ABSTRACT
This chapter discusses the three steps of a Return on Investment (ROI) analysis. These are Identify and quantify costs, Identify and quantify benefits and Calculate ROI in a consistent manner. The chapter explores the Identify and quantify capital, direct, and indirect operating costs. It explains the Identify and quantifies tangible and intangible benefits. The chapter analyses the quantitative methods of calculating ROI and examines Compare methods of ROI and the relative strengths and weaknesses of each. ROI is a financial metric—the percentage of dollars returned for a given investment/cost. Tangible benefits are straightforward and relate directly to the bottom-line results of the ROI analysis. Most healthcare organizations have established ROI thresholds and require ROI analysis as part of the approval process for enterprise-strategic-capital and operating expenditures. Traditional ROI analyses are relatively straightforward and typically consist of building a financial model, usually in a spreadsheet format.
