Running the numbers: Making sure your spending pays off

If you're going to invest in new technology, you want to be assured that it will eventually pay for itself. Here are four steps to ensure you're spending wisely.

By Tyler Chin, AMNews staff. Dec. 16, 2002.

Technology is touted as, among other things, a cost-saving device. But how do you know a new system will save you any money, especially if it comes with a hefty price tag?

The answer is to do a return-on-investment analysis, which is easier than you might think. It boils down to a four-step process: figuring out the cost of the technology compared with the cost of the business process you're trying to replace; determining the financial benefits you can reap; determining when you'll recoup the cost of technology; and checking after you buy to determine how your initial projections held up.

"You've got to know if you can afford it, and that's one way to go about it," said Steven J. Mash, MD, an orthopedic surgeon and CEO of M&M Orthopaedics, an 18-member group in Downers Grove, Ill.

Since 1998, the group has committed $1.3 million to buy an electronic medical record and two other technologies, after ROI analyses showed it would earn its money back on each system in three years. M&M, as well as Mount Carmel Health Providers, a 50-doctor primary care group in Columbus, Ohio, share information and tips on how you can do your own ROI analysis.

1. Figure out the cost of the process to be replaced. The first thing you have to determine when considering buying technology is why you want it. M&M wanted an EMR to improve quality of care and efficiency by giving staff and doctors electronic access to patient information so they would not have to make clinical decisions without charts or waste time in paper chases, Dr. Mash said. [...]