Proving Your Program's Worth: ROI and ROS in Community Health

Welcome back to the CHM Micro-Credential podcast. I'm your host, Dr. Tami Moser. In today’s episode, we delve into the pivotal role of demonstrating value in community health initiatives through Return on Investment (ROI) and Return on Services (ROS) calculations. Whether you’re pitching to stakeholders, applying for grants, or evaluating your program’s effectiveness, mastering ROI and ROS can be the key to your initiative’s success. We’ll break down the differences between traditional ROI and ROI as cost savings, and provide comprehensive guidelines for conducting accurate calculations. We’ll also address common challenges, explore real-world examples, and give you an actionable plan to start calculating ROIs and ROS for your own community health programs. Stay tuned as we crunch the numbers and reveal the impactful stories they tell about improving community health and well-being.

Tami Moser [00:00:00]: Welcome to the community health management podcast. I'm your host, doctor Tami Moser. And today, we're diving into a crucial aspect of program planning, demonstrating the value of your community health initiative through return on investment, ROI, and return on services, ROS calculations. Whether you're pitching to stakeholders, applying for grants, or evaluating your program's effectiveness, understanding and effectively communicating your o I ROI and ROS can make a make or break your initiative success. So let's start by breaking down these two concepts. Cost. In community health, this might mean comparing the cost of implementing a program to the financial benefits it generates, such as reduced health care costs or increased productivity in the community. ROS or return on services is a bit different.

Tami Moser [00:00:59]: It focuses on the value created by the services provided, which may include non financial benefits like improved health outcomes or increase community well-being. Both of these metrics are crucial for demonstrating your program's worth, but they each tell a different part of the story. Now let's dive a bit deeper into ROI calculations as there's an important distinction we need to make. There are actually 2 types of ROI we commonly use in community health programs, traditional ROI, and ROI is a cost savings. Traditional ROI focuses on financial gains or new revenue generated by a program. This is typically used when your initiative is expected to bring in new funds, such as through billable services or increased grants. ROI is a cost savings, on the other hand, measures the reduction in expenses that occur as a result of your program. This is often more applicable in community health settings where programs aim to prevent costly health events or reduce the use of expensive services.

Tami Moser [00:02:05]: So let's look at when we use each. Traditional o ROI, you use this when your program is expected to generate new revenue. For example, if you're implementing a new service that will be reimbursed by insurance, so you're bringing in those revenue dollars on a regular basis. ROI is cost savings. You use this when your program is primarily aimed at reducing health care costs. For instance, a diabetes prevention program that reduces emergency room visits. In many cases, it's appropriate and even advisable to use both. If you've got revenue coming in, traditional ROI is an excellent place, an excellent calculation to put in place to help people understand what kind of return on that investment.

Tami Moser [00:02:54]: I invest $1, and I get a return of 2. Right? So cost plus a dollar is what we're bringing in or a 100% revenue. So I'm looking at that traditional return on investment. It's an easy calculation to make, generally speaking, and it's pretty straightforward to understand. Return on cost savings is more challenging in many instances because you're really thinking about well, let's take an example. A community health worker program might both generate revenue through billable home visits, so that's traditional ROI, and reduce hospital readmissions, which would be return on investment as cost savings. And it's a cost savings it can be a cost savings in different ways. Right? So you've got reduced hospital readmissions, so there is a cost savings to the insurance companies, and there can be a a cost savings to the hospital through a reduction of penalties because of readmissions.

Tami Moser [00:03:58]: So you really kinda have to understand where all the penalties lie and where costs are coming from. And the thing about return on investment is cost savings is your organization might not be the organization that's seeing the savings. It may be another. Right? So if you're reducing, emergency room visits, then the insurance company is gonna have some of that cost savings, and the patient may also have cost savings if they would be looking at, you know, deductibles and things of that nature that they have to pay out of pocket before insurance starts paying. But you as, let's say, a community health program that's independent of the insurance company and and the patient, you don't see that cost savings. Your program is though delivering those cost savings. So that one's a little less straightforward in your, calculations, but this gives a more comprehensive picture of your program's financial impact when you combine traditional ROI and ROI as cost savings. Now let's talk about guidelines for conducting a sound ROI calculation.

Tami Moser [00:05:11]: And you will notice that there are both examples of this in the, example writing assignment. And there is also a link to a website. And when you open that up in additional resources, you'll be able to scroll through the website, and it's got a lot of material also about calculations. It's got an extra video you can watch. So don't get hung up on this. Just look through the resources and start working through it. And we can you can ask questions at any time, but just be aware that you need to start getting numbers down and locations for where these numbers are coming from and walk your way through the calculations because the the math's not difficult. It's the numbers that you have to plug into the formula that really make the difference.

Tami Moser [00:06:00]: Right? So guidelines. 1st, a clear time frame. Specify the period over which you're calculating return on investment. Health interventions often have different short term and long term ROIs. Also, you may see, like, an ROA traditional ROI for the short term, and the long term may have an additional return on investment as cost savings. So you can also see short term and long term not only will look different, but your combination may be different. The second guideline is looking at comprehensive costs. You need to include all costs associated with the program, including indirect costs like overhead and opportunity costs.

Tami Moser [00:06:40]: So the overhead conversation is about going back to, the conversation about okay. Is HR just going to throw this in for us and do it, or are we going to have some overhead that we have to, contribute for HR's involvement? Right? So you're picking up some of those costs because they're doing things for you and using their work time for your program instead of their traditional workload. Now opportunity costs are what do you miss out on because you're doing this? Right? There's opportunity costs associated with that. That I don't get as hung up on in terms of comprehensive costs, but it can be a consideration. So just keep that in mind. The 3rd guideline is realistic projections. Base your revenue or savings projections on solid data and conservative estimates. It's better to underestimate than overestimate.

Tami Moser [00:07:36]: 4th is appropriate comparisons. Ensure you're comparing your program's outcomes to an appropriate baseline or control group. So this may refer back to other programs that have been written up that you can use as that baseline. 5th is sensitivity analysis. Conduct calculations with different assumptions to show a range of possible outcomes. So this is that back to worst case, best case, most likely case scenario. Right? That is really conducting those different calculations with different assumptions associated. And so I don't think I mentioned this before in the other podcast, but when you're looking at best case, worst case, most likely case, you're making certain assumptions to get those numbers.

Tami Moser [00:08:22]: Right? So maybe my worst case scenario is, a competing service started at the same time. We didn't get our social media campaigns up in time. Therefore, our engagement with patients was much lower than we expected, and we had a smaller starting group. Right? Those are assumptions I'm making to get my worst case scenario. Any assumptions you make to get best case, worst case, most likely case, you need to document those with that breakdown because some of those assumptions may not be true, but you could still end up in a worst case. But I need to know what they are. That shows the range of possible outcomes and helps with sensitivity analysis. 6th is transparency.

Tami Moser [00:09:06]: Clearly, 6th is transparency. Clearly document all your assumptions, your data sources, and calculations methods. There's often this idea that you're just gonna remember, and you're just trust me. You're not gonna remember. Our what we have to hold in our brains is too big. The amount of things that you'll have come up between when you did it and when you revisit it, can make a big difference. I mean, life happens. Right? I I went home and I slept, and I don't remember what my assumptions were to get this, what my data sources were, or how I calculated.

Tami Moser [00:09:46]: So just make all those notes, and you can make them in the Excel spreadsheet. You can add a note to an individual cell in a spreadsheet. So document how you're calculating everything, data sources and assumptions. And you can use the note function. You can just put an assumption list and a, resource list and a calculation, you know, breakdown definition, if you will, operational definition for your calculations in the spreadsheet on the bottom as notes or as an example. If you look to the spreadsheet workbook I've given you and the spreadsheets at the bottom, many of those, when you open them up, personas would be a good example of this. To the right of where you fill in information is an actual picture of an example with some information in it so you can look at it. So add those same kinda examples to your spreadsheets, and that just adds transparency.

Tami Moser [00:10:40]: That also means anybody who looks at it is gonna know what you were doing. This also helps with sustainability over time because you may decide to go somewhere else and leave the program, leave the company or the organization, and somebody else has to pick this up and move forward with it. So it's not it's not always about the fact you won't remember. It's about the fact you may pass this off to somebody else, and they have no clue what your assumptions were, your data sources were, or your calculation methods were. So document, document, document. The next is to consider nonfinancial benefits. While not part of the ROI calculation itself, alongside your ROI figures. This can be very important.

Tami Moser [00:11:27]: Maybe it is an increased awareness of nutrition for the entire family so that you have some nonfinancial benefits that aren't focused on that patient or your engagement with them, but instead are about kind of the outcomes you get from overall exposure to your program of other people in the family. I mean, that's that's just a example off the top of my head, but I'm sure you would be able to go, oh, no. This could happen. This could happen. This could happen. And these don't have a financial benefit associated, but they are a benefit. Then last, there's stakeholder perspectives. So consider calculating ROI from different perspectives.

Tami Moser [00:12:08]: What's the ROI for your organization versus the health care system as a whole? Now this gets really interesting because it goes back to what I talked about, earlier and the fact that, you know, when I look at the cost savings, return on cost savings, I don't get any of those cost savings. Those are different organizations that get that cost savings. So that would be something you would do from a stakeholder perspective. The insurance companies are stakeholders, and you're gonna save them money over time. And so from that perspective, you've got a different kind of value associated with it. That can also be used to go to the primary insurers in your area, especially if you run a pilot study first, a pilot test, and you see what those cost savings might look like, that would give you some financial grounds to go to the primary insurance providers in your area and go. If you can invest this to support this program, this program will save you this estimated over time. And, again, check for sensitivity analysis, worst case, best case, most likely case.

Tami Moser [00:13:24]: That could get you some extra funding and a different support level from one of your stakeholders. Remember, while ROI is a powerful tool, it shouldn't be the only factor in decision making. Some high value programs may have a low or even negative ROI, but still be worth implementing due to their impact on community health and well-being. And keep in mind, the negative ROI versus a breakeven ROI. So if I put in a dollar, we get a dollar's value. That would be a breakeven ROI. A profitable return on investment would be I invest a dollar and I get $2 back, $5 back per dollar. Right? That's positive ROI.

Tami Moser [00:14:09]: A negative ROI could be I put in a dollar and we get back 50¢. So I'm at a 50% loss per dollar invested. That may be okay. You know, we go back to many who engage in this kind of work aren't looking to make a profit. Right? So a balanced ROI may be the end result you're looking for, but your organization may also go. The traditional ROI is negative, but the cost savings ROI, really does highlight where the value of the program is. And with supporting financials, that's perfectly acceptable because those other impacts on the community health and well-being are well worth the investment for our organization. So this becomes important to really think through and be aware of.

Tami Moser [00:15:04]: And for whoever's making decisions about whether this program goes forward or not, talking through the RII, traditional and cost savings and return on services can really be something you need to have in place in terms of discussions and what is acceptable and not acceptable before you go into this work. And, please, I'm just gonna add this as a caveat. Not that I think anybody would necessarily do this, but it does happen. Do not play around with your numbers to get a result that whoever is going to fund the program wants to see. I mean, be real with this. Right? That's that transparency. You do not wanna get in a situation where your ROI calculations were way different than what actually happens, and it's a negative difference. So, you know, the Institute For Healthcare Improvement has a guide to ROI analysis and population health management, and that is something that will also be available to you.

Tami Moser [00:16:07]: Now let's talk about how to calculate these metrics. For ROI, the basic formula is net profit divided by cost of investment, and then you take that number times a 100. In a community health context, this might look like ROI equals cost savings from reduced ER visits minus program costs, and then divide that by program costs and times it times a 100. For example, if your diabetes prevention program costs $100,000 to implement and results in $150,000 of savings from reduced emergency room visits, your ROI would be 50%. ROS can be trickier to quantify as it often involves non financial outcomes. You might use a formula like ROS equals value of outcomes divided by cost of services times a 100. The challenge here is assigning a value to outcomes like improved quality of life or reduced disease burden. This often involves using established health economics metrics like quality adjusted life years or disability adjusted life years.

Tami Moser [00:17:18]: So keep that in mind. The ROS, little more challenging, but there is economic health economic metrics available to help you with that. Now let's address some common challenges in calculating and presenting ROI and ROS. Time frame. Health outcomes often take years to manifest while program costs are immediate. So be clear about your projection timeline and use conservative estimates. This is an understood that your outcomes are gonna take longer to manifest. And that's why some short term outcomes leading toward the end outcome.

Tami Moser [00:18:10]: That is not the language I wanted to use, but it's what pops into my mind. So we'll go with it right now. This is where it's kind of an understood. So don't try to mess with this. Just create some conservative estimates, and you may be in the negative for a period of time before you see the real outcome that you want. 2nd is attribution. It can be difficult to prove that your program rather than other factors, cause the desired outcomes. Causality is really difficult to do.

Tami Moser [00:18:43]: So you can use control groups or a benchmark against similar communities when possible. Sometimes you might not be able to really factor this in appropriately, and that's just because it's difficult to prove some things or quantify them. Next can be quantifying nonfinancial benefits. Right? So work in health economists or you can use them. Right? So papers that have been written surrounding this or use established frameworks to assign monetary value to specific health improvements. So this is where you wanna do some real research into the literature that's out there about health economics and particular types of nonfinancial benefits. And if you can find a study or an economist that has put out a piece of work that gives you a framework here for monetary value that fits with what you're doing, that's gonna be best case scenario, I think, right here. And then you have data collection.

Tami Moser [00:19:49]: Robust data is crucial for accurate calculations, and you've got to invest into good data collection and management systems from the start. And this goes back to, I think I've talked about this in the past, but if not or if so, we're gonna do a refresher or a starting point. Data collection is imperative. You have to be able to get to the data. So this goes back to our discussion about defining which data points are important to you and then figuring out the formula for that calculation, and then for each number that goes into the formula going and making sure that you can access it and where you can access it. And this is just as important when we're talking finances, maybe even more so. Right? You've got to collect strong data to do accurate calculations. And so how are you gonna manage your data collection system? How and who is gonna manage it? What pieces of information do you get? Go back to what we talked about earlier on.

Tami Moser [00:20:52]: What numbers do you need to do the calculations you need to do? Where would you find them at? How easy are they to access? Are they always there, or is it only sometimes or hit and miss? Do we need training on where certain numbers go? Because we've we've got a system that where we can cap we can capture that information, but we just never have before. There's a lot to kind of research here to get a better idea about data collection. It can be manual collection as long as you know before you begin that that's what needs to happen, and people are trained on the process of manual collection of that particular data point. If you don't do that, what ends up happening is you get to a point where you sit down to do calculations and you don't have your numbers. You don't have accurate numbers, and you're trying to throw something together, and that's problematic. So keep that in mind. When it comes to presenting your financial projections effectively, remember these key points. 1, know your audience.

Tami Moser [00:21:50]: Tailor your presentation to their interests and their level of financial literacy. This also goes back to thinking through your calculations of ROI and ROI cost savings from stakeholder perspective. Who are you what stakeholder are you gonna be presenting to? Use that perspective for the data. Use visual aids. Graphs and charts can make complex financial data more accessible. In fact, I'll make sure and list in the resources a couple of books that are about presentation of data in interesting ways, so that you can use visual aids and really address the next point, which is tell a story, connect your numbers into real world impacts on individuals in the community. So if you'll look at a couple of these books, they're you can get them on Amazon. They're not overly expensive, and they have a lot of opportunity for you to kinda look through different ways in which to present data and then how those presentations can help you create and tell the story of your numbers.

Tami Moser [00:22:49]: But you really do wanna take them, and and it can even be in telling a story. Okay. So let me step back. You more than likely have access to, in your organization, someone who is who is a natural storyteller. If you ask them about something, like, how was your vacation? You get a story that makes you laugh, makes you, engages you. Right? You really find it amusing or interesting, and they put it in a storytelling format. They're just really good at that. They can be really a a good point of reference for helping you tell a story if you're not a natural storyteller.

Tami Moser [00:23:28]: Right? So think about that. And you wanna be transparent. So clearly state your assumptions again and your methodology for all of this in the presentation. There's nothing wrong with that. People are always gonna have questions about it, so just be upfront about your assumptions and your methodology. If people ask you about, well, did you think about this and you didn't say no. I didn't. But I'm gonna make a note now, and I'm gonna go and see if that changes anything in these perspectives.

Tami Moser [00:23:52]: Do you want me to send you that information once I've done it? And they may say yes or no. You know, that's fine. But just that's part of that transparency of, you know, I my assumptions were different. And then provide context. Compare your ORI and ROS to industry benchmarks or similar programs. Give them some kind of context for what your numbers mean in terms of whether this could be considered successful or not. And that's really objective or subjective, not objective. Right? I mean, you're trying to place it in context.

Tami Moser [00:24:27]: That's why if you can use industry benchmarks or similar programs and their outcomes, it gives you a way to place your ROI and ROS calculations into some level of context. So just keep that in mind. The context is important. You want them to know how it adds up. So they may look at it and go, well, that ROI doesn't look that great or that ROS is questionable. But then you're like, well, here's the benchmark for this kind of service, and here are similar programs and their outcomes. I'm like, oh, well, then this looks pretty good. Right? The context makes all the difference.

Tami Moser [00:25:01]: Let's look at a real world example. So I want you to imagine you're running a maternal health program in a rural community. Your costs include staff salaries, equipment, and educational materials totaling about half a $1,000,000 per year. The benefits might might include reduced costs from fewer complicated births, and let's put a cost of that at 400,000. And I'm gonna tell you right now, I made these numbers up. So, I don't have a reference for you to look at. Right? It's kind of a fill in the blank kind of example. You may also see a benefit of increased productivity or from healthier mothers.

Tami Moser [00:25:40]: And let's say that has a has a $200,000 associated with it. And then we've got improved long term health outcomes for the children. And let's estimate that value at 300,000. So your RO calculation might look like this, 900,000. Right? That's our 4 100, 203100 added together of our benefits. So 900,000 minus 500,000, which is our cost per year, and then divided by 500,000 times 100, which would equal 80%. For ROS, you might also consider non financial outcomes like increased community knowledge about maternal health or improved patient satisfaction scores. The goal here is to think all the elements through.

Tami Moser [00:26:31]: Right? And to get a clear perspective of what that means for your program. Now here's your action item for this podcast. I want you to calculate preliminary ORI, traditional and possibly cost savings or maybe only cost savings ROI and not traditional. That's for your you to decide. It really depends on your program and what you're doing And ROS projections for your proposed community health program include both financial and non financial outcomes. Make sure you note all your assumptions and prepare a brief presentation explaining your calculations and their significance. Now by brief presentation, I mean, consider you were having to present these to your stakeholder group. You don't need to get crazy here.

Tami Moser [00:27:18]: This is not something that is for a grade. It's for you to practice putting this information in a format where it could be presented to people that want to understand what this program actually is returning to us. Right? And your job then is to use this to really be able to brief them on it accurately and to provide context for what your program is gonna end up providing to the community. In our next episode, we'll be discussing how to use these financial projections to engage stakeholders and secure funding for your program. Your ROI and ROS calculations will be crucial in making a compelling case for your initiative. Thank you for tuning in to this podcast episode. Remember, while ROI and ROS are powerful tools, they're just part of the picture. The true value of your program lies in its impact on people's lives.

Tami Moser [00:28:16]: Keep that mission at the heart of your work as you crunch the numbers, which is often very boring or stressful for many people. Remember, there's a purpose for it, and you have a mission that you're trying to achieve. And crunching the numbers is just a small piece of this puzzle. Until next time, this is doctor Tami Moser wishing you success in demonstrating the value of your community health endeavors.

References:

[1] Healthcare Financial Management Association. (2023). ROI Calculation Methods for Healthcare Initiatives.

[2] Journal of Community Health Management. (2022). Beyond ROI: Measuring Return on Services in Community Health Programs.

[3] World Health Organization. (2023). Guide to Cost-Effectiveness Analysis in Health Interventions.

[4] National Association of Community Health Centers. (2023). Best Practices in Financial Reporting for Community Health Programs.