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Enterprise Performance Management for Maximizing Healthcare IT ROI

Originally published June 28, 2010

The healthcare provider sector typically spends a very small percentage of revenues on IT compared to most other industries. In 2009, we interviewed a significant number of CIOs and CMIOs of large hospitals in India, and they attributed low investments in healthcare IT to the absence of a strong business case. We believe this is a common challenge faced by healthcare CIOs across the globe.

The primary issue with healthcare IT ROI is that it’s not measured quantitatively, and what cannot be measured cannot be managed. Benefits realization and ROI from healthcare IT investments cannot be demonstrated in the same way that investments in medical equipment can, for example, where revenue contribution of purchased equipment is straightforward to calculate. Most hospitals’ current BI systems and processes are not designed to track value realization, and they continue to focus on reporting key clinical and operational metrics. They are also challenged by the quantification of certain benefits like reduction in drug-drug interactions to dollar value, as data elements required for such conversions may not be captured in the business intelligence (BI) systems.

In the wake of ARRA healthcare IT stimulus, a large number of providers are planning electronic medical records (EMR) implementations. It is a short-sighted approach to consider BI requirements related to EMR implementation as centered on meaningful use metrics and their reporting. Overall realized value from EMR can be measured only by tracking its direct as well as indirect impact on clinical, operational and financial metrics. Generally speaking, this holds true for any healthcare IT investment, whether on clinical systems or backend ERP systems. So, how can changes to clinical, operational and financial metrics as a result of healthcare IT initiatives be measured and converted to dollar figures? This requires a quantum shift toward healthcare enterprise performance management (HEPM).

Need for a Comprehensive Framework

Currently, performance is measured at a macro-level in most provider organizations. Hospital CXO dashboards typically report key clinical, operational and financial metrics with drill downs to granular levels. Many providers rely on the reporting capability of healthcare IT and backend systems. They do not have an integrated data warehouse and analytical system that can provide a consolidated view of the metrics and their interrelationships. HEPM or provider data-warehousing and business intelligence projects tend to be the worst offenders in terms of ROI. Many providers fall into the trap of designing expensive BI programs around their pet hypothesis on an organization’s issues. A lot of investment is made into a BI program to generate reports to test the hypothesis, and many times it misses the mark.

What is needed is a comprehensive framework for enterprise performance management that supports all the essential requirements for HEPM:
  • An exhaustive list of a provider’s clinical, operational and financial performance levers and metrics associated with them.
  • Relationship map between performance levers and how a change in one metric impacts value of other metrics. In the relationship map, all the clinical and operational metrics value chains culminate in financial parameters like revenue, cost or free cash flow that can be measured in dollar terms. This enables quantification of benefits realized by improving any clinical or operational metrics.
  • Business intelligence system that supports problem analysis of non-performing metrics and identifies statistically relevant levers that can be tweaked to improve performance.
  • Analytical capability to predict, model or simulate future performance levels.
  • Ability to map IT and other initiatives to the performance levers impacted by the initiative and estimate potential benefit realization in monetary terms.
Investments in data warehousing and BI programs can be optimized by leveraging these tools to design the program in line with organizational goals and levers that impact those goals. This way, a BI program can be thought through in complete detail and validated, thereby improving the cost effectiveness of the program.

Provider IT initiatives are not always planned and prioritized based on their expected ROI because typically it’s unclear what parameters impact ROI of an initiative and what metrics can be used to measure the impact. For maximizing ROI from healthcare IT investments, rigor and discipline is required in planning and prioritizing IT initiatives. Most provider organizations do not have well defined approach to this. Project approvals and budget allocation can be driven by isolated individual influences and subjective experience over business rigor.

The first step in maximizing healthcare IT ROI is to invest in right initiatives to the right extent at the right time. Cost-benefit analysis for the project would be one key input for project prioritization. Strategic nature of a project, mandates by regulations or lack of vendor support for older version of the system can be some of the other parameters that influence priority of a project. For cost-benefit analysis of any IT project planned by the provider organization, business subject-matter experts can estimate the expected business benefits by nailing down the metrics that will be impacted by successful project execution and the extent of change expected in these metrics that can be attributed to the project.

Once an organization embraces HEPM, every IT (and even non-IT ) initiative undertaken by the provider will have metrics attached that the initiative is expected to change favorably. The values of these metrics at the commencement of the initiative are taken as benchmark against which improvements are measured. Traversing the performance lever value chain, any delta in the metrics can be translated into a corresponding dollar value.

For ensuring high ROI, high level management of performance by senior executives is not enough. Providers need to have metrics management governance where each individual is held accountable for a set of key performance indicators that they must manage and control. This down-in-the-pits approach for micro-management of performance metrics, in turn, will ensure better performance of macro-level metrics. Apart from metrics management governance, metrics management process needs to be established and staff must be trained on it. Metrics management process will involve regular review and analysis of non-performing metrics, identifying opportunities and strategy for further improvements in metrics, adjusting performance benchmarks with change in business context and reporting on key performance indicators.

An aggressive high performance culture needs to be instilled in staff so that they set the bar higher for a provider organization’s performance on a continuous improvement journey.

A BI-Centric Approach

In our own work, Infosys believes that HEPM is an integral part of all strategic initiatives. For example, ICD9 to ICD10 migration are planned by most providers as an IT re-engineering initiative. However, we believe that ICD9 to ICD10 migration must involve integration of clinical and financial BI systems to provide hospitals with visibility into the case mix and average cost of service delivery for each ICD 10 code. This information will enable them to negotiate for favorable ICD10-based contracts with payers. This BI-centric approach to ICD10 initiative planning has a potential to deliver ROI far beyond what a purely re-engineering approach can deliver.

Healthcare IT project execution is plagued by IT process inefficiencies resulting in delays and quality issues that increase total cost of ownership. IT initiatives like EMR implementation are driven by physician preferences and cannot focus on a single, organization-wide theme like maximizing value realization from EMR investments. In the absence of a common underlying theme for EMR implementation, system design and configuration decisions are heavily influenced by needs of individuals. EMR systems customized for individuals will not only take much longer to implement but also lack process standardization that is essential for long-term cost-effectiveness of an EMR. Often, physicians and staff are reluctant to change the way they work so when IT is introduced, current processes are configured into the IT system as-is without diligent attempt to re-engineer sub-optimal processes. Consequently, most EMR implementation projects are followed by EMR “enhancement” projects. Failing end-user adoption, the system needs to be continuously re-configured to meet diverse end-user needs. The extended system enhancements phase adds significantly to the costs of healthcare IT.

HEPM solutions can provide visibility into the impact of EMR design decisions on potential benefits realization. These data points can be leveraged to negotiate a fine balance between physician preferences and organizational standards in EMR implementation. HEPM can also demonstrate the benefits realized by early adopters of EMR system (for example, a department within the hospital). Factual evidence of realized benefits can be used to promote organization-wide EMR adoption.

HEPM provides a clear line of sight into benefits realized and aims to continuously increase ROI through performance management. Besides HEPM, there are several other supplementary approaches for optimizing ROI:
  • Increase IT Effectiveness – IT departments of many provider organizations suffer from low IT process maturity that results in higher costs for IT project execution. They are typically challenged by issues like lack of adequate number of IT staff, unavailability of required skills for the project, dysfunctional business-IT interface, estimation errors, scope creep, rework, lack of coordination across various project teams, poor quality of deliverables and vendor management issues. IT effectiveness issues lead to project delays and dissatisfied end users, which adversely affects ROI. Taking a hard look at pitfalls that IT projects run into and addressing IT effectiveness issues can tremendously impact ROI.
  • Business Process Optimization – An inefficient process, when automated through IT systems, will remain an inefficient process. Many times, organizations fail to realize full value potential from the IT investments because no attention was paid to address the inherent inefficiencies in existing business processes. Provider business analysts must diligently assess the processes associated with IT initiatives and ensure that the processes are optimized and standardized to the extent possible. 
  • Sustained End-User Adoption and Learning (SEAL) – Healthcare provider verticals, in particular, abound in examples of healthcare IT initiatives that failed entirely because physicians and nurses refused to use the system. Strategy for end-user adoption and training should be an integral part of project planning. Continuous communication and a functional feedback loop with end users is required throughout the project life cycle. An effective approach toward training and adoption can significantly reduce the initial productivity loss on working with the new system and prevent ROI erosion.
Maximizing ROI from IT investment requires a fundamental shift from “spending money on information” to “making money from information,” facilitated by healthcare enterprise performance management. A change in focus from data collection and reporting to advanced data analytics across the hospital(s) and developing insights that can be harnessed to drive better clinical outcomes, operational efficiency and cost savings is required. Aggressive and informed performance management coupled with efficient execution of IT programs, business process optimization and user adoption are critical success factors for increasing ROI from healthcare IT dollars.

SOURCE: Enterprise Performance Management for Maximizing Healthcare IT ROI

  • Mark BrownleeMark Brownlee
    Mark is Associate Vice President and Head, Healthcare Provider Practice, at Infosys Technologies. As the head of the healthcare provider practice at Infosys, he is responsible for the complete management of client relationships and building new solutions to meet healthcare provider needs. He may be contacted by email at
  • Seema PandeySeema Pandey
    Seema, Principal, Insurance, Healthcare and Life Sciences, at Infosys Technologies is an industry expert with more than 13 years of experience, specializing in healthcare IT consulting, electronic health records, disease management, hospital performance management and Health 2.0. She may be contacted by email at



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