Outcomes based approach to measuring the impact of new technology Vikas Arya HSCI 740 Spring 2004 May 22,2004

Need to answer four questions when considering new technology for your organization: 1. Should the organization invest in this technology? 2. What are the associated risks and benefits? 3. What is the impact on patient outcomes? 4. What is the Return on Investment to the organization? Use both qualitative and quantitative models to answer these questions and justify spending for new technology. Use both qualitative and quantitative models to answer these questions and justify spending for new technology. These models will impact optimal expenditure policies within the organization and identify optimal technology policies at national and international health levels. These models will impact optimal expenditure policies within the organization and identify optimal technology policies at national and international health levels. Outcomes-based approach views results against inputs to justify spending for new technology. Outcomes-based approach views results against inputs to justify spending for new technology.

Challenges to IT implementation in Healthcare 1. Costs: Manufacturing and Marketing to develop new technology 2. Competing priorities: Senior management and hospital boards need budgetary justification. 3. Culture: Clinicians must buy into the technology. 4. Confidence: Patients may be skeptical. (e.g. EMR security) 5. Consistent: Government regulation forces standards.

Micro-Economic principles used to evaluate Healthcare expenditures. 1. Crowding out effects: The larger a particular segment of a budget portfolio is, the lesser resources available for other activities. (Fig. 1) Capital assignment varies by organization. 2. Cost effective care: Technology is costly only if it is not offset y proportionate improvements in outcomes. Justify costs through results.

Economics Basis for Outcomes Evaluation “Full” considers inputs, (costs) AND outputs, (outcomes). “Full” considers inputs, (costs) AND outputs, (outcomes).Vs. 2. “Partial” considers inputs, (costs) OR outputs, (outcomes). Also done at several levels: a) Cost-Identification (identify costs) b) Cost-Effectiveness (compare strategies with outcomes using neutral units.) c) Cost-Utility (Outcomes in quality-adjusted life years.) d) Cost-Benefit (Use monetary units for comparison.)

Principles of Outcomes Evaluation Donabedian Model uses the “structure-process-outcome” relationship for outcomes evaluation framework. Donabedian Model uses the “structure-process-outcome” relationship for outcomes evaluation framework. Micro Level studies (within the organization) vs. Macro Level (larger scale like state or country) Micro Level studies (within the organization) vs. Macro Level (larger scale like state or country) Outcomes Research 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 Evaluation 1. Demonstrate added value: Directly impacts clinical and/or business outcomes or indirectly impacts outcomes by enhancing strategic plan. 2. Investment Models: Weill Broadbent Information Technology Portfolio and Business Value Model evaluates technology in regards to: a) Infrastructure (business integration) b) Transactional (reducing costs) c) strategic (marketing position/competitive advantage) d) informational (better information) Constructive Technology Assessment Model: Discussions between manufacturers, developers, researchers, and users of technology being developed.

Techniques for Technology Evaluation 3. Measure Costs and Benefits: Costs a) Charges: Rate setting and converting resources to department costs. b) Accounting costs: Estimate the break even point. c) Economic costs: Marginal cost of providing more units of service vs. not providing. d) Direct: Patient care e) Indirect: Overhead f) Opportunity: Lost opportunities (e.g. patient wages) Benefits a) Objective measures: Length of stay, functional outcomes, quality of life tools b) Subjective measures: Patient satisfaction, quality of care

Techniques for Technology Evaluation 4. Estimating Return On Investment: Accounting Definition: Accounting Definition: (Net Income/Investment)x100= ROI Technology Definition: Technology Definition: It is the “added-value” to the system. Remember that the outcomes or results are compared against the initial costs or investments. This is the outcomes bases approach.

Example of Technology Evaluation Type of technology: Picture archival and communication system (PAC) is being evaluated. Type of technology: Picture archival and communication system (PAC) is being evaluated. Method: Decision analytic model related to organizational impact of invest/no invest was interfaced with the Weill Broadbent IT portfolio model to develop a quantitative model. Method: Decision analytic model related to organizational impact of invest/no invest was interfaced with the Weill Broadbent IT portfolio model to develop a quantitative model. Sources of data were: physician needs, satisfaction survey performed on the community as well as sensitivity analysis for discount rates and net present value of costs and benefits projected into the future. Sources of data were: physician needs, satisfaction survey performed on the community as well as sensitivity analysis for discount rates and net present value of costs and benefits projected into the future. Results: institution-specific report the quantifies implications of investing or not in PAC and level of risk associated with each decision. Results: institution-specific report the quantifies implications of investing or not in PAC and level of risk associated with each decision.

What have you learned? Simply stated, what is the outcomes-based approach? Simply stated, what is the outcomes-based approach? From an IT perspective, what is ROI? From an IT perspective, what is ROI? Ask these four questions when considering investment in a new technology. Ask these four questions when considering investment in a new technology. The economic principle of “cost effective” care compares inputs, (costs) against what? The economic principle of “cost effective” care compares inputs, (costs) against what? Name the 5 C’s (challenges) to implementing IT in the healthcare setting. Name the 5 C’s (challenges) to implementing IT in the healthcare setting.

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