1. Contino, Diana S. MBA, RN, CNE, CCRN

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"Capital deepening" leads to increased staff productivity and greater return on investment.


Ever-increasing information technology (IT) expenditures often dominate capital budgets. By increasing the amount of capital per employee-a process known as capital deepening-business investment in computers increases output per employee hour (labor productivity).1 To improve outcomes and foster greater return on investment (ROI), we seek ways to streamline processes and enhance the accuracy of care delivery strategies.


Experts agree that we can't reduce medical errors or improve coding, compliance, and operating margins without automating key operational areas, namely, computerized provider order entry, medication administration, billing/coding, medical records, staffing/scheduling, materials management, and financial reporting. The challenge lies in determining which system is optimal and whether or not the investment will produce cost or efficiency savings.



Classical financial analysis of ROI is reported as a ratio and is a measure of an investment's performance.2 It's calculated by dividing the return-the money earned during the time period-by the average investment-the average amount invested over the time period. With IT purchases, there's no set formula because the sum of the gains is difficult to quantify. Investment evaluation involves quantifying savings and expenditures.


Regarding efficiency enhancements, there may or may not be true cost savings, but rather quasi-savings. For example, an emergency department (ED) implements patient tracking software and places the tracking board in the house supervisor's office and in the inpatient units. Now both parties can anticipate their next admission prior to receiving a bed assignment, thus improving the admission process. This may result in one less ED patient waiting for a room assignment or leaving without a medical evaluation. There's a cost attached to the tracking board, but there are considerable assumptions used in determining the savings associated with the increased efficiencies of staff and operations. If these assumptions are too aggressive, savings may not be realized. Usually the finance staff and chief financial officer request conservative estimates for these quasi-savings.


The person proposing or evaluating an IT project must consider the savings obtained by:


* decreased manual labor costs


* decreased supply or printing costs


* fewer days in accounts receivable


* the projected life of the equipment and its replacement costs


* the cost of maintaining or upgrading equipment over time


* efficiency gains such as error reduction or improved communication between providers.



Determine overall value by assessing the cost of purchase and its value over time in conjunction with the savings garnered because of the purchase.



IT investment planning experts conclude that the process of strategic planning requires significant input from IT professionals. Successful projects and satisfactory results are closely aligned with the organization's business strategy after thorough analysis of the facility's systems and IT staff capabilities.3 (See "Capital purchase best practices.")


Carl Ray, an ED nurse who specializes in nursing informatics and principal author of the Emergency Nurses Association's ENA Guidelines for Emergency Department Nurse Staffing, recommends viewing ROI from a nursing perspective. He believes that it's essential to also focus on streamlining processes and saving clinicians time through improved care coordination and immediate patient data access. He says, "For a nurse, the five rights of IT are the right information, available in the right format, delivered by the right medium, in the right place and at the right time."


When considering IT purchases, focus on the value obtained from the facilitation of clinical and operational processes, with the ultimate goal of improved patient care, performance, and outcomes. Health care leaders must look beyond immediate financial gains to the benefits that enhanced information management offers health care professionals and patients.

Table. Capital purch... - Click to enlarge in new windowTable. Capital purchase best practices



1. Congressional Budget Office. The role of computer technology in the growth of productivity. May 2002. Available at: Section 3 of 7. [Context Link]


2. Hoskin R, Wily J. Financial Accounting. New York, NY: Wiley; 1994. [Context Link]


3. Morris S, Clark J, Holmes J, et al. IT Investment planning: the best hospitals. J Healthcare Inform Manage. 2002;16(2):62-65. [Context Link]