. First level are direct costs for hardware, software and implementation services. These are easy and straight forward. A second level of cost are the organizations direct labor,facility preparation and hardware support. The third level of costs (fully loaded) include the indirect labor such as the planning and selection of the system, the staff time used in implementation, the staff training, and the percentage of labor of user departments to maintain and use the system.

Benefits are also complex beginning with the direct savings or revenues - in this case recognized reduction in LOS and increase volumes. The second level of benefits reflects cost avoidance of building new facilities - potential impacts. A third level of benefits are seen in the culture change and the upstream impact (changes that occured during implementation) and downstream impact on other processes in the organization.

Each one of these costs and benefits do not occur in a closed environment. Many other changes and pressures are occuring in the organization and community. Therefore estimates of the relative impact of the new technology must be made and the costs and benefits adjusted accordingly. In the end a much more accurate assessment of the value of these new technologies can be provided.