Metrics matter: producing ROI for the C-suite

Contributing lab leaders:  Nam K. TranEdward Septimus and Michael Broyles

If anything is guaranteed when it comes to the months following the implementation of a new laboratory initiative, it's the C-suite will want to know their return on investment (ROI). Still, relatively few major laboratory-led projects are actually measured for their financial impact. A department might highlight the improved outcomes that resulted, but chances are they won't have a dollar figure they can point to in order to demonstrate economic value.

The question, then, involves figuring out why. What's holding up ROI measurement efforts and what can be done to give the C-suite what they want?

Here, three lab leaders offer their thoughts on the complicated issues surrounding ROI. A project's financials, they all agree, shouldn't necessarily determine its ultimate success or failure, but it's important to make a strong business case using the metrics that you have available.

Article highlights:
  • With any major laboratory initiative, the C-suite will want to know their return on investment.
  • Many laboratories struggle to capture the data they need to demonstrate ROI.
  • The solution is to track metrics that accurately reflect the value of the implementation.

Sign up today to receive a free gift as well as our latest insights and more in your inbox!

The challenge: "capturing the data"

The primary obstacle in the way of meaningful measurement is the limited access most laboratories have to the electronic medical record, says Nam Tran, PhD, MS, MAS, HCLD (ABB), FACB, associate professor of clinical pathology and director of Clinical Chemistry, Special Chemistry/Toxicology, and Point-of-Care Testing at UC Davis. “Capturing the data—that's the biggest challenge that I've seen that prevents us from doing a full ROI." His organization employs six specialists who “mine" the electronic record for the data they need, he says. “That's brute-force, manual labor that we have to pay for. Not every place has that luxury, and I definitely struggle to keep all six going in terms of funding."

Michael Broyles, BSPharm, RPh, PharmD, director of pharmacy and laboratory services at Five Rivers Medical Center in Pocahontas, Arkansas, agrees with Dr. Tran that hospital records systems are tricky. “It seems like sorting through the data and doing the statistical analysis is nothing compared to the collection process itself, because most of our EMRs are just not user-friendly," Dr. Broyles says. If your hospital doesn't have a team that is dedicated to data collection, that kind of work “may fall by the wayside, and hence you don't complete that circle for your ROI."

The solution: look for value

In lieu of leveraging a facility's EMR to illustrate clinical ROI, laboratories should focus on alternative ways of measuring the real value of the solutions they've implemented, says Edward Septimus, MD, FIDSA, FACP, FSHEA, clinical professor at Texas A&M College of Medicine. “I think before you implement, number one you have to do a really good job around educating [clinicians] about how to optimize and use the test as a value added." And second, Dr. Septimus recommends, “put in place some measurement of the impact of the test or the technology that you're implementing."

That measurement approach doesn't need to be complicated, but it should give executives what they want. “So when the C-suite asks, 'What am I getting for this?' you can give them real data on measures that your clinicians have agreed upon." When measuring, Dr. Septimus says, be sure to do so in a way that accurately reflects the value of your solution. “Let's say I implement test A, and [it] saves the organization $100,000 in year one. You may not get that same return on investment in year two or year three because you've optimized them within the first year." Many organizations make the mistake of not carrying over savings year after year, Dr. Septimus notes. “And then all of sudden your costs escalate when you let the foot off the pedal."

Dr. Broyles agrees and says it's also important to start with a strong baseline. “You have to know what you're comparing to. And so you need to be able to have a methodology where that baseline information is obtainable—or at least have a control group that you're comparing it to." Difficulties arise when laboratories don't clearly define what they want to measure, he adds. “Are you measuring days of therapy? Are you looking at length of stay? You have to define all those things as you go along."

The bottom line, Dr. Broyles says, is the C-suite isn't interested in “cost avoidance" because they've “been sold that song and dance so many times, it's hard for them to believe." What they do want are measurements that show the real costs—and the resulting value—of laboratory tests and procedures. “When you can show hard dollars, that's a lot easier for them to grasp."

On implementing a new test

Edward Septimus, MD, FIDSA, FACP, FSHEA
Professor of Internal Medicine
Texas A&M Health Science Center

Want to be the first to receive the latest insights from industry leaders? Sign up for our newsletter.