Hospital Management Information System Project: Completed Cost-benefit Analysis

Source: Planning for Quality

Instructions: Use this learning aid to review the completed cost-benefit analysis of the hospital management information system project.

Scenario Information: Manual System Components The hospital employs ten full-time doctors, 50 nurses, and numerous support staff. The hospital has an average of 100 inpatients per day. Pharmaceutical Ordering: Doctors write an average of one prescription per inpatient in a day. Currently, it takes a nurse ten minutes per prescription to process the order, at $50 an hour. Transcription of Medical Records: Doctors write one medical record note per inpatient in a day. Currently, it takes a transcriptionist 30 minutes to transcribe each note, at $35 an hour. Miscellaneous Costs: When added over a three-year period, printing for these activities costs the hospital $240,000. Manual System Benefits:

The current system allows the nurses the opportunity to verify each doctor's order for accuracy. It's estimated that this opportunity saves the hospital approximately $35,000 each year. Likewise, transcriptionists review each record during the transcription process and can clarify ambiguities, which saves the hospital approximately $15,000 each year.

Automated System Components The hospital has hired a quality manager to determine whether the hospital should invest in an automated pharmaceutical ordering system and an automated voice-recognition medical records system.

Cost of Automated System Components:

The quality manager determines that the automated system components would require 50 workstations at a cost of $2,000 each. Additionally, she determines that when totaled over a three-year period: o server and infrastructure upgrades would come to $150,000 o assessment, analysis, design, and programming would equal $250,000 o training and documentation would cost $100,000 o system maintenance, help desk, and payroll would cost $240,000 o the cost of printing would be $90,000.

Automated System Benefits:

The automated pharmaceutical ordering system would reduce the nursing staff time for completing each prescription to five minutes. The automated voice-recognition medical records system would reduce the transcriptionists' time to ten minutes per note; they would only have to proofread and print each note instead of transcribing them.

Cost-benefit Analysis Template: Estimated Costs for the Manual System Components over Three Years Item Calculations Total Multiply 100 prescriptions per day by 10 minutes per prescription. The total is 1,000 minutes per day. Multiply those 1,000 minutes by 365 days to pharmaceutical ordering arrive at 365,000 minutes. Multiply 365,000 by $912,500 system three years. The total is 1,095,000 minutes. Divide 1,095,000 minutes by 60 minutes per hour, and you'll get 18,250 hours. Multiply 18,250 by $50 an hour. Multiply 100 medical notes per day by 30 minutes per transcription. The result is 3,000 minutes per day. Multiply 3,000 by 365 days to get 1,095,000 medical records system minutes. Next, multiply 1,095,000 by three years. $1,916,250 The total is 3,285,000 minutes. Divide 3,285,000 by 60 minutes per hour, which comes out to 54,750 hours. Multiply 54,750 by $35 per hour. printing n/a $240,000 Total estimated costs: $3,068,750 Estimated Benefits for the Manual System Components over Three Years Item Calculations Total manual nurse review of Multiply $35,000 by 3 years. $105,000

orders manual transcriptionist Multiply $15,000 by 3 years. review of medical records Total estimated benefits:

$45,000 $150,000

Estimated Costs for the Automated System Components Item Calculations Total 50 workstations Multiply 50 workstations by $2,000. $100,000 server and infrastructure n/a $150,000 upgrades assessment, analysis, n/a $250,000 design, and programming training and n/a $100,000 documentation system maintenance, help n/a $240,000 desk, and payroll printing n/a $90,000 Multiply 100 prescriptions per day by 5 minutes per prescription. The total is 500 minutes per day. Multiply those 500 minutes by 365 days to arrive pharmaceutical ordering at 182,500 minutes. Multiply 182,500 by three $456,250 system years. The total is 547,500 minutes. Divide 547,500 minutes by 60 minutes per hour, and you'll get 9,125 hours. Multiply 9,125 by $50 an hour. Multiply 100 medical notes per day by 10 minutes per transcription. The result is 1,000 minutes per day. Multiply 1,000 by 365 days to get 365,000 medical records system minutes. Next, multiply 365,000 by three years. $638,750 The total is 1,095,000 minutes. Divide 1,095,000 by 60 minutes per hour, which comes out to 18,250 hours. Multiply 18,250 by $35 per hour. Total estimated costs: $2,025,000 Estimated Benefits for the Automated System Components Item Calculations Total reduction in cost of Subtract $90,000 from the current cost of $150,000 printing $240,000. reduction in cost and time Multiply 100 prescriptions per day by five $456,250 for ordering minutes per prescription. The total is 500 minutes

per day. Multiply those 500 minutes by 365 days to arrive at 182,500 minutes. Multiply 182,500 by three years. The total is 547,500 minutes. Divide pharmaceuticals 547,500 minutes by 60 minutes per hour, and you'll get 9,125 hours. Multiply 9,125 by $50 an hour. The total is $456,250. Subtract $456,250 from the current cost of $912,500. Multiply 100 medical notes per day by ten minutes per transcription. The result is 1,000 minutes per day. Multiply 1,000 by 365 days to reduction in cost and time get 365,000 minutes. Next, multiply 365,000 by for documenting and three years. The total is 1,095,000 minutes. Divide $1,277,500 managing physicians' 1,095,000 by 60 minutes per hour, which comes notes out to 18,250 hours. Multiply 18,250 by $35 per hour. The total is $638,750. Subtract $638,750 from the current cost of $1,916,250. Total estimated benefits: $1,883,750

The costs ($3,068,750) are higher than the benefits ($150,000) of the manual system components. The costs ($2,025,000) outweigh the benefits ($1,883,750) of the automated system components. The benefits of the automated system components ($1,883,750) outweigh the benefits of the manual system components ($150,000). The costs of the manual system components ($3,068,750) are higher than the costs of the automated system components ($2,025,000). Final recommendation: Invest in the two automated system components.

Difference between manual and automated system components: