Outcomes based approach to Outcomes based approach to measuring the impact of new measuring the impact of new

technologytechnology

Vikas Arya

HSCI 740 Spring 2004

May 22,2004

Need to answer four questions when Need to answer four questions when considering new technology for your considering new technology for your

organization:organization:1.1. Should the organization invest in this technology?Should the organization invest in this technology?2.2. What are the associated risks and benefits?What are the associated risks and benefits?3.3. What is the impact on patient outcomes?What is the impact on patient outcomes?4.4. What is the Return on Investment to the What is the Return on Investment to the

organization?organization?

Use both qualitative and quantitative models to answer Use both qualitative and quantitative models to answer these questions and justify spending for new technology.these questions and justify spending for new technology.

These models will impact optimal expenditure policies These models will impact optimal expenditure policies within the organization and identify optimal technology within the organization and identify optimal technology policies at national and international health levels. policies at national and international health levels.

Outcomes-based approach views results against inputs to Outcomes-based approach views results against inputs to justify spending for new technology.justify spending for new technology.

Challenges to IT Challenges to IT implementation in Healthcareimplementation in Healthcare

1.1. Costs:Costs: Manufacturing and Marketing to Manufacturing and Marketing to develop new technologydevelop new technology

2.2. Competing priorities:Competing priorities: Senior Senior management and hospital boards need management and hospital boards need budgetary justification. budgetary justification.

3.3. Culture:Culture: Clinicians must buy into the Clinicians must buy into the technology.technology.

4.4. Confidence:Confidence: Patients may be skeptical. Patients may be skeptical. (e.g. EMR security)(e.g. EMR security)

5.5. Consistent:Consistent: Government regulation Government regulation forces standards.forces standards.

Micro-Economic principles used Micro-Economic principles used to evaluate Healthcare to evaluate Healthcare

expenditures.expenditures.1.1. Crowding out effects:Crowding out effects: The larger a The larger a

particular segment of a budget portfolio particular segment of a budget portfolio is, the lesser resources available for is, the lesser resources available for other activities. (Fig. 1)other activities. (Fig. 1)Capital assignment varies by Capital assignment varies by organization.organization.

2. 2. Cost effective care:Cost effective care: Technology is Technology is costly only if it is not offset y costly only if it is not offset y proportionate improvements in proportionate improvements in outcomes. Justify costs through results.outcomes. Justify costs through results.

Crowding Out effectFig. 1 IT

Physical Plant

Staff

Economics Basis for Economics Basis for Outcomes EvaluationOutcomes Evaluation

• ““Full” considers inputs, (costs) AND outputs, Full” considers inputs, (costs) AND outputs, (outcomes).(outcomes).

Vs.Vs.

2.2. ““Partial” considers inputs, (costs) OR outputs, Partial” considers inputs, (costs) OR outputs, (outcomes).(outcomes).

Also done at several levels:Also done at several levels:

a)a) Cost-Identification (identify costs)Cost-Identification (identify costs)

b)b) Cost-Effectiveness (compare strategies with Cost-Effectiveness (compare strategies with outcomes using neutral units.)outcomes using neutral units.)

c)c) Cost-Utility (Outcomes in quality-adjusted life Cost-Utility (Outcomes in quality-adjusted life years.)years.)

d)d) Cost-Benefit (Use monetary units for comparison.)Cost-Benefit (Use monetary units for comparison.)

Principles of Outcomes Principles of Outcomes EvaluationEvaluation

Donabedian Model uses Donabedian Model uses the “structure-process-the “structure-process-outcome” relationship for outcome” relationship for outcomes evaluation outcomes evaluation framework.framework.

Micro Level studies (within Micro Level studies (within the organization) vs. Macro the organization) vs. Macro Level (larger scale like Level (larger scale like state or country)state or country)

OutcomesResearch

Clinical Outcomes(narrow focus)

Health Services(broad focus)

•By itself, “Outcomes Research” is an analytic tool, (e.g. analyze a type of technology).

•Combined with Management Science and Quality Management, it transforms to “Outcomes Management”, a strategy tool (e.g. how does adopting a certain technology impact the organization or larger system).

Techniques for Technology Techniques for Technology EvaluationEvaluation

1.1. Demonstrate added value: Directly impacts clinical Demonstrate added value: Directly impacts clinical and/or business outcomes or indirectly impacts and/or business outcomes or indirectly impacts outcomes by enhancing strategic plan.outcomes by enhancing strategic plan.

2.2. Investment Models: Investment Models:

Weill Broadbent Information Technology Portfolio Weill Broadbent Information Technology Portfolio and Business Value Model and Business Value Model evaluates technology in evaluates technology in regards to:regards to:

a)a) Infrastructure (business integration)Infrastructure (business integration)

b)b) Transactional (reducing costs)Transactional (reducing costs)

c)c) strategic (marketing position/competitive advantage)strategic (marketing position/competitive advantage)

d)d) informational (better information)informational (better information)

Constructive Technology Assessment Model:Constructive Technology Assessment Model:

Discussions between manufacturers, developers, Discussions between manufacturers, developers, researchers, and users of technology being developed.researchers, and users of technology being developed.

Techniques for Technology Techniques for Technology EvaluationEvaluation

3. 3. Measure Costs and Benefits:Measure Costs and Benefits:

CostsCosts

a)a) Charges: Rate setting and converting resources to Charges: Rate setting and converting resources to department costs.department costs.

b)b) Accounting costs: Estimate the break even point.Accounting costs: Estimate the break even point.

c)c) Economic costs: Marginal cost of providing more units of Economic costs: Marginal cost of providing more units of service vs. not providing.service vs. not providing.

d)d) Direct: Patient careDirect: Patient care

e)e) Indirect: OverheadIndirect: Overhead

f)f) Opportunity: Lost opportunities (e.g. patient wages)Opportunity: Lost opportunities (e.g. patient wages)

BenefitsBenefits

a)a) Objective measures: Length of stay, functional outcomes, Objective measures: Length of stay, functional outcomes, quality of life toolsquality of life tools

b)b) Subjective measures: Patient satisfaction, quality of careSubjective measures: Patient satisfaction, quality of care

Techniques for Technology Techniques for Technology EvaluationEvaluation

4. 4. Estimating Return On Investment:Estimating Return On Investment: Accounting Definition:Accounting Definition:

(Net Income/Investment)x100= ROI(Net Income/Investment)x100= ROI Technology Definition:Technology Definition:

It is the “added-value” to the It is the “added-value” to the system. Remember that the system. Remember that the outcomes or results are compared outcomes or results are compared against the initial costs or against the initial costs or investments. This is the outcomes investments. This is the outcomes bases approach.bases approach.

Example of Technology Example of Technology EvaluationEvaluation

Type of technology: Picture archival and communication Type of technology: Picture archival and communication system (PAC) is being evaluated.system (PAC) is being evaluated.

Method: Decision analytic model related to organizational Method: Decision analytic model related to organizational impact of invest/no invest was interfaced with the Weill impact of invest/no invest was interfaced with the Weill Broadbent IT portfolio model to develop a quantitative Broadbent IT portfolio model to develop a quantitative model.model.

Sources of data were: physician needs, satisfaction survey Sources of data were: physician needs, satisfaction survey performed on the community as well as sensitivity analysis performed on the community as well as sensitivity analysis for discount rates and net present value of costs and for discount rates and net present value of costs and benefits projected into the future.benefits projected into the future.

Results: institution-specific report the quantifies Results: institution-specific report the quantifies implications of investing or not in PAC and level of risk implications of investing or not in PAC and level of risk associated with each decision.associated with each decision.

What have you learned?What have you learned?

Simply stated, what is the outcomes-based Simply stated, what is the outcomes-based approach?approach?

From an IT perspective, what is ROI?From an IT perspective, what is ROI? Ask these four questions when considering Ask these four questions when considering

investment in a new technology.investment in a new technology. The economic principle of “cost effective” The economic principle of “cost effective”

care compares inputs, (costs) against care compares inputs, (costs) against what?what?

Name the 5 C’s (challenges) to Name the 5 C’s (challenges) to implementing IT in the healthcare setting.implementing IT in the healthcare setting.

ReferencesReferences

Sachdeva, Ramesh C. MD,Phd,MBA. Sachdeva, Ramesh C. MD,Phd,MBA. Measuring the impact of new Measuring the impact of new technology: An outcomes-based technology: An outcomes-based approach. approach. Critical Care Medicine. Critical Care Medicine. 2001;29(8):N190-N195.2001;29(8):N190-N195.