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Slides for lecture by Alemi Objectives Learn one:  Assigned reading Presentations What do you know? Do one:  ROI on IT More

EHR transaction costs

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Business Value of IT
 

Objectives

The objectives of this section are:

• Examine the value of information systems through observing their impacts on revenues

• Project cost and benefits of information technology

• Calculate return on investment for information systems

• List advantages of relying on observed data as opposed to defining benefits and costs

Learn One:  Assigned Reading

1. Read the paper on Business Value of IT by Alemi  More►

Presentations 

1. Lecture on business value of IT 
   • Part one: bottom up and top down approaches to costs  Slides►  Listen►   SWF►  WMV►  You Tube 1► You Tube 2► You Tube 3►
   • Part two:  causal analysis of return on investment  Slides►   Slides 2003►   Listen►   SWF►
2. Presentation by James L. Oakes, Jr., Principal Health Care Information Consultants LLC Slides►
3. Calculating present value from future returns   Slides►  Listen►  SWF►  You Tube►

4. Example of a bottom up evaluation of cost of EHR  Excel►

5. Current approaches, by Yumn Abduljawad  Listen►

6. How to calculate correlations?  Listen►

7. How to calculate return on investment  Listen►

What do you know?

Advanced learners like you, often need different ways of understanding a topic. Reading is just one way of understanding. Another way is through writing about what you have read.  The enclosed assessment is designed to get you to think more about the concepts taught in this session.

1. What is wrong with the traditional methods of evaluating return on investment in EHR.  How does the method proposed in the reading overcome the shortfalls of these traditional approaches?

2. What are three pieces of information needed to establish a more causal relationship between investment in technology and its return?  Think of a specific organization and describe where can you find these three pieces of data. 

3. Does correlation establish causality and if not what additional information is needed so that a more causal analysis is done?

4. What is the present value of $10,000 income for the next 5 years if the current rate of interest is 6% per year? 

5. Plot a chart showing the relationship between Investment in IT and revenues using the data in Table 1.  
   

   Academic year	Revenue (in 1000s)	IT investment (in 1000s)
   97-98	$107,263	$9,770
   98-99	$117,197	$11,363
   99-00	$126,091	$15,572
   00-01	$132,811	$17,312
   01-02	$137,656	$15,099
   Table 1:  University Revenue & Investment in Online Teaching

   Compare your work with results in Figure 1.

   
   
   Figure 1:  Investment in Online Teaching and University Revenue
   

6. Calculate the present value of IT investment for the data in Table 1.  Assume a 6% return on investment. 

7. Calculate the correlation between IT investment and Revenue in Table 1.

Do One: ROI on an IT Project

Adult learners understand a topic best by doing it.  It gives them both new skills and confidence in their ability to carryout the recommended procedures.  In this project, you will estimate the relative value of VistA for the Veterans Administration.  In order to make sure that the project can be done in a short time interval, no data collection is necessary.  All needed data will be provided by the instructor in response to your queries.   Use the approach proposed in the course to calculate the business value of the Vista information system to the Veterans Administration.

1. Decide on variables you want to track over time and collect the relevant data from the literature or from your instructor:

   You will find data on cost of IT (Look under Office of Information & Technology), cost of health care services, percent of patients satisfied with the care, and rates of various medication errors at the Department of Veterans Affairs Office of Budget web site.  In particular, take a look at the following reports:

   • In August 20, 2007 we asked the Department of Veterans Affairs to provide us two pieces of information under the Freedom of Information Act.  We asked them for the budget of the Office of Information in the last decade (this office was recently organized and the FOIA officer had to estimate what the budget of the office would have been prior to the re-organization).  We also asked for the number of patient records in VistA database.  On October 16th 2007 they provided us with the following information:

     Fiscal Year	Budget of Office of  Information	Number of Records in VistA	VHA Cost per Patient Index
     2007		5,161,786
     2006	439,816,220	5,188,836
     2005	607,884,497	5,094,494
     2004	533,190,714	4,976,773	0.8%
     2003	316,467,395	4,806,871	-4.6%
     2002	245,998,730	4,545,559	-9.1%
     2001	187,087,714	4,088,075	-7.3%
     2000	171,353,392	3,673,612	-6.5%
     1999	203,211,123	3,425,474	-8.6%
     1998	199,997,062	3,273,020	-6.2%
     1997	470,817,061	2,999,381	0.8%
     Table 2:  Investment in IT, Use of VistA and Cost per Patient Index

2. Calculate the correlations between (a) index on cost of care per patient, (b) number of records in VistA system and the budget of the office of information.    

3. Provide scatter diagram showing the relationship between IT investment (budget of Office of Information) and cost of care (VHA cost per Patient Index)?  What comes first, IT investment or changes in cost of care?

4. Prepare a narrated slide presentation using exacting the following sections:

• Introduction.  Discuss the importance of evaluating the value of IT investment

• Describe the System and the organization.  Discuss what is VistA, how many patients are expected to be affected and how widespread is the implementation of the system. 

• Sources of Data.  Discuss and properly cite sources of your data.  

• Methods of Analysis.  Describe the method of analysis.  Do not assume that the reader has reviewed this web page.  Your presentation of the method should be clear and compelling.  Cite work of others.

• Results.  Present your findings.

• Discussion.  Discuss the limitations of the study and the meaning of the findings.

5. Your entire narrated presentation should not exceed 10 minutes and should not be more than 10 slides.  Narrate slides► 

6. Convert the presentation to a video format suitable for posting to the web.  If you are using Microsoft operating system, you can use the 30-day free Camtasia to convert the narrated slides into a suitable video format.  After download, open your Power Point slides and use the Camtasia toolbar add-in to convert the narrated slides.  If you are using a MAC environment, use "Make Movie" option inside the Power Point slides.   Download Camtasia► Convert Slides►

7. Post your video at a public domain.  If you are posting to You Tube, you can use AVI, MOV or WMV formats.

8. Send the URL of your work to the instructor, who will post student's work in this space.

Here are some recent student works.  Please do not assume that these are error free or exemplary work as the content of the assignment has changed over time:

• See work by Karen and Elena More►

More

• Bruce Savage's evaluation of information technology, see slides, see calculations. 

• Current Directions Inc. tutorial on how to justify cost of a data collection device.

• Erik Brynjolfsson  from MIT Center for Coordination Science talks about the productivity associated with information technology

• Sarvanan Devaraj, Rajiv Kohli  write about the IT payoff and measuring the business value of information technology investments.

• Tony Murphy writes about achieving business value from technology.

• Michael Sherwood-Smith, Zahir Irani, Dan Remenyi, Arthur H. Money, and Alan Twite write about IT costs and benefits.

• John Glaser. writes about analyzing information technology value in Healthcare Financial Management, March 2003 v57 i3 p98(4)

• Bloomfield, Eric L. MD, MS, FCCM The Impact of Economics on Changing Medical Technology with Reference to Critical Care Medicine in the United States. Anesthesia & Analgesia. 96(2):418-425, February 2003.  Accession Number: 00000539-200302000-00023

• Sachdeva, Ramesh C. MD, PhD, MBA Measuring the impact of new technology: An outcomes-based approach. Critical Care Medicine. 29(8) Supplement:N190-N195, August 2001.  Accession Number: 00003246-200108001-00008.

• Olson, Gary M.; Olson, Judith S. Human-Computer Interaction: Psychological Aspects of the Human Use of Computing. Annual Review of Psychology. 54:491-516, 2003 Accession Number: 00000689-200300000-00020

• Lennox, A Scott clinical research fellow 1; Osman, Liesl M senior research fellow 2; Reiter, Ehud lecturer 3; Robertson, Roma research assistant 3; Friend, James professor of respiratory medicine 2; McCann, Ian research assistant 1; Skatun, Diane research fellow 4; Donnan, Peter T medical statistician 5 Cost effectiveness of computer tailored and non-tailored smoking cessation letters in general practice: randomised controlled trial. BMJ. 322(7299):1396-1400, June 9, 2001.  Accession Number: 00002591-200106090-00023

• Nahm, Rosemary MSN, RN; Poston, Iona PhD, RN Measurement of the Effects of an Integrated, Point-of-Care Computer System on Quality of Nursing Documentation and Patient Satisfaction. Computers in Nursing. 18(5):220-229, September/October 2000.  Accession Number: 00002771-200009000-00009

• Randolph, Adrienne G. MD, MSc; Haynes, R. Brian MD, PhD; Wyatt, Jeremy C. MD; Cook, Deborah J. MD, MSc; Guyatt, Gordon H. MD, MSc Users' Guides to the Medical Literature: XVIII. How to Use an Article Evaluating the Clinical Impact of a Computer Based Clinical Decision Support System. JAMA. 282(1):67-74, July 7, 1999.  Accession Number: 00005407-199907070-00008

• Berner ES, Webster GD, Shugerman AA, et al. Performance of four computer-based diagnostic systems. N Engl J Med. 1994;330:1792-1796.  Accession Number: 00006024-199406230-00006

• Hunt DL, Haynes RB, Hanna SE, Smith K. Effects of computer-based clinical decision support systems on physician performance and patient outcomes: a systematic review. JAMA. 1998;280:1339-1346.  Accession Number: 00005407-199810210-00031

• HIMSS cost and benefits of EHR
  • Exploring the EMR Cost-Benefit Analysis: Managing ROI into Reality - Presentation (9/18/2006)
  • The Value of Electronic Health Records in Solo or Small Group Practices - Other Pubs (9/1/2005)
  • A Cost-Benefit Analysis of Electronic Medical Records in Primary Care - Other Pubs (4/1/2003)
  • The Economic Effect of Implementing an EMR in an Outpatient Clinical Setting - Other Pubs (1/1/2003)
• Six cases studies:  In this report, six cases studies are done on health care organizations and how they evaluated return on investment beyond looking at financial returns.

• Cost of an electronic health record for a primary care practice.

• Sachdeva RC.  Measuring the impact of new technology: an outcomes-based approach.  Crit Care Med 2001 Aug;29(8 Suppl):N190-5.  Accession Number: 00003246-200108001-00008  Vikas's summary

• MAYNARD, ALAN; BLOOR, KAREN Building castles on sands or quicksands? The strengths and weaknesses of economic evaluation in pharmaceuticals. British Journal of Psychiatry. 173(36S) Supplement 36:12-18, September 1998.  Accession Number: 00002405-199809001-00004  Keith's summary

• Snyder-Halpern, Rita PhD, RN, C, CNAA; Wagner, Mary C. MS, RN Evaluating Return-on-Investment for a Hospital Clinical Information System. Computers in Nursing. 18(5):213-219, September/October 2000.  Accession Number: 00002771-200009000-00008 Helayne's summary

• Henricks, Walter H. M.D.. Roumina, Kavous Ph.D.. Skilton, Bradley E.. Ozan, Debra J.. Goss, Gwendolyn R.. The Utility and Cost Effectiveness of Voice Recognition Technology in Surgical Pathology. Modern Pathology. 15(5):565-571, May 2002. Accession Number: 00006693-200205000-00014  Mike's summary

• Fleisher, Lee A. MD. Mantha, Srinivas MD. Roizen, Michael F. MD. Medical Technology Assessment: An Overview. Anesthesia & Analgesia. 87(6):1271-1282, December 1998.  Accession Number: 00000539-199812000-00012

• Cost-Benefit Analysis guide for NIH information technology projects.  Shoba's presentation. 

• Miller RH, Sim I, Newman J. Electronic medical records: lessons from small physician practices. Accessed at http://www.chcf.org/topics/view.cfm?itemID=21521 on 27 October 2004.

• Baron, Richard J. MD; Fabens, Elizabeth L. MD; Schiffman, Melissa MD; Wolf, Erica MD Electronic Health Records: Just around the Corner? Or over the Cliff? Annals of Internal Medicine. 143(3):222-226, August 2, 2005.   Accession Number:  00000605-200508020-00008

• Kaushal, Rainu MD, MPH; Blumenthal, David MD, MPP; Poon, Eric G. MD, MPH; Jha, Ashish K. MD, MPH; Franz, Calvin PhD; Middleton, Blackford MD, MPH, MSc; Glaser, John PhD; Kuperman, Gilad MD, PhD; Christino, Melissa AB; Fernandopulle, Rushika MD, MPP; Newhouse, Joseph P. PhD; Bates, David W. MD, MSc; the Cost of National Health Information Network Working Group The Costs of a National Health Information Network. Annals of Internal Medicine. 143(3):165-173, August 2, 2005.  Accession Number: 00000605-200508020-00002

• Hindel R, Preger W. Cost-effectiveness prospects of picture archiving and communication systems. Health Policy. 1988;9(1):91-101.

• Stockburger WT. An evaluation of the financial impacts of optical disk storage for digital radiography. Radiol Manage. 1987 Fall;9(4):35-9.

• Gunasekaran, A. et al., "A Model for investment justification in information technology projects", International Journal of Information Management, October 2001,Vol. 21, No. 5, pp. 349-364.

• Stamelos, I. et al., "Managing uncertainty in project portfolio cost estimation", Information and Software Technology, Nov. 2001, Vol. 43, No. 13, pp. 759-768. 

• Ragowsky, A., Ahituv, N., Neumann, "Documenting the Benefits an Organization May Gain by Using Information Systems,"  Communications of the ACM, Vol. 43, No. 11, November 2000, pp 303-311. 

• Ragowsky, A., Ahituv, N.,  Neumann, S., "Identifying the Value and the Importance of an Information System Application,"  Information & Management, Vol. 31.  

• Renkema, T.J.W. and Berghout, Egon W. "Methodologies for information systems investment evaluation at the proposal stage: A comparative review,"  Information and Software Technology, 1997, Vol. 39, pp. 1-13. 

• Powell, Phillip. "Information technology evaluation: Is it different?", Journal of Operational Research Society, 1 (1992) 29-42.