Part I: Making the Case for an Autoverification ROI

We are rolling out a 3-part blog series on The Autoverification Return on Investment. Subscribe here  so you don’t miss an article.

Moving from a manual result review environment to one that relies on autoverification rules is a big decision, whether you are expanding your current autoverification program, replacing your current rules software systems, or just starting from scratch to implement an automated rule-based review process. The business justification process can range from little or no financial consideration to a full business case that compares your current situation to the new proposed outcomes.  Knowing if you are getting your money’s worth is something to consider in order to strengthen your overall program success. Calculating a return on investment, known as ROI, is a basic business concept that is useful in taking the guess work out of making the business decision to move forward. A solid ROI analysis helps you pinpoint the areas that require improvement to achieve your specific autoverification goals.

Without an ROI analysis, your organization may not feel comfortable in funding or allocating additional resources for your autoverification program. Yet without that funding it will be difficult to achieve your goals. Providing a financial analysis not only helps support your autoverification objectives, but it also mitigates the risk of change and helps everyone in the organization align with your intended objectives and goals.

The benefits of an autoverification ROI analysis include the following:

• Universally understood: A simple ROI analysis based on ‘known’ laboratory metrics can be very powerful in demonstrating the financial and productivity benefits of an autoverification program in a way that is understandable by all stakeholders:  lab leadership, clinical, IT groups, even finance.

• Tells a story: An autoverification ROI analysis lays out the current result review situation and shows how the proposed improvement option(s) can take autoverification to the next level. The ROI analysis is the ‘engine’ that drives your business case forward and provides the undisputable evidence that supports your autoverification plan.

• Project decision criteria: A ROI analysis is usually used as a basis for making a business decision and used when comparing between projects to determine which project will be prioritized ahead of another.

• Easier to calculate then you think: All laboratories have access to the information needed to fill out a ROI analysis template. You don’t have to dig out data from another department.

• Useful in comparing various options: ·Perhaps you want to split up your autoverification objective into multiple projects. How to decide what to tackle first? Consider preparing a ROI calculation per project option. You can quickly identify which one is more favorable, give you an early win, or will be more acceptable to leadership.

• Does not necessarily measure risk: A ROI analysis calculates the profitability of pursuing a specific project, but it does not address risks. Risks can take many forms such as: what will happen to my lab if I fail to pursue an autoverification program or improvement,  what are the risks if I pursue one autoverification solution over another, etc.  It is a good idea to include a risk assessment in your final business case to accompany your ROI calculation outcomes.

AV ROI% Calculation Overview

An AV ROI analysis is a simple calculation that compares costs with benefits to support an investment in a project or initiative. The ROI analysis tries to evaluate the amount of financial return or benefits on an investment relative to the investment’s cost. The result of the ROI calculation is expressed as percentage or a ratio. A positive percentage indicates that the project is probably worthwhile and should be considered for funding.

Diagram 1: AV ROI% Results Calculation

$ AV Return on Investment: The financial gain from the implementation of your autoverification improvements solution which are generated by changes in efficiency, quality, and improvement activities.

$ AV Investment or Cost: The cost of purchasing, developing, implementing, and using the improvement actions of the autoverification solution.

AV ROI % Results: The final computation of a ROI % is dividing your net benefit or returns by the investments or cost of the project. A ROI is typically expressed as a percentage because it is easier to understand as opposed to a ratio. A positive percentage indicates that the benefits (or return) are greater than the cost whereas a negative percentage indicates that the total costs exceeds the returns.

Impact to you. The ROI percentage that is calculated should be in line with ROI expectations from other investments in your organization for IT or software projects. Healthcare IT projects have higher percentages (> 100 %) if they are replacing manual processes with automation. Lower ROI percentages are anticipated if you are replacing a process that is already automated. A ROI that is in the double digits indicates that the endeavor is probably worth pursuing (Johnson, 2020).

Example 1: ROI % Calculation for New AV Program

A mid-sized laboratory is implementing autoverification in their hematology laboratory. They anticipate a net savings by reducing their manual review of results by $300,000 per year against an investment of $150,000 for purchasing AV software, rule implementation and training services, and $5,000 in annual support.

AV ROI % = $300,000/$150,000+$5,000 = 1.94%

Outcome: This positive return on investment demonstrates that the mid-sized laboratory can expect to recoup 1.9 times the savings over the cost of the investment to implement autoverification in their hematology department.

Example 2: ROI % Upgraded AV Program

A university laboratory is expanding their autoverification program to add immunochemistry and urinalysis. They anticipate it will cost them $40,000 for rule creation, testing and validation in order to gain savings of $60,000 per year by reducing manual review of results. .

AV ROI % = $60,000/$40,000 = 150%

Outcome: This positive return on investment demonstrates that the university laboratory can expect to recoup 1.5 times the savings over the cost to expand their AV program.

$ AV Return on Investment

You can expect that the AV financial return (or gain) you seek will be calculated as a decrease in your daily operational costs.  These decreases  can be visualized as falling into the categories depicted in Diagram 2- Make-up  of $ AV Return on Investment. You can assess these productivity gains  through an analysis and goal setting exercise that will help you determine what cost reductions and financial productivity gains are possible for your lab.

Diagram 2: $ AV Return on Investment

One of the first exercises to assemble a ROI is to identify the expected $ financial return on investment, the benefits, expressed in $ that support your AV program (Diagram 1: the numerator). This is achieved by  calculating the anticipated savings and revenue gains through Cost Reductions and Productivity/Efficiency Gains  (Diagram 2: $AV Return on Investment) over an annual basis that can be achieved with the implementation of an autoverification program. Listed below is a description of each component of the $ AV ROI Return on Investment side of the ROI% calculation that you should investigate as you prepare your AV ROI% calculation. 

$ AV Return on Investment Cost Reduction Overview

• Tech time reduction: Tech Time Reduction is the time in $ that your AV software solution is expected to reduce the cost of your current manual  review process.  To calculate this cost reduction, you will first need to understand how long it takes currently, in minutes, to perform manual review processes that you plan to replace with autoverification. Extrapolate this total time across a year. Then multiply the annual total time savings (be sure to convert it into hours first!) by the average, hourly rate across all personnel, (including managers). Be sure to adjust your hourly rate to include overhead (direct and indirect costs, such as benefits). The result is a Total Tech Time Reduction per year, expressed in $.

•  Error reduction: The primary benefit of investing in autoverification solutions is to eliminate or nearly eliminate manual review errors. To calculate these savings, first calculate your current average number of errors handled on an annual basis, then multiply it by the average time (in minutes) it takes to correct these errors. As discussed above, multiply the time (remember to convert minutes to hours first!) by your hourly cost of personnel to correct these errors. Manual review errors can include releasing invalid results, transcribed test result values, calculation issues, patient final reporting issues and report corrections. It is estimated that between 2.3% and 26.9 % of manual review errors are attributed to the human action of transcribing data from two different databases ( Goldberg, Niemierko & Turchin, 2008).

• Workflow re-work reduction: One of the advantages of autoverification is reducing the number of reruns and reflexes that are not clinically useful based on your laboratory best practices. An annualized value or a reduction in review time can be estimated by first determining  your current rerun and reflex rate (as a percentage) that can be eliminated with autoverification. Convert this rate into the number of reruns/reflexes performed. Next, determine the average time (in minutes) it takes currently to perform these manual reruns/reflexes. Finally, multiply the time (be sure to convert it from minutes to hours first!) by your staff average hourly rate to determine the expected savings in workflow rework per year.

 $ AV Return on Investment- Productivity/Efficiency Gains Overview

• Increased capacity: The productivity gains you achieve from implementing or upgrading your autoverification program can be identified by estimating opportunities for revenue growth that might be achieved with increased capacity. Even if that growth is not expected to materialize right away, you should include it (annualize your estimates) in your calculation because your expanded capacity could eliminate or delay the need to add an instrument or headcount.

• Increased throughput (reduction in TAT): In addition to increasing your lab’s capacity,  autoverification also impacts throughput which in turn reduces turnaround time. Aside from the inherent benefits turnaround time can bring to the patient experience and patient care pathways, a reduction in turnaround time can free up time for technologists to bring on additional testing. Anticipated incremental annual revenue gains from new or additional testing should be added to your AV ROI calculation. 

• Standardization and reproducibility: The use of autoverification streamlines the review of patient results and improves quality through standardization and data reproducibility. Similar to the reductions in turnaround time, the predictability of consistent  results and the reduction in escalation of difficult cases to the next layer of management should also be translated into annual $ savings.

$ AV Investment or Cost

The second step in the assembly of an autoverification ROI is to calculate the investment costs (Diagram 1: denominator) associated with the implementation of a new AV program or the expansion of your current AV program. This part of the ROI% calculation is generally more straight forward. These items can include the cost of the software, any applicable hardware, rule creation services and implementation costs, including testing, training, service, and support. This side of the AV ROI% calculation should include everything that is needed to get your AV project up and running including internal costs (Diagram 3: $ Return on Investment Costs). If you are expanding your AV program, include all incremental costs associated with upgrading or enhancing your current autoverification program.

Diagram 3: $ Return on Investment Costs

$ AV Investment or Cost - AV Program Costs

• Software program: Typically, the largest cost of a new autoverification program is the purchase of the software that supports rules logic. Explore your options: Autoverification capability may be an add-on option of software already installed, such as interface connection software in your LIS or middleware or instrument on-board software. Before you make a directional decision, be sure to learn the pros and cons of these options. ‘Get under the hood’ and verify that the processes you plan to convert to autoverification, and which will support your ROI% analysis, can truly be handled by the software. All costs associated with the purchase of the autoverification software should be included in the ROI% calculation.

• Hardware or hosting software: An autoverification rule program may require the purchase of hardware components such as a server or PCs to support the system based on the vendor and product selected. Newer autoverification systems are cloud based and could include costs related to data hosting and storage. You will want to engage your IT team to assist you in understanding these options and calculating these costs, however, we encourage you to stay engaged. Sometimes IT can inadvertently over or under spec hardware, third party software and IT security requirements due to their lack of knowledge (understandably!) about autoverification.  Some IT departments ‘charge’ outside departments for their time so be sure to add these internal costs if they apply to you.

• Rule Implementation and training costs: All rules-based systems require that rules be created, tested, and validated for use by the laboratory. Typically, costs associated with the implementation of a rules based system will be proposed by your vendor for initial implementation and optional on-going service and support. Training is generally offered for the subject matter experts and support personnel to maintain and curate the rule set(s) on a long-term basis. These costs should be accounted for in your ROI% calculation.

• Service and support: Most providers of rules-based software systems require the purchase of an annual service and support program for software updates, upgrades, and periodic training. Additional program add-ons could include rule creation assistance and rule testing validation. Be sure to dive into these details to understand what is included, and as importantly, what is not included in these services. Your ROI% analysis should reflect anticipated costs for services incurred over the period of time covered by your analysis. For example, if service and support costs are not charged until after a warranty period, be sure to prorate these costs so that all aspects of your ROI% calculation cover the same time period.

$ AV Internal Costs

An organization may have internal costs that need to be considered for any company project. These costs may need to be added to the total investment costs of your project as the cost of internal resources or overhead. Listed below are examples of common internal costs that may need to be factored into an auto-verification project.

• Supplier demonstrations, evaluating technology, and supplier selection costs

• Any costs related to data conversion or internal interface development

• Payroll costs associated with IT/security or quality management employees that need to review IT projects and impact on the organization in regard to business continuity or security

• Management overhead allocation costs including project management, finance, administration, or other key stakeholders

$ AV Investment or Cost - AV Program Expansion

• Add-on software upgrade or program costs: The addition or expansion of your autoverification program could include costs associated with new rule set introduction by connection, family of instruments or by discipline. Software options or features may also have to be activated to support multiple rule sets per the vendor. Be sure to inquire about rules program expansion costs that may be required to cover all future costs associated with your autoverification strategic plan.

• New software or rules implementation: As with any implementation of software, the expansion of a current autoverification program may require an upgrade of hardware, an upgrade of software, installation, training, rules set up/creation and other costs. Your ROI% should account for these additional costs where they relate to your expansion project. Additional costs that benefit the overall current program should either be excluded from your ROI% investment cost calculation or apportioned.

• Incremental service and support: Incremental software purchases may carry incremental service and support costs, but not always. Again, if your current software requires an upgrade to enable you to expand your autoverification, often the service and support fees increase as well. In this case, consider ascribing a percentage of these to your ROI investment costs but not the full amount. You’ll want to also be mindful to only ascribe costs that are incurred during the time frame covered by your ROI% analysis.

Healthcare Return on Investment (ROI%)

The ROI percentage for healthcare projects primarily focuses on cost savings vs revenue earned.  According to Health Catalyst, technology investments are increasing determined based on their ability to improve operations and quality (Brown & Hough, 2013). The reframed healthcare ROI considers the downstream impact of quality of care that generates financial savings so that higher revenue-generating activities can be undertaken. The link between the clinical, operational, and financial aspects of a ROI are usually the most successful for project approval and prioritization.

The final computation of the ROI% is the outcome of your evaluation in mathematical terms of the benefits and investment costs of the project. The final ROI % represents a wholistic view of your project expressed as a final value used for consideration for investment.

Once you have calculated your ROI% is critical to review with your peers and stakeholders to obtain buy-in and to gain any additional insights. Your ROI% is one component of the overall business case for your project. The business case should include a clearly stated proposal, justification of the business need that is in alignment with your organizational goals, risk analysis and project alternatives.

The use of a ROI % helps justify a business decision for funding to answer these key questions:

• Is this autoverification project a good investment?

• What type of return should we expect?

• What is the ROI% comparison to other projects - which project should be chosen?

Inspire you.

To start with, completing an AV ROI% analysis helps your lab visualize the meaningful and substantial improvements you can make to your operation because they are based on YOUR data and metrics. Using AV ROI% analysis to justify building, growing, or expanding your autoverification program will facilitate the approval process that will turn your visualization of what’s possible into a reality of change. 

AV Blog Series - Continued

Continue with our autoverification ROI series of blogs to learn how you can create a powerful AV ROI business case. Our next discussion, Part 2 in the blog series, will focus on the anatomy of the ROI calculation inputs that you will need to include in your AV ROI% analysis.

References:

Brown, B. & Hough, L. (2013). How to drive roi in your healthcare improvement projects (executive report). Health Catalyst. November 19, 2013. Retrieved from https://www.healthcatalyst.com/how-to-drive-roi-in-your-healthcare-improvement-projects-html

Goldberg, S., Niemierko,A & Turchin, A (2008). Analysis of data errors in clinical databases. AMIA Annual Symposium Proceedings Archives, 2008. Retrieved from https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2656002/.

Johnson, S. (2020). Here’s everything you should know about a return on investment and how to use to ensure your business spending is increasing your earnings. Business News Daily. Updated July 10, 2020. Retrieved from https://www.investopedia.com/articles/basics/10/guide-to-calculating-roi.asp