Measuring ROI in Healthcare: Tools and Techniques to Measure the Impact and ROI in Healthcare Improvement Projects and Programs

Measuring ROI in Healthcare: Tools and Techniques to Measure the Impact and ROI in Healthcare Improvement Projects and Programs

by Jack Phillips

ISBN: 9780071812719

Publisher McGraw-Hill Education

Published in Medical Books/Administration & Medicine Economics, Business & Investing/Reference

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Sample Chapter


Healthcare Performance Improvement Trends and Issues

Few topics stir emotions to the extent that healthcare does. The mention of the topic often elicits strong feelings and opinions about costs, quality, access, and a host of other issues. Healthcare touches everyone, and it represents one of the largest expenditures in almost any economy, particularly in the United States. The cost to provide healthcare is growing much faster than the cost of other goods and services. Although the quality of healthcare has improved, safety and consistent quality outcomes still remain a concern. Access to quality healthcare is still an issue (particularly for those individuals who cannot afford it), as is the patient experience, which is rarely addressed appropriately.

Because of its tremendous cost and importance, the healthcare industry has been a target for many types of measurement efforts. Healthcare (the treatment of the health of people) is one of the most highly regulated and measured of all industries. All types of monitoring, recording, and measuring have entered into the healthcare arena, some with success and others not as successful due to the "practice of medicine." The practice of medicine is not an exact science, but one of discovery. Meanwhile, all types of healthcare performance improvement projects have been undertaken, and unfortunately, many of them have failed to live up to expectations. What is needed is a systematic approach to improving the healthcare industry, using a proven measurement process that generates credible outcomes.

These important challenges must be addressed for a sustainable healthcare system in the United States and around the world. This opening chapter describes the issues and challenges that the healthcare industry faces and builds the case for major changes in the ways that healthcare improvement projects are initiated, delivered, and evaluated. The following opening stories highlight the dramatic changes that are occurring in healthcare and what healthcare organizations must do to survive in the future. Scripps has spent years preparing for the future and they will be able to address the tremendous changes that will occur. Metropolitan Foundation Hospital more than likely will not be able to survive and will be a candidate for consolidation, merger, or acquisition.


Metropolitan Foundation Hospital

Metropolitan Foundation Hospital has enjoyed a successful 30 years of service in a major metropolitan area. With several locations in the city, the nonprofit healthcare provider is operating at a modest but manageable deficit. Executives are active in their community as part of their corporate social responsibility program. The hospital only accepts patients who do not have health insurance to meet the minimally acceptable legal requirement. Fees charged are based on the cost of services.

As the top executives plan for the future, they see substantial changes in the healthcare area as Medicare switches from pay for services to pay for value or bundled payments for service (capitation). Commercial payers are also migrating in the same direction. One analysis shows that based on Medicare reimbursement rates, the hospital would have to reduce prices by $1,200 per average case rate, which obviously would be devastating financially for the healthcare firm.

As the top executives address this issue, they have reviewed the current status with some of the key areas. Although they have collected patient satisfaction data, they have not taken any particular actions because of them. Further, identifying the cost of processes and procedures has not been routine and systematic. Although patient quality and outcomes are loosely tracked, little effort has been made to show related cost of that patient quality. Efforts to improve physician and nurse engagement have been limited at best. Top executives recognize that too much waste occurs and the staff seems to be inefficient, but they struggle with commitment to make changes. These challenges present executives with some critical obstacles in the future of healthcare.

Scripps Health

Scripps Health is a not-for-profit, San Diego–based healthcare system that is successful on any dimension. The system, which includes five hospitals and 23 outpatient facilities, treats almost 2 million patients annually. Scripps employs more than 13,000 employees and has been named one of "America's 100 Best Companies to Work For" every year since 2008. The system also includes clinical research and medical education programs.

Having enjoyed success over the past 80 years, Scripps is a financially sound and stable organization with AA-rated bonds, one of only four healthcare organizations in California to hold this distinction. The "people" part of their process is managed extremely well, enabling Scripps to provide efficient, quality healthcare. Scripps regularly appears on lists of admired organizations, the best places to work, and the best employer for certain groups. Executives place specific emphasis on corporate social responsibility with more than $370 million contributed to community service and charity care. Scripps is considered among the top providers of healthcare. For example, Scripps was named by Thomson Reuters as one of the Top 10 health systems in the nation for providing high quality, safe and efficient patient care.

The success of Scripps rests on the quality of its leadership and the systems and processes in place to make it an outstanding healthcare delivery organization. Scripps focuses significant efforts on sound financial processes, process improvement projects, and a variety of initiatives to improve the quality of healthcare. Among the processes used by Scripps is the ROI Methodology, a process that shows the success of healthcare improvement projects using six types of data with standards and a process model. At least 20 of Scripps professional team members have achieved the designation of Certified ROI Professional as they continue to conduct ROI studies on a variety of processes to ensure that they are delivering value and quality healthcare and achieving a positive financial outcome.


Healthcare reform is front and center in American society, the economy, and political arenas. Costs have grown annually, outpacing general inflation for decades, compounding the healthcare concern. The weight of this cost trend on Medicare has led Congress to pass landmark legislation that may, in fact, be the legacy of the Obama Administration. The legislation addresses coverage for the uninsured, affordable health insurance for small businesses, and coverage for minors and preexisting conditions. This legislation is sweeping in nature and has far-reaching implications.

Substantial Cost Impact

To pay for expanded coverage for the millions of uninsured Americans, a series of cuts in Medicare reimbursement to hospitals, physicians, and other providers from current levels will be used as "prepayment" for this coverage. The expanded coverage and payments for the uninsured will forestall the current practice of cost shifting by hospitals to commercial carriers to cover the uninsured. Hospitals have used the shifting of the cost of providing uninsured care to commercially insured payers via increased pricing.

Healthcare reform also allows employers and individuals to purchase coverage through state-run insurance exchanges that bid competitively at lower prices to offer coverage. These declining prices toward Medicare rates, which generally do not cover costs in most hospitals, will have a devastating impact on the viability of healthcare operations. A(Continues…)

Excerpted from "Measuring ROI in Healthcare: Tools and Techniques to Measure the Impact and ROI in Healthcare Improvement Projects and Programs" by Jack Phillips. Copyright © 2013 by Jack Phillips. Excerpted by permission. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher. Excerpts are provided solely for the personal use of visitors to this web site.
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Author Profile

Jack Phillips

Jack Phillips

Jack Phillips grew up in San Diego, California. He has worked alongside EMS personnel, law enforcement, and fire fighters for nearly twenty years. He discovered a passion for writing by writing a short story about 9/11 in 2001, has written screenplays, and has always worked towards publishing this novel. Whenever the chance arrives he finds himself writing another story. Off the Deep End is his first published novel. He lives in San Diego, still working in EMS as a Supervisor and EMT, living with his pretentious two dogs while continuing to write more and more each day.

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