Soft Returns of Investment
There are three steps that are needed to document soft returns: Identifying a process improvement opportunity, create a formula to calculate the benefits, and determine the costs of the process and the net benefits. Besides the three steps, there are various benefits for implementing EHR, such as improving the safety, quality, effectiveness and efficiency of care to meet patients ' expectations (satisfaction). In other words, the contribution of EHR in health systems can enhance organizations ' performance (Smith, 2009).
According to Pecht & Jaai (2012), “soft return” on investment works as indicators that provide the right measurement of intangible benefits for investors, such as improving reputation, customer connections and influencing public image in projects without estimating the financial or physical benefits. On this returns, when documenting the justification of soft returns, the process includes soft costs (risk avoidance, patient safety, process improvement, client goodwill, regulatory compliance and support costs). Undoubtedly, Soft analysis can measure all these benefits through the three steps that process soft return documents: (1) Identifying the Process Improvement Opportunities, (2) Create a Formula To Calculate The Benefits and (3) Determining the Cost Of The Process And The Net Returns.
Identifying the Process Improvement Opportunities
It is really challenging to find and define right chances that are used to improve the process, especially when having insufficient resources; however, organizations usually focus on saving costs as possible as they can. In fact, the best approach while having scarce resources is to find areas of improvement and come up with ideas to improve the proce...
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...eting tool that show the differences between the present value of revenues and the present value of expenses. The project can be profitable when the net present value is positive. In other words, the present value of revenues is greater than the present value of expenses. Profitability index is another tool for evaluating investment projects, which is the ratio of the PV of benefits on the PV of costs. A project can be beneficial if the profitability index is greater than 1. Also, it has the same idea as NPV that In other words, the present value of benefits is greater than the present value of costs. However, these two methods (NPV and Profitability Index) have been used to evaluate the proposal of implementing EHR.
Financial Analysis
The following table demonstrates the PV of costs, the PV of benefits and the NPV respectively, over 5-year period for the investment:
The new lift has an economic life of 20 years and we would like to make 14% on our investment. The NPV factor of 14% at 20 years is 6.6231. By multiplying our net yearly income or our annuity of $500,000 times the NPV factor of 6.6231 we will have a NPV of $3,311,550.
After calculating the Net Present Value (NPV) and the Internal Rate of Return (IRR) for each project, I have determined that both the dishwasher and the trash compactor projects should be pursued. Both of them have shown positive NPVs at the new discount rate of 11.58% (WACC). Another indicator that told me that these two projects should be pursued by Star was that they both yielded IRRs greater than the given hurdle rate. The disposal did not meet these requirements and therefore should not be undertaken.
Thus, reducing administrative work gives an opportunity to clinicians to spend more time with their patients. Through health informatics, some medical procedures can be automated, saving money for the health care budget. Research by Blumenthal and Tavenner (2010) states that, “The widespread use of electronic health records (EHRs) in the United States is inevitable. EHRs will improve caregivers' decisions and patients' outcomes. Once patients experience the benefits of this technology, they will demand nothing less from their providers.
The U. S government passed the American Recovery Act in 2009 that established incentives and penalties to promote EHR use. From this legislation the Meaningful Use Program for EHR’s s was created. Through The Meaningful Use Program the U.S. government is able to support the adoption and use of EHR technology to enhance and revolutionize health care. The goal of the program is to increase EHR adoption, improve quality, safety, reduce disparities, and improve public health (hmsa , 2012).
This object is one of the financial goals to invest properly. Marriott used discounted cash flow techniques to evaluate potential investment. It is beneficial because it is considered present time value. Projects which increase shareholder value could be formed with benchmark hurdle rates, the company can ensure a return on projects which results in profitable and competitive advantage.
This analysis shows that the projects NPV as 13.37 million dollar. Our result is slightly different than the presenting team because of rounding. But both of our teams had positive NPV which suggest that the project should be accepted.
“An electronic health record (EHR) is a digital version of a patient’s paper chart. EHRs are real-time, patient-centered records that make information available instantly and securely to authorized users.” (healthit.gov) The EHR mandate was created “to share information with other health care providers and organizations – such as laboratories, specialists, medical imaging facilities, pharmacies, emergency facilities, and school and workplace clinics – so they contain information from all clinicians involved in a patient’s care.” ("Providers & Professionals | HealthIT.gov", n.d., p. 1) The process has proved to be quite challenging for providers. As an incentive, the government began issuing payments to those providers who “meaningfully use certified electronic health record (EHR) technology.” (hhs.gov) There are three stages that providers must progress through in order to receive theses financial incentives. Stage one is the initial stage and is met with the creation and implementation of the HER in the business. Stage two “increases health information exchange between providers.” ("United States Department of Health and Human Services | HHS.gov", n.d., p. 1) Stage three will be the continuation and expansion of the “meaningful use objectives.” ("United States Department of Health and Human Services | HHS.gov", n.d., p. 1) The hospital, where I work, initiated the HER mandate many years ago. In this paper, I will discuss the progression and the challenges that my hospital encountered while implementing the EHR mandate.
Making an investment towards a new project/product/company is hardly a simple process. Numerous factors including costs, benefits, time, and resources need to be taken into account before a decision to pursue a new project should be ventured into. At the end of the day prioritising projects and investing funds into projects that have the most potential towards favourable return on investment should be considered. Investment appraisal should not only be used for projects with a monetary return, it is also pertinent to use the tools where the return may not be easy to quantify such as training or development programs. Investment
The transformation of paper based health record to electronic health record is not an easy step for any providers or organizations but is a major step in the process of providing improved and efficient patient care. Every healthcare organization should have the vision of adopting EHR because it provides numerous benefits not only to providers but also to patient. It is the vision of every healthcare provider to offer the best health care possible. So implementation of EHR is a necessity.
The result is that the volume of data and its management is a burden on the provider and his/her staff. Eventually, as EHR use becomes usual, patients will begin to recognize enhanced healthcare results.
Discounted cash flow is a valuation technique that discounts projected cash inflows and outflows to evaluate the potential value of an investment. There are three discounted cash flow methods: Net Present Value (NPV), Profitability Index (PI) and Internal Rate of Return (IRR). The net present value discounts all cash inflows and outflows at a minimum rate of return, which is usually the cost of capital. The profitability index refers to the ratio of the present value of cash inflow to the present value of cash outflows. The internal rate of return refers to the interest rate that discounts cash inflow projections to the present to ensure that the present value of cash inflows is equivalent to the present value of cash outflows (Brown, 1992).
Values obtained can be a reliable indicator of the value of the Company for a minority investment (i.e., a non-control investment)
middle of paper ... ... A system of creative suggestions not only stresses on continuous improvement but it also emphasizes importance in identifying problem sources and eliminating waste so that organizational performance can be improved. viii) Vision towards quality achievement.
The business always develops due to investments and the correct most accurate analysis is an integral part of any initiative. Any initiative should be studied by financial analysts, correctly predicted in terms of financial investments and beneficiaries, tracked at various times, studied , changed on time, if necessary. Success of investments depends From financial analysis, it helps to protect the business from financial losses and predict cash flow and return of investment.
Organizations who jump the gun and do not take the time to allocate their resources suffer in the long run. Resources are an essential component of the business and the organization needs to understand their importance and not be wasteful. Finally, the organization needs to understand the first to steps thoroughly so that they can implement innovations and manage them wisely.