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Tracking return on investment to improve patient safety

Almost every day we read about demands on our healthcare systems to cut expenditure. One of the most common strategies to do this is through the co...

August 21, 2012
Göran Malmberg CEO

Almost every day we read about demands on our healthcare systems to cut expenditure. One of the most common strategies to do this is through the consolidation of hospitals, thus creating larger care units to spread fixed costs and expand patient access to services.

There is ongoing debate concerning this approach and some research demonstrates hospital mergers have reached the point where too large units are actually resulting in decreased quality of care and increased cost.


International studies imply that quality related cost items within healthcare services account for approximately 25% of the total cost of care.[1] It is suggested that the implementation of standardization and structures to establish more efficient patient processes is a more effective approach and will result in decreased costs and at the same time increase quality.

It is tempting to compare with other trades such as manufacturing or processing industry where investments in new technology, implementation of processes and improvement of skills are linked to outcomes and return on investments (ROI). Continuous performance measurement, quality assessment and/or workforce productivity metrics are critical data in order to analyze cause and determine action. Obviously, these processes and structures do cost money and require investment commitments. However, if properly executed, the reward and ROI will be received!

Simulation-based training has become popular and is viewed as a cost-effective method for training of personnel. Some insurance providers are even offering reduced premiums for hospitals that utilize simulator training [2], however with the general hard demands for cost savings, investments in training and skills development are hard to justify.

An attending physician at a university hospital typically allocates part of his/her time to educational tasks such as research and training of junior physicians and personnel. However, in most situations this investment is not linked to expected outcome, but rather considered as more general skills development and maintenance. The result is an environment where hospitals, departments and physicians are required to scramble for funds to finance research, training and required equipment. Our experience shows that in many situations funds are only raised for a one time investment in a piece of technology, but are then unavailable for the continuous use of this equipment. The initial investment in technology always requires a commitment to further maintain that investment through training and support to not result in the expenditure becoming redundant.

Comparing again to a manufacturing situation in a modern corporation one can see that a $1 investment in technology is typically linked to another $3-4 of investment in implementation services, improved processes and internal resources. Most corporations know from experience that only investing the first $1 will not result in the desired ROI.

Healthcare has massive opportunities for improvements linked to implementation of processes and structures for continuous improvement and quality management, but these require bold decisions to allocate financial as well as personnel resources. For a hospital team this typically means that hours need to be set aside  during working hours for physicians and teams to practice and improve in an already  under-resourced environment.

Again, from the manufacturing industry it is suggested that scenario-based training and task oriented continuous training can provide fast ROI exceeding 100%. I am sure that this would also be the case in the healthcare arena. However, without defined processes and continuous measurements of performance and quality issues, it is and will continue to be difficult to relate investments in skills and technology to outcomes.

In Sweden we have recently seen “Lean Production” initiatives in several large hospitals, which is absolutely the right way forward. We believe there are massive improvements to be made in the hospital arena by applying the processes and experiences from other trades. With continuous tracking of performance and effects of changes there is an obvious opportunity to improve. But without the necessary investments in resources, technology, and processes, such initiatives run the risk of just becoming an interesting experiment without real business improvements.

Göran Malmberg


[1] Between $.30 and $.40 of every dollar spent on health care is spent on the costs of poor quality. This extraordinary number represents slightly more than a half-trillion dollars a year [in 2005]. A vast amount of money is wasted on overuse, underuse, misuse, duplication, system failures, unnecessary repetition, poor communication, and inefficiency.^ Lawrence, David (2005). Building a Better Delivery System: A New Engineering/Health Care Partnership – Bridging the Quality Chasm. Washington, DC: National Academy of Sciences. p. 99.

[2] Physician Insurers Association of America.2007. Provider-Directed Insurers Ahead of the Curve. 


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