Don’t talk to me about savings – my innovation saves lives
Patient safety and benefits are paramount when assessing new innovations, but commissioners need to understand the financial benefits too. Here Lesley Soden, Programme Director of Innovation at Health Innovation Network, explains how innovators can make sure they have a robust case by gathering the right data and accessing the right support.
Picture the scene: you’re promoting the ground-breaking clinical benefits of your innovation to a potential NHS customer, but the conversation quickly turns to questions about savings and ensuring a return on investment. This topic soon overpowers the discussion, and everything you had prepared on improving patient care or helping health professionals do their jobs better is forgotten. You’re left feeling perplexed about the NHS customer’s priorities and your own responsibility to the system.
The bottom line is that every NHS provider and commissioner will have a year-on-year savings target, usually between two per cent and nine per cent. To put this into context, for a specialist hospital with a £200 million budget, even just a two per cent savings target would be £4 million. This doesn’t mean that they aren’t interested in hearing about the workforce or patient safety improvement potential of your innovation. It does mean that they also need to see how you will help them save that cold hard cash.
How you can help
It’s imperative that you can prove your return on investment, or ROI, as well as talk about the system benefits of your idea. And the two aren’t mutually exclusive. Your ROI can be based on a number of factors, such as incident rates, patient or staff satisfaction rates, length of stay, emergency re-admission rates, infection rates, A&E waits, etc., all of which can offer an overall financial benefit to the NHS provider. While there is typically a lot to consider, the good news is that there is funding available from bodies such as the NIHR (National Institute for Health Research), Innovate UK or health charities to pay a university or health economist for ROI expertise.
Your ROI must not only be more appealing than similar options available on the market; it must also be impressive against cost-saving innovations in other categories.
But what does ‘return on investment’ actually mean? Put simply, ROI means that the financial benefits associated with the investment are greater than the costs incurred. For example, Locum’s Nest, the digital app that allows doctors to book and get paid for additional shifts, identified that one Trust recorded savings of £1.3 million in its opening 10 months after adopting the app. The cost of implementing the system was significantly less than this figure, giving a clear return on the finances and time invested by the Trust.
Articulating the benefits
This example clearly demonstrates a direct benefit, but there are a number of indirect ones that can be used to illustrate return on investment as well. In healthcare, these are often calculated in productivity, or the time saved by clinicians with which they can treat more patients and reduce delays in a patient’s pathway through the hospital, the cost saving of which can be inferred. For example, the use of the Infinity ePortering solution at Northwick Park Hospital, which coordinated approximately 9,000 requests for porters to transport patients and equipment each month, reduced the average request-completion time by six minutes, saving the hospital indirect financial costs of over 10,000 hours in productivity time per year. Other indirect benefits can be factors such as staff satisfaction, which are qualified through an increase in staff retention and, therefore, reduced recruitment costs.
As seen in these examples, good ROI analysis measures an innovation’s efficiency in terms of the expected benefit flow, whether direct or indirect. It should not be confused with “budget impact analysis”, which is an economic assessment used to calculate the actual cost of specific resources and equipment required to adopt and implement an innovation or service. Being able to effectively communicate the value of both direct and indirect ROIs is one of the most important skills any innovator for the health and care system can develop.
Understanding your audience
It’s important to remember that the benefits associated with an investment are not always measurable in a direct cash return to the investor. The value could be identified in terms of improved population health, the resulting decrease in demand on health services and an increase in system-wide savings. These can be more complicated ROIs to demonstrate, because the savings may not be immediately felt by the part of the system you are asking to implement your innovation. Convincing a commissioner to pay for something that they will not directly see a financial return on is not as straightforward a task. For example, asking a hospital to pay for an innovation that supports early patient discharge might seem like an obvious win for the trust, but in reality, the savings generated would directly benefit the commissioner, not the hospital itself. In these instances, you need to highlight the benefits to all parties. For the hospital, this could be freeing up bed capacity, resulting in an increased number of elective operations, which would generate an income for them.
Your ROI must not only be more appealing than similar options available on the market; it must also be impressive against cost-saving innovations in other categories. For example, a Board might decide, rather than choosing between two digital innovations capable of reducing temporary staff agency costs, to simply pay for online infection-control training in order to reduce infection spread rates among staff. Your innovation must be able to demonstrate a better return on investment than all other options, too.
Being able to effectively communicate the value of both direct and indirect ROIs is one of the most important skills any innovator for the health and care system can develop.
Calculating your ROI
A financial ROI is calculated through a cost-benefit ratio, which is the cost of an innovation divided by its benefits. This is often represented as an estimated value generated for every £1 spent on the intervention. The ROI value should be greater than every £1 spent to show a good return on investment.
For example, Public Health England’s 2017 report on the prevention and treatment of musculoskeletal (MSK) conditions showed that ESCAPE-Pain, an MSK prevention programme, had an ROI of £5.20, which is a great return for every £1 spent on the intervention. This demonstrates to commissioners and providers that the intervention of commissioning ESCAPE-Pain will generate a financial ROI.
Another example of a good cost-benefit ratio can be seen in SecurAcath, which secures percutaneous catheters in position on the skin, reducing the need for frequent catheter replacement or reattachment. In a comparison study against the use of a similar device, they found that SecurAcath decreased costs in catheter replacement by £17,952, as SecurAcath resulted in a 0% catheter replacement rate compared to 5.9 per cent for the other device in the same year it was implemented.
The most attractive cost-benefit ratios promise in-year savings, meaning that commissioners don’t have to wait a long time to reap the rewards of their investment.
However, don’t be dissuaded if your idea is more of a long burn. There is a focus in the NHS Long Term plan on keeping people well for longer, and whilst people prefer quick wins – don’t we all – it’s not a guarantee that you will get rejected if you can’t promise a short-term return. In this instance, your ROI analysis could focus on the cost of preventing diseases and conditions in contrast to the cost of treating these conditions (e.g. cardiovascular disease or diabetes).
If you are piloting your innovation within a health or social care service, you don’t just need to work out your costs; you also need to understand the current system data you’re claiming to be an improvement upon. You might be asked by a service lead to help identify the baseline data at the start of the pilot, and this data is contingent upon how your innovation will impact the service.
Normally, a provider will have key monthly performance indicators (KPIs) that are reported to their commissioners and their Trust Board in aggregated data. This could be measured in things like the number of face-to-face patient contacts, waiting times or staff agency costs. The piloting of an innovation within a specific service may require the running of tailored data reports for these KPIs to provide valuable baseline information.
A service lead will request that their internal informatics / business intelligence teams run these reports, as they are the only people in the company who are allowed access to that level of data. You will, then, receive this report from a business intelligence employee to build up your knowledge of the current system data. The request for data reports is often overlooked by innovators and makes it difficult to maximise the pilot benefit outside of a specific site if the right evidence is not generated.
Evidencing the ROI of your innovation is often challenging and costly. However, it could be money well spent if this evidence leads to paid contracts. There are several options available:
- Do the work in-house. It should be reasonably straightforward for you to provide estimations of savings based on the improvements or outcomes your innovation has achieved in health care settings. You could use data that is readily available such as:
- Number of bed days that your innovation has saved (e.g. by avoiding admission or reducing planned admissions). This can be quantified by the cost of an NHS bed per day.
- Staffing hours saved by the innovation and the associated benefits (e.g. efficiencies, more patient-facing time, reducing unpaid overtime, more effective management of follow-up appointments or reducing DNAs).
- Better management of medicines, which leads to a reduction in medicines being prescribed.
- Prevention of deterioration through early diagnosis or better management and the savings associated with reducing the risk.
- Find a masters student. Many masters students will be up for taking on your research as part of their dissertation project. Specifically targeting universities that have students from relevant health economics or data science backgrounds or who are specializing in the same area as the product (e.g. a physiotherapist) is a good place to start.
- Commission an external and impartial consultancy. The outcome of which should be a robust piece of work that clearly demonstrates the ROI. Some AHSNs provide this service.
It would be great if innovations were only assessed on the patient benefit, but unfortunately, the NHS doesn’t have a bottomless purse. And neither should it. That absolutely doesn’t mean that patient safety isn’t of the upmost importance, it just can’t be the only deciding factor. Make it easy for commissioners and NHS providers to see the value – both financial and otherwise – of your innovation by making sure you start with a robust baseline, gathering the right data during any pilots, looking out for funding opportunities and working with your local universities to access masters or PhD students who are keen to undertake your health economics study.
For more guidance on understanding health economics and how to calculate an ROI, check out these resources:
 Return on Investment of Interventions for the Prevention and Treatment of Musculoskeletal Conditions (PHE, 2017)
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