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2 Adopt - Plan
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.
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.
Section 1.2 Adopt – Plan – Total Cost of Ownership and Return on Investment - 2
Total Cost of Ownership and Return on Investment
Costs Assumptions Qty Initial Cost Year 1 Year 2 Year 3 Year 4 Year 5
HARDWARE
Database Server(s) & List if not using an
Devices ASP or SaaS
model
Other Server(s) & Back up servers &
Associated Devices as media
Applicable Fax server &
devices
E-mail server &
devices
Other:
Input Devices Workstations
(including desktops
and mobile
devices)
Peripherals (e.g.,
wireless cards)
Storage Devices Devices, media,
services if not
Other Devices 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 - 3
Copyright © 2009, Margret\A Consulting, LLC. Used with permission of author.
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 0 0 0 0 0 0
SOFTWARE
Operating System Describe license
Application Describe license
Software subtotal 0 0 0 0 0 0
IMPLEMENTATION AND TRAINING
Vendor Implementation, List
Training, Support, Other
Services
Vendor Travel Costs Describe
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.
Total Cost of Ownership and Return on Investment
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
Total Costs 0 0 0 0 0 0
Benefits Current Cost Goal Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
Calculation %r
Paper Chart Supplies
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
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 - 7
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 - 8
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 - 9
Copyright © 2009, Margret\A Consulting, LLC. Used with permission of author.
Total Cost of Ownership and Return on Investment
Avoidance of Non-
reimbursed 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 0 0 0 0 0 0
Impact (Benefits – Costs) 0 0 0 0 0 0
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
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
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.