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Digital Health – Is It Worth It? How to Calculate ROI in Digital Health

by Juan Pablo Segura, Co-founder of Babyscripts 05/08/2019 Leave a Comment

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Digital Health - Is It Worth It? How to Calculate ROI in Digital Health

The results are in. A 2019 PEGA survey asked 2,000 U.S. consumers how they felt about recent trends in healthcare, and the response was overwhelming — they want a personal touch, and they want it digital.  Not only that, but the survey also revealed that communications from healthcare organizations actually drive a patient’s desire to improve their health, fueling the popular opinion that technology is the magic key to patient engagement. What the survey fails to reveal, though, is why the provider response is about ten years behind the demands of their tech-enabled patients.

According to a recent survey from Deloitte, twenty-three percent of consumers have had a virtual visit with a doctor or nurse, and 57% of those who have not been willing to try it in the future. Compare this to the 14% of providers who have implemented the technology for virtual visits, and 18% who plan to implement it in the next two years.

The narratives for this disparity in numbers have been played out over and over again: providers are traditionally conservative, and reluctant to trade a known entity — even an outdated and inefficient one — for an innovation that won’t have an immediate positive impact. Compounding the problem are the thousands of apps that intend to solve key healthcare issues but market their improvements and value-drivers in confusing and difficult to quantify ways.

But despite these obstacles, digital innovation is not going away. Deloitte predicts that by 2020, healthcare spending in the US will exceed $8 trillion, with a significant portion of that going to digital transformation. So the real problem is not identifying the obstacles—we’ve heard them all before— but in figuring out how to make sure that these investments are delivering a significant return, the first step to overcoming the obstacles to adoption.

Calculating ROI starts with identifying the final goal. For the healthcare system writ large, it’s better outcomes, but for each stakeholder in the healthcare equation, ROI calculations and objectives can look strikingly different.

For example, payers might have a direct financial interest in improving outcomes, but that’s not necessarily the case for providers. That financial interest depends on whether those providers seeking to evaluate ROI are paid on outcomes, aka value-based care. If there isn’t a fee for value equation, then providers will gravitate towards other measures.

Because the majority of providers are not paid on outcomes, digital healthcare startups need to focus on helping to create efficiencies in the delivery of provider care. With the country facing a serious physician shortage, those efficiencies can aid overextended providers in properly allocating their time and attention, instead of spending hours of the year performing mundane and time-consuming administrative tasks like updating EHRs.

To help guide this discussion on calculating ROI in digital health, we have to differentiate between hard and soft ROI, two concepts easily confused by startups and even buyers of digital health solutions.

The most relevant and easiest to calculate is hard ROI — the quantifiable benefits that digital innovation brings to practice. Take an example of hard ROI at its simplest: at the beginning of pregnancy, providers spend a majority of the patient’s first appointment explaining topics like genetic screening; nutrition, weight gain, and exercise; the structure of the office; the visits and the providers; and safe medications, among other things. Typically, this information is then distributed to the patient in a paper packet. Despite best efforts, this 5lbs of paper most likely ends up out of sight and out of mind, while the patient uses the most convenient means to get her information: she calls her provider directly or searches the internet.

Both scenarios defeat the purpose of the packet. The first, by creating redundancies and pulling the provider from more serious concerns; the second by undermining the single source of truth that the provider has tried to establish. The second is also potentially dangerous, as Dr. Google proliferates conflicting information that can result in harm to mother or baby.

On top of these problems, a packet such as this might cost about $10 to produce and needs to be updated every time the guidelines, recommendations, or contact info changes, creating more paper and more cost.

Digitizing this entire process solves version control problems and cuts cost by about 80%, a significant change in the bottom line that providers experience immediately.

Moving appointments out of the office is another version of hard ROI. On average, an in-office appointment costs a physician an hour of time and around $200. Unused scheduling capacity — the consequence of canceled appointments, no-shows, inconvenient or error-prone scheduling tools, among other things — can cost a practice tens of thousands of dollars every year: it costs the U.S. healthcare system about $150 billion annually.  

Using technology to enable remote appointments, or reduce the need for appointments altogether, can recoup a considerable amount of the losses, particularly those resulting from no-show appointments (up to 30% in some practices).

It’s these kinds of measurable cost savings that are crucial for getting innovation past the gate.

Soft ROI is more difficult to quantify — things like customer loyalty, brand strength, and other intangibles are great examples. Ultimately this soft ROI is rooted in patient satisfaction and patient engagement; if you can improve one, then the others will follow.

For example, an experience-oriented tech solution, in addition to meeting the rising patient demand for tech-enabled care, can drive an increase in patient engagement. Patients are more likely to keep coming back to the health system that offers them that experience, more likely to share their experience with their friends, more likely to serve as a brand ambassador.

Of course, how frequently that patient comes back, and for what procedure, is less predictable; making it nearly impossible to arrive at a value assessment in terms of the bottom line. Although there are some ways of gauging soft ROI — third-party studies around patient activation for example — a solution company should be ready to accept some serious hesitancy from the customer on whether they trust that soft ROI enough to ultimately buy the solution.

And selling the solution is the goal. For vendors to be successful in driving adoption of solutions, it is crucial that they know the difference between these two kinds of ROI, as well as understand the standards by which health systems evaluate their purchasing decisions. They need to demonstrate immediate bottom-line benefits; but also sustainability and scalability to set the stage for long-term success.

If the rate of providers comfortable with tech is ever going to start rising to match the rapid growth of patient demand for it, providers need to be shown that investment in innovation is going to provide a significant return. And that proof starts here.

Juan Pablo Segura Bio
Digital Health - Is It Worth It? How to Calculate ROI in Digital Health
Juan Pablo Segura created the first Prenatal Care Moonshot focused on prematurity He was named a “Healthcare Transformer” by Startup Health and a “Wireless Lifechanger” by CTIA. Juan Pablo successfully raised more than $8 million through three separate rounds of growth capital and signed significant revenue deals with 13 large hospital systems on behalf of Babyscripts. Juan Pablo has been invited to present at several conferences on the future of digital health and consumer empowerment in the healthcare space, including – mHealth, HIMSS, WEGO Health, Health Datapalooza, and Health 2.0. 
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Tagged With: Babyscripts, digital health, Digital Healthcare, digital innovation, google, health 2.0, Health Datapalooza, Health Systems, healthcare spending, healthcare startups, himss, mhealth, patient engagement, Patient Satisfaction, Payers, Startup Health, Value-Based Care, Virtual Visits, Wego Health

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