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The Skinny on ROI and Contracts

The Skinny on ROI and Contracts. Alan Vierling RN MSN abctvierling@aol.com. ROI- What is it?. Return on investment The money you expect to generate as a result of this implementation We require 13% ROI over 5 years For every 100K spent, want 113K back

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The Skinny on ROI and Contracts

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  1. The Skinny on ROI and Contracts Alan Vierling RN MSN abctvierling@aol.com

  2. ROI- What is it? • Return on investment • The money you expect to generate as a result of this implementation • We require 13% ROI over 5 years • For every 100K spent, want 113K back • Requirements change yearly based off of financial status of system

  3. Speaking the Language • ROI:Return on Investment. Driven by bond market, will vary from facility to facility. • Hurdle Rate: Minimum ROI required to get approval. For profit hospitals tend to have higher Hurdle Rate. • Soft Dollars: Savings that are hard to quantify. • Hard Dollars: Easily tracked money.

  4. Assumptions for ROI • Assumptions: Elements necessary for the ROI to work. Required in all ROI’s. Foundation statements that will drive your business model. They will be scrutinized by everyone who reads your ROI. Must be able to explain the Assumptions.

  5. Common EDIS Assumptions • Decrease LWBS • Decrease TAT • Decrease Ambulance Diversion • Increase Admissions • Enhanced Revenue from Charge Capture • Enhanced MD Revenue from Improved Charting

  6. More Assumptions • Increased Volume • Increased Capacity • Decreased Paper Cost • Labor Savings • Increased Efficiency • Enhanced Image • Decreased Risk

  7. Even More Assumptions • Improved Reporting • Improved Patient Satisfaction • Development Practice Protocol • Decreased Storage Cost of Med Rec • Savings on QA Time • Data Tracking on Consults and Referrals • Improved Data Capture on MD/RN performance

  8. The Thought Process • Begin with the Obvious • Focus on Hard Dollars First • Soft Dollars Next • Overestimate Expense,Underestimate Revenue • Be Able to Defend Your Estimates • Be Able To Articulate assumptions

  9. Left Without Being Seen • Get total number for previous year • Assume you capture half • Multiply times average ED charge • If facility collects for MD add that average charge

  10. Example • 3672 Total LWBS in system • 3672 X .5 = 1836 • 1836 X $400 = $ 734,400.00 • $734,400.00 + $138,600.00 (MD fees) • $873,000.00 • At 60% capture = $523,800

  11. Real Life Results • Total Cost 5 facilities = $1.5 million • First Year Total Revenue = $1.7 million • First IT system to make money • Ahead of schedule and under budget • You Can Do the Same Thing because It’s Not Rocket Science !

  12. ROI Formats • Varies Dramatically by facility • Occasionally will use Decision Support Automation Software • Use your Financial Advisor ad nauseum • Your Software Vendor Can be Valuable Resource

  13. ROI Summary • LWBS Revenue Generation • Increased Volume through Decreased TAT • Avoided Construction Cost • HIM Labor Savings; transcription, chart prep, chart retrieval • ED Labor Savings; Secretarial, Charge entry... • Paper Savings: Charts, forms, tests results...

  14. Closing Thoughts • “The Chicken is dedicated to breakfast, the pig is committed.” • Stay Committed.

  15. Questions on ROI?? Abctvierling@aol.com

  16. Contracts the Very Basics

  17. Contracts • A contract has to have 3 elements • An offer has to be made • Everybody has to agree to the terms • Something has to be exchanged, usually goods or services for money

  18. Negotiation “It is expected and understood. If there is no conflict you have not asked for enough.”

  19. Necessary Elements • Definitions • License • Source Code Escrow • Term of Agreement • Compliance with Laws -specify your state not theirs

  20. More Recommended Elements • Testing and Acceptance • Delivery and Installation • Point of Contact • Non Hiring • Conduct of Personnel • Software Updates • Pricing and Payment Terms

  21. MORE • Confidentiality and Limitations of Use • Liability • Dispute Resolution • Cancellation/ Termination • Hardware and System Interfaces • Support and Help Desk Escalation • Disaster Recovery

  22. Nearing the END • On site support • Response Time for Problem Resolution • New Versions • Account representative • Site visit - what’s in it for you? • Shared Risk - if you don’t meet predetermined goals, vendor loses money

  23. Best Advice • Use an attorney who knows IT law and has experience. It will save you in the end. • Get a financial analysis on your potential vendor (Dunn & Bradstreet). • Ask for proof of vendor revenues spent on R&D. They need to be committed to your future.

  24. Questions?

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