I NEED A CBA FOR OUTPATIENT SETTING FOR 50 ELDERLY PATIENTS FOR USING PHYSICAL ACTIVITY AS A SUBSTITUTE FOR TAKING PAIN MEDICATION ORALLY OR TOPICALLY

What is a Cost-Benefit Analysis? A cost-benefit analysis is used to evaluate the total anticipated cost of a project compared to the total expected benefits in order to determine whether the proposed implementation is worthwhile for a company or project team. If the results of this comparative evaluation method suggest that the overall benefits associated with a proposed action outweigh the incurred costs, then a business or project manager will most likely choose to follow through with the implementation. The steps presented here for Cost-Benefit Analysis assume that the following tasks have been completed, and the information is available for input to the Cost-Benefit Analysis: Identify the problem, Clearly define and set the objective(s) of the project, Generate alternatives that would meet the stated purpose (s), Identify the constraints that exist within the Environment, Eliminate options that do not fall within the constraints. Cost Benefit Analysis is presented here as a sequence of steps. These steps should not be considered rigid. The analyst may need to revisit previous step(s)/decision(s) as the problem is further defined. These steps must be completed for each alternative being evaluated. Generally speaking, a cost-benefit analysis has three parts. 1. Identify all potential costs that will be incurred by implementing a proposed action. 2. Record all anticipated benefits associated with the potential action. 3. Subtract all identified costs from the expected benefits to determine whether the positive benefits outweigh the negative costs. Identifying Costs The first step is to identify and quantify all costs associated with a proposed action. In order to successfully identify all potential costs of a project, one must follow the subsequent steps. 1. Make a list of all monetary costs that will be incurred upon implementation and throughout the life of the project. These include start-up fees, licenses, production materials, payroll expenses, user acceptance processes, training, and travel expenses, among others. 2. Make a list of all non-monetary costs that are likely to be absorbed. These include time, lost production on other tasks, imperfect processes, potential risks, market saturation or penetration uncertainties, and influences on one's reputation.3. Assign monetary values to the costs identified in steps one and two. To ensure equality across time, monetary values are stated in present value terms. If realistic cost values cannot be readily evaluated, consult with market trends and industry surveys for comparable implementation costs in similar businesses. 4. Add all anticipated costs together to get a total costs value. What is a Cost? A cost is any expense to the organization, be it an expenditure of capital or an operating cost for the organization. A cost can also be viewed as any negative effect on the organization resulting from the implementation of the project. For example, the cost of technology obsolescence can translate to the loss of software support, the inability to find skilled staff, and the inability to introduce new programs. Each alternative to be evaluated must be defined to sufficient detail to identify all costs. When identifying costs, be as realistic as possible. For example, depending on the planned implementation approach, the costs of running two systems in parallel may have to be included here. Examples of Costs The following list provides some examples of costs to consider when identifying costs for the cost benefit analysis: New hardware (or upgrades to existing hardware), New software (or upgrades), Network costs (including management and administration), Telecommunications, Environment (e.g., computer room cost), Physical installation, External consulting and assistance (e.g., support services), Training, Documentation, Programming, Software development tools, Software testing and testing tools, Conversion, Operating costs, Maintenance costs, Labor costs, Research and development costs, Opportunity costs, Technology obsolescence, Disruption to the organization when implementing the system.Think about healthcare- some of the costs may be different given the population to be served, type of hospital or market etc. In additions there is a cost of hiring full versus part time, benefits, training, equipment for the staff or person to work, marketing the service, developing the educational materials etc. Assigning Value to Costs After the costs are identified, quantify the costs by assigning a monetary value. For costs that cannot be assigned a monetary value, ensure that the cost is highlighted in the summary of the cost benefit analysis for the project. Tips and Hints Prepare estimating spreadsheets for system development costs. List prices for purchased hardware, software, and network equipment. If the equipment is to be purchased at some point in the future, estimate the price of the equipment at that time. This can complicate the picture, as prices rarely stay the same over time. Hardware and software prices may rise or fall from one year to the next, depending on factors such as competition, successor products, and the general economy. Be as accurate as possible, using the information available. Identifying Benefits The next step is to identify and quantify all benefits anticipated as a result of successful implementation of the proposed action. To do so, complete the following steps. 1. Make a list of all monetary benefits that will be experienced upon implementation and thereafter. These benefits include direct profits from products and/or services, increased contributions from investors, decreased production costs due to improved and standardized processes, and increased production capabilities, among others. 2. Make a list of all non-monetary benefits that one is likely to experience. These include decreased production times, increased reliability and durability, greater customer base, greater market saturation, greater customer satisfaction, and improved company or project reputation, among others. 3. Assign monetary values to the benefits identified in steps one and two. Be sure to state these monetary values in present value terms as well. 4. Add all anticipated benefits together to get a total benefits value. What is a Benefit? A benefit is any positive effect on the organization resulting from the implementation of the project. Benefits occur when one gains an objective.When identifying benefits, there may be benefits that can be attributed to the new solution but are not part of the solution. For example, the time to market for a product may be decreased. This can be a great benefit to the corporation. Examples of Benefits The following list provides some examples of benefits to consider when identifying benefits for the cost benefit analysis: Scrap value of equipment, Increase in productivity due to better system response time, Increase in productivity due to improved process, Decrease in inventory, Reduction in average annual accounts receivable, Reduction in errors, Improved control, Research and development spill overs, Reduction in maintenance costs, Reduction in office space required, Personnel savings, Improved customer, client, patient service, Improved system security, Improved fault tolerance, Disaster recovery, and so forth Evaluate Costs and Benefits The final step when creating a cost benefit analysis is to weigh the costs and benefits to determine if the proposed action is worthwhile. To properly do so, follow the subsequent steps. 1. Compare the total costs and total benefits values. If the total costs are much greater than the total benefits, one can conclude that the project is not a worthwhile investment of company time and resources. 2. If total costs and total benefits are roughly equal to one another, it is best to reevaluate the costs and benefits identified and revise the cost benefit analysis. Often times, items are missed or incorrectly quantified, which are common errors in a cost benefit analysis. 3. If the total benefits are much greater than the total costs, one can conclude that the proposed action is potentially a worthwhile investment and should be further evaluated as a realistic opportunity.Assigning a Value to Benefits After each benefit is identified, assign a monetary value to the benefit. For benefits that cannot be assigned a monetary value, ensure that the benefit is highlighted in the summary of the cost benefit analysis for the project. Tangible Benefits Tangible benefits are those benefits that are concrete and easily quantifiable, such as reduced maintenance costs, improved system performance, reduction in outstanding Accounts/Receivable, or improved product. When estimating tangible benefits, round down. Example of Tangible Benefits Some measurements of the current system may be needed to quantify the benefits. An example is the benefit of improved fault tolerance. Measure the rate of failures in the current system and the cost of the associated failures. Another example is the benefit of improved response time. Measure the current time taken to process an order or to complete a transaction. Using this time, associate a cost with the measure. When quantifying the benefits, the improved process or system response decreases the current time, decreasing the associated cost. This savings is taken as a benefit. Example of Improved Process Benefits Reduction in accounts receivable can be recognized if invoices are sent out faster. If invoices are sent out one day earlier than in the past, the annual cash flow will increase by one day in the year. This translates to a percentage (i.e., 1/265 or approximately 0.4 percent) of the annual sales. The interest on the increased cash flow is realized as a benefit. A shorter monthly closing cycle of the general ledger can translate to a more efficient and timely reporting of results, and better input to the budgeting and financial planning processes. Cost Avoidance Benefits Some benefits are gained by avoiding costs. For instance: taking on more work without increasing staff (e.g., improved system performance may result in increased staff productivity),Avoiding the costs of technology obsolescence (such as inability to hire staff, no support for software, inability to use new hardware, loss of competitive advantage, inability to introduce new programs). Intangible Benefits Intangibles are difficult to measure and almost impossible to measure precisely. However, one can sometimes learn valuable things from rough measurements. Fortunately, precise measurement is rarely essential for business decisions. Use unorthodox and crude measurements when they are the best that can be obtained under the circumstances. New concepts, manifestations, and units of measure may need to be developed. Some intangible benefits that fall into this category are employee satisfaction, customer satisfaction, and vendor satisfaction. One suggested method to measure these benefits is to quantify the cost of hiring a new employee, attracting a new customer, or losing sales through product returns. Reduced employee turnover, returning customers, and reduced product returns can translate to a net savings for the company. Ultimate Objectives Some intangible benefits will remain forever intangible. These are termed "ultimate objectives" and are often the firm's business objectives (e.g., power, prestige, or social contribution). These intangible benefits cannot be translated to monetary form, but affect the business and as such should be included in the decision. These benefits should be highlighted in the summary of the cost benefit analysis for the project. Efficient, Effective, and Transformative Systems Another approach to identifying benefits is to classify systems in terms of their contribution towards improving efficiency, improving effectiveness, or transforming the nature of the business in new and innovative ways. Operational, tactical, and strategic applications are categorized as efficient, effective, or transformative. Increase Efficiency A system that automates a step-by-step, manual process, such as scheduling is primarily increasing efficiency. Increase Effectiveness A system that automates a manual process and provides information that the organization could not previously obtain without great effort, is increasing effectiveness. This kind of system allows the organization to be more effective in allocating resources and making decisions. For example, by analyzing aggregate information on caseload statistics over a number of criteria, a practice manager or nursing director/supervisor can distribute cases more effectively across a team of providers. These types of systems proliferate at thetactical or middle management level of the organization, where decisions are made more on a weekly and monthly cycle. The impact of these systems is the trend towards flattening the hierarchy in organizations today, as fewer managers are required to make decisions, with the support of technology. Transform the Nature of the Business A system that truly transforms the nature of healthcare, by streamlining patient care and or business processes in new, innovative ways, is where hospitals and organizations truly realize the overwhelming benefits of using APN's, technology, and other processes in transforming and reshaping their hospital/practice to create a new level of competitive advantage. A pictorial representation can be very enlightening to executives who are trying to see "where they stand" in technology, and "where they want to be." Marketing and sales professionals can be very helpful in making compelling justification for transformative new systems, particularly in terms of creating competitive advantage by assessing competition, as a benchmark. While transformative systems can introduce great risk and affect every level of the organization, the requirement to implement these systems can often be imperative in today's competitive global economy. Michael Porter, one of the leading authorities on competitive advantage, argues that you cannot use traditional capital budgeting techniques to analyze these kinds of information technology investments. A non healthcare example of this is American Airlines. If the American Airlines SABRE System had been viewed simply as a way to issue tickets faster, most of its potential would have been missed. The real payoff was in better scheduling, marketing, and market share, much of which was initially unanticipated. Think of a healthcare example you have read about or know of within your institution. Look at the current idea of the Cleveland Medical Mart. Identify what the Cleveland Clinic did in terms of developing themselves as a renowned institution, developing specific product lines, instituting a Midwest Wellness Industry. Conclusion Performing a cost benefit analysis is a valuable way to weigh the pros and cons of implementing a proposed action. A cost benefit analysis that has thoroughly identified and realistically quantified all costs and benefits is an accurate way to determine whether an opportunity is worth a company's time and energy. Author Note: Created by Dr. Tamira Harris for the Ursuline College NR 650 b: Health