Describe Return on Investment (ROI) and why this is important for Healthcare Man

Question

Describe Return on Investment (ROI) and why this is important for Healthcare Managers/Administrators to understand. Provide examples to develop and substantiate your viewpoint.

SUB: HCM 6005 - Operations in Health Care Management

Minimum 400 words, please. No Plagiarism

Ref: Public Health is ROI by American Public Health Organization at https://youtu.be/B5M9JefYxJI

How to Drive ROI in Healthcare Improvement Projects by Health Catalyst at https://youtu.be/Ae5OWAjFdUA

ROI of People Analytics for Healthcare by Trendata Inc. at https://youtu.be/Q-Jd1oqIcq8

Awaiting for your reply.

Explanation / Answer

Return on Investment (ROI) is used to evaluate the effectiveness of an investment. It is a performance measure that compares the effectiveness of different investments from the point of view of returns obtained as compared to the costs invested in the same. This is calculated by dividing the return from the investment by the cost of the investment. This result is articulated in the form of a percentage or a ratio.

The formula is as follows:

ROI = (Gain from Investment - Cost of Investment)/Cost of Investment

Here, "Gain from Investment” refers to the returns from the investment. Investors are more interested in projects that have positive ROI.

The advantages of ROI as a metric are as follows:

One of the biggest limitations of ROI is that we can compare ROI of companies only when they use similar accounting policies and methods.

Why this is important for Healthcare Managers/Administrators to understand the importance of ROI?

Care management involves cost intensive programs like health management, reimbursements etc. it is important, therefore, to show that such programs also end up saving costs in addition to improving patient care. This question can be effectively countered by proving that when the quality of care improves, costs actually get reduced and this leads to a positive Return on Investment. Earlier, health management programs were implemented to be able to counter the rising costs in the area of health care. While this still holds true, people are now looking at building health management, improving their health, taking additional care of safety and enhancing the quality of work life. This is done with the help of health management programs to be key enablers of these. According to a recent Employee Benefit News survey of HR professionals, 86 percent believe it is important to create a “culture of health.”

A case in point is a study where it transpired that with improved health care and preventive programs, hospitalization rates were 20 percent lower, ED utilization rates were 13 percent lower for enrolled patients, and mortality per annum was 16 percent, a reduction in 4percent as compared to the control group.

ROI of health care systems is analysed based on measurement of time taken in implementations, reduction in system downtime, the speed of user training etc.These can measure business value and thus, indicate the Returns on Investment.

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