For all those CFOs, CIOs and CDOs out there, the time has come to reassess your approach to evaluating investments, particularly those in HIT (healthcare information technology). Reports on how to respond to COVID’s dramatic financial impact on every sector including healthcare starts with and often focuses on a review of existing expenses – an appropriate but not sufficient business recovery plan. You cannot save your way to success. You should also review clinical, financial, and administrative operations, revenue enhancement, and risk mitigation. Typically, you’d score your options using the traditional, financially oriented ROI (return on investment). The ROI alone, however, fails to consider other very important elements. To get a true picture of the value of any investment, not just for IT, you should create a compelling business case utilizing the following 6 elements of the Value of Investment (VOI) framework which I have used successfully at 2 former employees and with existing clients.
VOI includes the traditional, financially oriented ROI. Too often ROI is limited to the area championing a purchase. For IT investments in particular, the operational, financial, and administrative benefits for the products and services are often realized outside of IT. If ROI calculations are limited to IT, they are almost always unfavorable. And, to make evaluation of IT investments more challenging, the NPV (net present value) of IT investments alone is very often negative. To avoid that, a cost/benefits analysis has to include all the areas impacted by the project.
Flexibility is the ability to do something with new processes or technologies associated with a project that were not readily achievable in either a manual or other automated fashion, e.g. using smart phones to locate the closest mobile imaging device or AI (augmented intelligence) to evaluate images with a degree of confidence not achievable by a human being given the limitations of human vision and diligence.
The value of IT assets is often radically different from tangible, physical assets, things you can touch like bricks and imaging hardware. For example, an information asset can be accessed by a multitude of people regardless of where they or it is located. Determination of value for information assets may not be tangible but still can and should be measured quantitatively and/or qualitatively. Satisfaction is a measurable intangible that doesn’t readily fit into the traditional ROI calculation. The most impactful intangibles are anecdotes or stories that personalize the investment decision and pull at the heart strings.
As utilized here, Social Value is the ability to appeal to a patient and family need. For example, restoring a sense of control to a patient and family by enabling them to control their inpatient environment or review and suggest corrections, if needed, to the contents of their electronic health record.
Risk identification is critical to VOI. The primary risk with any investment is the collection of factors which would interfere with value realization. Every organization will have to personalize its risk profile and customize it for their particular situation. Below are some relatively common factors and questions you might ask your organization. They are illustrative, not comprehensive.
- Organization will – Do we have the discipline to ensure we will stay focused on the project throughout its life? Will we get the outcomes we expect? Are we flexible and agile enough to adjust to maximize the benefits? Are we resilient?
- Disruption – How constructively disruptive is our investment to existing and future operations in clinical, financial, and administrative areas? How will this impact our culture?
- Vendor selection and viability – Did we choose the right vendor? How long will they be viable?
- Resource availability – Will we and the vendor have access and availability to the right and adequate resources throughout the life of the acquisition?
- Design decisions – Are we knowledgeable and wise enough now to make the right decisions to maximize the benefits?
- Interface, integration, and interoperability – Will we be able to get the right level of true integration, not just at the technical but at the process level?
- Analytics – Do we know how to formulate the right questions to ensure we are utilizing our investment to maximize its value?
This list should be considered a good starter kit. Every organization, every culture will need to modify the questions to suit their situation. And though not part of the VOI scorecard, the next element is critical to success.
Every investment decision should assign accountably to key participants for ROI and the other elements above to ensure that leaders and the staff at all levels meet or exceed the clinical, financial, and administrative targets. The most effective approach for large impact investment projects is to make shared KPIs (key performance indicators) a part of the employee review process for the project leaders.
In conclusion, the VOI provides a broader, more comprehensive framework for having the discussions that should precede any investment. The advantage of taking this VOI approach is to get the right people involved at all levels in the organization in the decision-making process and, by doing so, to improve understanding and buy-in. Taking a multidisciplinary approach will improve alignment between all areas which will be involved and impacted. The time has come to elevate and expand investment decision making to consider all dimensions of value.
If you need help with the VOI framework, governance, or project management, turn to StarBridge Advisors. Our seasoned advisors are ready to assist you on this journey.