FOR YOUR CONSIDERATION The Business Case for Quality (continued) Estimating cash flows (discussed in chapter 10) is an important, yet difficult, step in capital investment analysis. Similarly, estimating the cash flows from quality improvement programs is challenging, as many of these programs generate little to no revenue that can be directly attributed to the initiative. In this case, as the earlier definition suggests, the business case may be largely driven by either identifying indirect financial benefits or identifying the cash flows that occur incidentally to the initiative but cannot be directly traced to the program. For example, improved quality may increase the organization's market share or its ability to recruit and retain clinicians. Once the relevant cash flows from the quality improvement initiative are identified, the business case can be assessed by calculating the ROI, measured by the NPV or IRR. What is your opinion about the business case for quality? Should quality improvement initiatives be held to the same ROI criterion as traditional capital investment decisions? Note: The business case definition is based on information in S. Leatherman, D. Berwick, D. Iles, L. S. Lewin, F. Davidoff, T. Nolan, and M. Bisognano, 2003, The Business Case for Quality: Case Studies and an Analysis," Health Affairs 22 (2): 17-30. FOR YOUR CONSIDERATION The Business Case for Quality Thus far, we have applied capital investment analysis techniques to assess the ROI on the acquisition of fixed assets, such as land, buildings, and equipment. Increasingly, healthcare managers apply this analytic approach to evaluating investment in noncapital opportunities, such as quality improvement initiatives. Because organizations are re- source constrained, the absence of a business case," or financial return on investment, for quality is often cited as a reason healthcare organizations do not implement quality improvement interventions, despite strong evidence that supports their effectiveness. The principles of capital investment analysis are reflected in the most widely accepted definition of the business case for quality, which states that a business case for a health care improvement intervention exists if the entity that invests in the intervention realizes a financial return on its investment in a reasonable time frame, using a reasonable rate of discounting. This may be realized as bankable dollars' (profit), a reduction in losses for a given program or population, or avoided costs. In addition, a business case may exist if the investing entity believes that a positive indirect effect on organizational function and sustainability will accrue within a reasonable time frame" (Leatherman et al. 2003). FOR YOUR CONSIDERATION The Business Case for Quality (continued) Estimating cash flows (discussed in chapter 10) is an important, yet difficult, step in capital investment analysis. Similarly, estimating the cash flows from quality improvement programs is challenging, as many of these programs generate little to no revenue that can be directly attributed to the initiative. In this case, as the earlier definition suggests, the business case may be largely driven by either identifying indirect financial benefits or identifying the cash flows that occur incidentally to the initiative but cannot be directly traced to the program. For example, improved quality may increase the organization's market share or its ability to recruit and retain clinicians. Once the relevant cash flows from the quality improvement initiative are identified, the business case can be assessed by calculating the ROI, measured by the NPV or IRR. What is your opinion about the business case for quality? Should quality improvement initiatives be held to the same ROI criterion as traditional capital investment decisions? Note: The business case definition is based on information in S. Leatherman, D. Berwick, D. Iles, L. S. Lewin, F. Davidoff, T. Nolan, and M. Bisognano, 2003, The Business Case for Quality: Case Studies and an Analysis," Health Affairs 22 (2): 17-30. FOR YOUR CONSIDERATION The Business Case for Quality (continued) Estimating cash flows (discussed in chapter 10) is an important, yet difficult, step in capital investment analysis. Similarly, estimating the cash flows from quality improvement programs is challenging, as many of these programs generate little to no revenue that can be directly attributed to the initiative. In this case, as the earlier definition suggests, the business case may be largely driven by either identifying indirect financial benefits or identifying the cash flows that occur incidentally to the initiative but cannot be directly traced to the program. For example, improved quality may increase the organization's market share or its ability to recruit and retain clinicians. Once the relevant cash flows from the quality improvement initiative are identified, the business case can be assessed by calculating the ROI, measured by the NPV or IRR. What is your opinion about the business case for quality? Should quality improvement initiatives be held to the same ROI criterion as traditional capital investment decisions? Note: The business case definition is based on information in S. Leatherman, D. Berwick, D. Iles, L. S. Lewin, F. Davidoff, T. Nolan, and M. Bisognano, 2003, The Business Case for Quality: Case Studies and an Analysis," Health Affairs 22 (2): 17-30. FOR YOUR CONSIDERATION The Business Case for Quality Thus far, we have applied capital investment analysis techniques to assess the ROI on the acquisition of fixed assets, such as land, buildings, and equipment. Increasingly, healthcare managers apply this analytic approach to evaluating investment in noncapital opportunities, such as quality improvement initiatives. Because organizations are re- source constrained, the absence of a business case," or financial return on investment, for quality is often cited as a reason healthcare organizations do not implement quality improvement interventions, despite strong evidence that supports their effectiveness. The principles of capital investment analysis are reflected in the most widely accepted definition of the business case for quality, which states that a business case for a health care improvement intervention exists if the entity that invests in the intervention realizes a financial return on its investment in a reasonable time frame, using a reasonable rate of discounting. This may be realized as bankable dollars' (profit), a reduction in losses for a given program or population, or avoided costs. In addition, a business case may exist if the investing entity believes that a positive indirect effect on organizational function and sustainability will accrue within a reasonable time frame" (Leatherman et al. 2003). FOR YOUR CONSIDERATION The Business Case for Quality (continued) Estimating cash flows (discussed in chapter 10) is an important, yet difficult, step in capital investment analysis. Similarly, estimating the cash flows from quality improvement programs is challenging, as many of these programs generate little to no revenue that can be directly attributed to the initiative. In this case, as the earlier definition suggests, the business case may be largely driven by either identifying indirect financial benefits or identifying the cash flows that occur incidentally to the initiative but cannot be directly traced to the program. For example, improved quality may increase the organization's market share or its ability to recruit and retain clinicians. Once the relevant cash flows from the quality improvement initiative are identified, the business case can be assessed by calculating the ROI, measured by the NPV or IRR. What is your opinion about the business case for quality? Should quality improvement initiatives be held to the same ROI criterion as traditional capital investment decisions? Note: The business case definition is based on information in S. Leatherman, D. Berwick, D. Iles, L. S. Lewin, F. Davidoff, T. Nolan, and M. Bisognano, 2003, The Business Case for Quality: Case Studies and an Analysis," Health Affairs 22 (2): 17-30