Section 1.
2 Adopt - Plan
Business Case: Total Cost of Ownership and Return on
Investment
Developing a business case is a process that helps determine the readiness for making a specific investment, creates a value proposition, and describes how an
investment will be executed. For an investment of HIT or EHR, the business case needs to identify the costs and benefits to determine the feasibility of acquiring such
technology. Once documented, the business case can serve as a means to evaluate products against expectations and available funding, serves as a budget during
implemenation, and helps evaluate whether you are achieving your return on investment.
Total cost of ownership refers to the fact that the cost of acquiring technology is only part of the total expenditures you may need to make in order to acquire and
maintain HIT or EHR. For example, you may pay a software vendor for the application, a hardware vendor for input devices, and pay overtime or at least additional
straight time for nurse training. Often the costs not associated directly with software and hardware are overlooked in calculating a return on investment. These costs
often lead to unexpected cost overruns.
Use this spreadsheet to estimate the total cost of ownership (TCO) and return on investment (ROI) for a single application or group of
HIT applications being considered for acquisition. Initially, estimates will provide a good idea of how much financing you may
require. When actual costs become known, a better picture of your financing needs will emerge. Also use this tool to manage your
project budget and to post actual benefits as you identify them each year to evaluate benefits realized.
Instructions for Use
1. Complete the two worksheets in this spreadsheet. Record information in the Analysis worksheet. Use the Page Setup feature in File to annotate who compiled the
information and the date compiled in the document footer. (The project manager, with assistance from the chief financial officer or other equivalent individual and the
HIT steering committee, should complete this tool.)
2. Record estimates for all potential costs. Record initial costs when there is a one-time cost; record costs in each year when there are annual costs or when costs are
spread over time (e.g., ASP/SaaS payments or annual subscriptions).
Section 1.2 Adopt Plan Total Cost of Ownership and Return on Investment - 1
3. Record estimates for all potential benefits. Year 0 is the year in which you implement. There may be benefits in that year, but only a portion of normal benefits for a
full year. Benefits may grow over time or become stable at some point. Be sure to document your assumptions so you can go back and estimate actual benefits.
4. The spreadsheet calculates totals. The year in which the payback period value is positive is the payback period. For example, if the payback period becomes positive
in year 3, the payback period is roughly three years. (You may calculate a more exact payback period if desired.)
5. As solid information is obtained from vendors, adjust the entries until you have all known costs.
Copyright 2009, Margret\A Consulting, LLC. Used with permission of author.
For support using the toolkit
Stratis Health Health Information Technology Services
952-854-3306 info@stratishealth.org
www.stratishealth.org.
Section 1.2 Adopt Plan Total Cost of Ownership and Return on Investment - 2
Total Cost of Ownership and Return on Investment
Costs
HARDWARE
Database Server(s) &
Devices
Assumptions
Qty
Initial Cost
Year 1
Year 2
Year 3
List if not using an
ASP or SaaS
model
Other Server(s) &
Associated Devices as
Applicable
Back up servers &
media
Fax server &
devices
E-mail server &
devices
Other:
Input Devices
Workstations
(including desktops
and mobile
devices)
Peripherals (e.g.,
wireless cards)
Storage Devices
Other Devices
Devices, media,
services if not
using
an ASP or
Printers
SaaS model
Document
scanners
Card scanners
Wireless access
points
Docking stations
Battery chargers
Section 1.2 Adopt Plan Total Cost of Ownership and Return on Investment - 4
Copyright 2009, Margret\A Consulting, LLC. Used with permission of author.
Year 4
Year 5
Total Cost of Ownership and Return on Investment
Other:
Communications
ISP
Telecom fees
Data Center Furnishings Racks, carts, etc.
as Applicable
Other
Describe
Hardware subtotal
SOFTWARE
Operating System
Describe license
Application
Describe license
Additional Modules or
Components
Upgrades to Existing
Applications as Needed
Identify and
describe license
Identify
Interfaces
Describe
Other Software (e.g.,
code sets, drug
databases, MS Office,
other third party)
List
Software subtotal
IMPLEMENTATION AND TRAINING
Vendor Implementation, List
Training, Support, Other
Services
Vendor Travel Costs
Describe
Project Manager
% time allocated
Staff Training Time
Amount
Section 1.2 Adopt Plan Total Cost of Ownership and Return on Investment - 5
Copyright 2009, Margret\A Consulting, LLC. Used with permission of author.
Total Cost of Ownership and Return on Investment
System Selection
Registration fees
and travel
expenses
Selection Consultant
Fees
IT Contractor
Fees
Attorney
Fees
Electrician
Fees
Physical Facility
Contractor
Fees
Implementation
Consultant/Support
Contractor
Fees
Trainer (if different than
above)
Temporary Space &
Furnishings (for training
& chart conversion)
Fees
New Furniture
Cost
Data Conversion
Cost
Chart Conversion:
Temporary Staff or
Outsourced Services
Rate
Chart Conversion:
Loaner Scanner
Fees
Webmaster
Fees
Rental
Implementation
subtotal
MAINTENANCE
Hardware Service
Maintenance
Agreements
List and describe
Section 1.2 Adopt Plan Total Cost of Ownership and Return on Investment - 6
Copyright 2009, Margret\A Consulting, LLC. Used with permission of author.
Total Cost of Ownership and Return on Investment
Software License
Maintenance
Agreements
List and describe
Ongoing education
Fees and
expenses
Subscriptions
List all
Telecom Fees
Fees
IP Fees
Fees
Maintenance
subtotal
STAFFING (Additional Permanent Staff)
IT Operations Staff
Salary + benefits
Clinical Data Analyst
Salary + benefits
Applications Analyst
Salary + benefits
Other IT Staff
Salary + benefits
Nurse/Health
Informaticist
% time equivalent
Staffing subtotal
CONTINGENCY
Potential Additional
Costs
Specify % (usually
of software license)
Total Costs
Benefits
Current Cost
Calculation
Goal
%r
Year 0
Year 1
Year 2
Year 3
Paper Chart Supplies
Section 1.2 Adopt Plan Total Cost of Ownership and Return on Investment - 7
Copyright 2009, Margret\A Consulting, LLC. Used with permission of author.
Year 4
Year 5
Total Cost of Ownership and Return on Investment
Assumptions:
Annual cost of file
folders, forms
printing, etc.
Paper Chart Storage
Assumptions:
Warehousing fees
Assumptions:
Revenue from chart
room conversion (be
careful to count only
once)
Clerical Chart Costs
Assumptions:
Clerical hours spent
pulling & filing charts
& copying
documents x
(Salary + Benefits)
lost through
discharge or attrition
Assumptions:
Courier costs
Transcription Cost
Assumptions:
Transcriptionist
hours x (Salary +
Benefits) lost
through discharge or
attrition
Assumptions: Cost
of transcription
services
Copy Service Cost
Section 1.2 Adopt Plan Total Cost of Ownership and Return on Investment - 8
Copyright 2009, Margret\A Consulting, LLC. Used with permission of author.
Total Cost of Ownership and Return on Investment
Assumptions: Cost
of copy services
Paper Statement Costs
Assumptions: Staff
hours x (Salary +
benefits) lost
through discharge or
attrition
Paper supplies and
postage costs
Overtime Reduction Due
to Efficiencies
Assumptions: Staff
overtime hours x
(Salary + Benefits)
Outsourcing Reduction
Due to Incorporating
Task In-house (not
covered above)
Assumptions:
Identify annual fees
for such reduction
Other Productivity
Savings (not covered
above)
Assumptions: Staff
hours x (Salary +
Benefits) lost
through discharge or
attrition
Malpractice Premium
Section 1.2 Adopt Plan Total Cost of Ownership and Return on Investment - 9
Copyright 2009, Margret\A Consulting, LLC. Used with permission of author.
Total Cost of Ownership and Return on Investment
Assumptions: %
reduction specified
by carrier
Impact on OASIS
Compliance
Assumptions:
Estimated % at risk
Lost Charges
Assumptions:
Estimated revenue
due to charges not
posted
Penalties/Denials
(avoided through
eligibility/prior
authorization checking)
Assumptions:
Estimated revenue
not lost through late
filing or denials
Incentives Due to Quality
Improvement
Opportunities
Assumptions:
Estimated % of
revenue impacted as
specified by health
plans
New Service Revenue
Assumptions: Value
of additional patients
due to better referral
management
Section 1.2 Adopt Plan Total Cost of Ownership and Return on Investment - 10
Copyright 2009, Margret\A Consulting, LLC. Used with permission of author.
Total Cost of Ownership and Return on Investment
Avoidance of Nonreimbursed Duplicate or
Contraindicated Services
Assumptions: Value
of number of
services identified
from sample of
those not
reimbursed
Other, specify:
Assumptions:
Other, specify:
Assumptions:
Total Benefits
Impact (Benefits Costs)
Payback Period (Year in which benefits exceed
costs)
For support using the toolkit
Stratis Health Health Information Technology Services
952-854-3306 info@stratishealth.org
www.stratishealth.org.
Section 1.2 Adopt Plan Total Cost of Ownership and Return on Investment - 11
Copyright 2009, Margret\A Consulting, LLC. Used with permission of author.
Total Cost of Ownership and Return on Investment
Copyright 2009, Margret\A Consulting, LLC. Used with permission of author.
This toolkit was funded by Aging Services of Minnesota and its subsidiary, Alliance Purchasing for use by home health agencies
in Minnesota. Produced by Stratis Health.
Section 1.2 Adopt Plan Total Cost of Ownership and Return on Investment - 12
Copyright 2009, Margret\A Consulting, LLC. Used with permission of author.
Total Cost of Ownership and Return on Investment
Section 1.2 Adopt Plan Total Cost of Ownership and Return on Investment - 13
Copyright 2009, Margret\A Consulting, LLC. Used with permission of author.
Total Cost of Ownership and Return on Investment
Section 1.2 Adopt Plan Total Cost of Ownership and Return on Investment - 14
Copyright 2009, Margret\A Consulting, LLC. Used with permission of author.
Total Cost of Ownership and Return on Investment
Section 1.2 Adopt Plan Total Cost of Ownership and Return on Investment - 15
Copyright 2009, Margret\A Consulting, LLC. Used with permission of author.
Total Cost of Ownership and Return on Investment
Section 1.2 Adopt Plan Total Cost of Ownership and Return on Investment - 16
Copyright 2009, Margret\A Consulting, LLC. Used with permission of author.
Total Cost of Ownership and Return on Investment
Section 1.2 Adopt Plan Total Cost of Ownership and Return on Investment - 17
Copyright 2009, Margret\A Consulting, LLC. Used with permission of author.
Total Cost of Ownership and Return on Investment
Section 1.2 Adopt Plan Total Cost of Ownership and Return on Investment - 18
Copyright 2009, Margret\A Consulting, LLC. Used with permission of author.
Total Cost of Ownership and Return on Investment
Section 1.2 Adopt Plan Total Cost of Ownership and Return on Investment - 19
Copyright 2009, Margret\A Consulting, LLC. Used with permission of author.
Total Cost of Ownership and Return on Investment
Section 1.2 Adopt Plan Total Cost of Ownership and Return on Investment - 20
Copyright 2009, Margret\A Consulting, LLC. Used with permission of author.
Total Cost of Ownership and Return on Investment
Section 1.2 Adopt Plan Total Cost of Ownership and Return on Investment - 21
Copyright 2009, Margret\A Consulting, LLC. Used with permission of author.
