May 2019

HIT Happenings: How to Calculate ROI in Digital Health
By Juan Pablo Segura
For The Record
Vol. 31 No. 5 P. 5

A 2019 Pega survey asked 2,000 US consumers how they felt about recent trends in health care. The response was overwhelming—they want a personal touch, and they want it digital. The survey also revealed that communications from health care organizations actually drive a patient’s desire to improve their health, fueling the popular opinion that technology is the magic key to patient engagement. What the survey fails to reveal, though, is why the provider response is about 10 years behind the demands of their tech-enabled patients.

According to a recent survey from Deloitte, 23% of consumers have had a virtual visit with a doctor or nurse, and 57% of those who have not are willing to try it in the future. In contrast, 14% of providers have implemented the technology for virtual visits and 18% plan to implement it in the next two years. Providers are traditionally conservative and reluctant to trade a known entity—even an outdated and inefficient one—for an innovation that won’t have an immediate positive impact. Compounding the problem are the thousands of apps that intend to solve key health care issues but market their improvements and value drivers in confusing and difficult-to-quantify ways.

But digital innovation isn’t going away. Deloitte predicts that by 2020, US health care spending will exceed $8 trillion, with a significant portion of that going to digital transformation. But how can one ensure this brings a significant return on investment (ROI)? It starts with identifying the final goal. For the health care system writ large, it’s better outcomes, but these can look strikingly different for each stakeholder.

For example, payers might have a direct financial interest in improving outcomes, but that’s not necessarily the case for providers, whose interest depends on whether those evaluating ROI are paid on outcomes. If there isn’t a fee-for-value equation, providers will gravitate toward other measures.

Because the majority of providers are not paid on outcomes, digital health care startups need to focus on streamlining the delivery of provider care. Efficiency can aid overextended providers in properly allocating their time and attention instead of spending hours performing mundane and time-consuming administrative tasks such as updating EHRs.

To help guide this discussion on calculating ROI in digital health, we have to differentiate between hard and soft ROI, two concepts startups and buyers of digital health solutions confuse.

Hard ROI
The most relevant and easiest to calculate is hard ROI—the quantifiable benefits that digital innovation brings to a practice. Take an example of hard ROI at its simplest: At the beginning of pregnancy, providers spend a majority of the patient’s first appointment explaining topics such as genetic screening; nutrition, weight gain, and exercise; structure of the office; the visits and the providers; and safe medications, among other things, and then distribute this info to the patient in a paper packet. Despite best efforts, this packet most likely ends up out of sight and out of mind, while the patient uses the most convenient means to get her information: She calls her provider directly or searches the internet.

Both scenarios defeat the purpose of the packet. The first, by creating redundancies and pulling the provider from more serious concerns; the second by undermining the single source of truth that the provider has tried to establish. The second is also potentially dangerous, as Dr. Google proliferates conflicting information that can result in harm to mother or baby.

On top of these problems, a packet such as this might cost about $10 to produce and needs to be updated every time the guidelines, recommendations, or contact info changes.

Digitizing this entire process solves version control problems and cuts costs by about 80%, a significant change in the bottom line that providers experience immediately.

Moving appointments out of the office is another version of hard ROI. On average, an in-office appointment costs a physician an hour of time and around $200. Unused scheduling capacity—the consequence of cancelled appointments, no-shows, inconvenient or error-prone scheduling tools—can cost a practice tens of thousands of dollars every year.

Using technology to enable remote appointments or reduce the need for appointments altogether can recoup a considerable amount of the losses, particularly those resulting from no-show appointments (up to 30% in some practices).

Soft ROI
Soft ROI is more difficult to quantify—things such as customer loyalty, brand strength, and other intangibles are great examples. Ultimately this soft ROI is rooted in patient satisfaction and patient engagement; if you can improve one, then the others will follow.

For example, an experience-oriented tech solution can meet patient demand for tech-enabled care and drive an increase in patient engagement. Patients are more likely to keep coming back to the health system that offers them that experience, more likely to share their experience with their friends, and more likely to serve as a brand ambassador.

Of course, how frequently that patient comes back, and for what procedure, is less predictable, making it nearly impossible to arrive at a value assessment in terms of bottom line. There are some ways of gauging soft ROI, but a solution company should be ready to accept a customers’ serious hesitation on whether they trust the soft ROI enough to buy the solution.

For vendors to be successful in driving adoption of solutions, it is crucial that they know the difference between these two kinds of ROI, as well as understand the standards by which health systems evaluate their purchasing decisions. They need to demonstrate immediate bottom-line benefits but also sustainability and scalability to set the stage for long-term success.

— Juan Pablo Segura is cofounder of Babyscripts.