The Business Value of Information Technology

1. The Business Value of Information Technology Georgetown University Health Information Systems January 20, 2011 James L. Oakes, Jr., Principal Health Care Information Consultants LLC joakes@hcicllc.com

2. James L. Oakes • Thirty years in healthcare information systems and management engineering • Extensive experience as an operating manager, vendor executive, and consultant • Specializes in helping healthcare providers plan and optimize use of information resources, systems, and technology to improve clinical, operational, and financial outcomes • Worked with return on investment methodologies and analysis for over 25 years and pioneered the use of healthcare-specific economic analysis of healthcare information technology, including financial, clinical, and decision support • Developed and deployed healthcare value-based planning methodology for healthcare now adopted at a 600 bed regional medical center, a nationally known pediatric referral center, etc. • Served as interim Chief Information Officer in 3 healthcare institutions in financial or operational turnarounds and provided CIO level leadership assistance and development in 12+ others • Assisted in the development of a business case and pilot methodology for a community-wide health information exchange initiative (HIE) and recently completed planning and implementation options for a statewide HIE • Co-authored the recently released book, Return on Investment for Healthcare: Maximizing the Value of Healthcare Information Technology (HIMSS 2003 book of the year) advocating the development of a disciplined business case for technology investments • Appeared on the Hospital Satellite Network and spoken at numerous professional conferences, including CPRI, HFMA, SIIM, and HIMSS on such issues as effective governance, value realization, and strategy alignment • Holds a Bachelor of Industrial Engineering and a Master of Industrial Management, both from the Georgia Institute of Technology

3. “The Press Can’t Tell You What to Think, but They Can Tell You What to Think About…” John Naisbitt

4. Health Care Technology in the 21st Century • Still predominately paper based • Systems not interoperable • Slow, expensive implementations • Increasing public pressure to “do something” • Continuing economic pressures • Provisions of ARRA (Stimulus Act) incent use of IT • Many provisions of Health Reform depend on its use • Best practices • Information exchange • Reduction in errors • Standardization of care

5. Stimulus Update • First payments made in January 2011 • Implementations ratcheting up, but slowly • Many providers waiting until 2012 for greater clarity • Risk of losing incentive in out years if start too soon • ONC estimates 80+% of eligible providers will participate • CIOs estimate only 15% are ready for “meaningful use” • Growing number of studies showing that EHRs do (or don’t) add value • Health Reform is “elephant in the room”

6. Why was the casualty rate so high in the civil war?

7. HIT - It is not just technology! • It is a massive reengineering effort that converts paper processes to digital workflow • It is about ROI or achieving the benefits from the use of technology in healthcare to gain the full value in: • Quality • Efficiency • Revenue • Numerous studies have been published attesting of the value of health information technology • Numerous other studies have been published finding it has little value • Both are correct!

8. IT Strategy Alignment Competitive Advantage Increased Effectiveness Increased Efficiency Cost of Doing Business Necessary Evil

9. Enterprise Level • Financial Strategy • Marketing Strategy • Business Line Strategy • Customer Service Strategy • Process Level • Work & Process Redesign • Functional/Programmatic Transformation Tactical Level • Incremental Improvement • Automation Benefits (ie, cycle time reduction, FTE reduction, error elimination) $$$ $$ $ Traditional Healthcare Industry ROI Return on Investment is Essential The Economic Value Pathway Historical measurements have focused on tactical items, but should also focus on strategic goals. A broader focus: Can technology contribute to the bottom line?

10. For Example… • A metropolitan community hospital • Full service medical/surgical • Busy emergency services • Competitive environment • Battle for market share

11. Develop a vision for the future…. • Phase in applications in a logical manner • If moving towards a “core vendor” strategy, phase in as contracts expire • Look for “quick wins” along the way • Recognize that users must see continuing benefits to support a long term plan • Be prepared to adapt plan as circumstances dictate • Communicate, communicate, communicate!

12. One Organizations Portfolio – Leading to CPOE CPOE 18 + Months Problem Care Plans Lists 18 Months Common Integrated Nursing Today Order Monitors Assessments Sets Outpatient Document Electronic Vital Signs Online Assessments Imaging Signature I/O’s MAR Electronic Operating Clinical Case 100% Medical EKG Room Alerts Mgmt. Codified Necessity Results Mgmt. Physician Online Results Ad - HOC Dictation/ Bar Code Scheduling Remote Reporting Transcription Access Universal Integrated Patient Order Patient Home Radiology LAB Pharmacy Demographics Management ID Health

13. Legend Electronic Medical Record System yet to be Installed Sequenced or Simultaneous Installations Patient-Centric Information Systems February 2007 Web-based Viewable Results** Computerized Provider Order Entry** System Operational Orange Indicates FY 08 Emphasis Integrated Patient Monitors** (OB, ICU, ER, Telemetry) Web-based Physician Remote Access** Electronic Scheduling** * Installed Quadramed Product **Planned Quadramed Product Care Plans Problem Lists** Outpatient Assessments** Clinical Alerts** Online Medication Administration Record** Picture Archiving & Communication System (PACS) McKesson HMI Electronic EKG Results Pyramis Electronic Signature** Quantim e-Sig** Document Imaging/Storage EDM* ED Documentation & Tracking T-System EV Nursing Assessments** Vital Signs I/O** OB QS Sentinel Management Ad-HOC Reporting Crystal Reports Dictation/ Transcription Precyse Solutions HealthNotes*, SpeechQ Case Management MIDAS+ Utilization Review MIDAS+ OR Management ORSOS Materials Management Dimension21 Patient Registration Affinity Reg* NTierprise HomeWorks, Mestamed Order Mgt. Viewable Results Common Order Sets Order Mgmt* Pathology MediSolutions AP RadiologyRMS Lab Medilab Pharmacy Affinity Pharmacy* Etreby Clinics/Ambulatory /Physician NTierprise PM HealthmaticsEMR Home Health Homeworks Transitional Care AccuCare Home Medical Equipment MestaMed Coding Quantim Coding* Homeworks Medical Record Management Affinity* MRI*, MRA*, MRC* Medical Necessity Caremedic LMRP Billing & Collections Affinity*, SSI, Medifax MestaMed, Homeworks, Medware, Zirmed TheFOUNDATION REQUIREDto make these components into aFully Functional Electronic Medical Recordincludes the following: 1.Business Continuity Plans that provide for Redundant Storage and Communications to ensure constant availability of the systems 2. An adequate number of appropriate user devices connected to a Robust Infrastructure that provides data that is shared (interfaced or integrated) across the continuum of care 3.Common Identification of the Patientacross the continuum of care 4.Adequate Technical Support to ensure continuous operation.

14. What Value does the system bring? • Costs • Direct, one-time • Direct, ongoing • Indirect • Benefits • Level I • Level II • Level III Value Analysis

15. Benefits • For the CFO • Capital Avoidance • Efficiency Improvements • Reduced A/R • Denials Reduction • Paper Storage elimination • Etc. “Its got room for the kids” • For the CMO • Improved Registration Process • Decreased Turnaround Time • Streamlined Coding • Increased Customer Satisfaction • Physician Satisfaction • Etc. “Its got a Hemi”

16. Should we invest in this technology?4 Useful Calculations • Benefit-Cost Ratio • Payback Period • Net Present Value • Internal Rate of Return

17. Benefit-Cost Ratio vs. Payback Period vs. NPV vs. IRR • Measures are complementary • Intended to guide, rather than substitute for, decision making • None of these measures attempt to account for intangibles • Particularly useful in comparing alternative investment opportunities • Never assume that just because numbers are in a spreadsheet, they are necessarily accurate

18. Investment Analysis Example • Proposed acquisition of a Document Imaging System • System hardware and software will cost $250,000 • Use of the system will lead to greater efficiencies in the HIM department • Should we approve the purchase?

19. Direct, one time (negotiated with vendor): Costs: Direct, Ongoing (negotiated with vendor): Indirect:

20. Projected Benefits: Level 1

21. Cash Flow - Level I benefits only

22. Net Present Value and Internal Rate of Return – Level I Benefits only

23. Level II Benefits • Process Redesign Across Departments and Functions • IT Enabled Registration and Scheduling: • Inpatient Registration Process • Outpatient Registration Process • ED Registration Process • Satellite facilities Registration Process • Document Retrieval Process

24. Level III Benefits • Revenue Cycle • Reduction in unbilled $ • Reduction of days in AR • Reduction of denials • Customer Satisfaction • Faster, more user friendly patient registration • Faster access to billing and payment information • Increased market share

25. Cash Flow - With Level I, II, III Benefits

26. Net Present Value and Internal Rate of Return – Level I, II and III Benefits

27. Comparison of Benefits: Level I, II and III

28. Intangible Benefits • Brand Advantage • Competitive Advantage • Management Information • “Catch-Up” To Standard Practice • Stakeholder Satisfaction

29. EHR Return on Investment Analysis Example • Methodology • Interview based approach • Combines industry experience with client specific environment • Utilizes information gained from multiple sources • Vendor Claims • Prior studies • Literature review (including Davies Award submittals) • Consultant experience • Benefits Identified in Four Categories • Revenue • Hard dollar savings • Soft dollar savings • New opportunities

30. ROI Analysis – Benefits

31. ROI Analysis – Cost/Benefit Projections

32. Things to keep in mind…. • You can’t do everything at once • Not all applications need to be state-of-the-art • Value is in the mind of the beholder • You must decide how far out on the “bleeding edge” your institution wants to be • A well implemented middle of the road system is more valuable than a snazzy one that is poorly implemented • Paper will always be with us?

33. The Healthcare Technology The Healthcare Technology Adoption Life Cycle Adoption Life Cycle Mainstream Mainstream Mainstream Mainstream Early Early Market Market Market Market Market Market Ù Ù Ú Ú Chasm Chasm Skeptics Skeptics Innovators Innovators Pragmatists Pragmatists Conservatives Conservatives Early Adopters Early Adopters Innovators Mainstream Skeptics Understand Your Institution’s Risk Profile Traditional Technology Adoption Curve

34. Number of Installations Radiology Pharmacy Automated Pathways EKG Lab EMR RFID Billing Physician Office Management PACS AI Voice Activated Systems Budgeting Credentialing Time

35. Organizations tend to plan extensively for technology acquisition and the resulting implementation. Very few health care organizations plan for success of the technology throughout its entire life cycle Life Cycle Success Plan

36. The IT Value Planning Process:Life Cycle Success Plan

37. What about Quality? • Many processes in healthcare are quality or safety driven, not financial • Processes may or may not be amenable to financial measurement, but are usually amenable to some form of quantification • The more specifically a process can be quantified, the more it can be measured – and therefore analyzed and improved • Specific tools may vary, but the underlying principles are the same • Different constituencies will perceive value in very different ways, although they may all be looking at the same process • Quality improvement can be achieved and expressed in a variety of ways…..

38. Eliminating Illegibility

39. “Technology is just a matter of using the right wrench to pound in the correct screw”