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Return on Investment (ROI)

 

You can calculate the ‘Return on Investment’ (ROI) of a quality improvement initiative using the financial benefits and costs data from the project.

At the start of a project you estimate the costs and the expected financial benefits so that the sponsor can assess what the ROI may be before investing, and again towards the end of a project, as a measure for the success of the improvement project.

ROI can be used throughout the life of a project to continually see if benefits are being realised.

How to use it

The formula for calculating ROI is:
Benefits – costs = surplus
Return on investment can also be provided as a % figure, showing the savings as a percentage of the total costs:
Benefits – costs x 100

Costs

While ROI is usually thought of as being purely about ‘financial’ benefits, it is helpful to start by thinking about the quality benefits of investments. What initially may seem like a non-financial benefit, i.e. improved patient safety may be able to be translated into financial terms (for example improving patient safety results in shorter lengths of stay meaning reduced number of bed days).

Collecting this information will help you to develop a clear evidence base on which to build your business case for change.

Estimating what an improvement initiative will cost to implement and sustain provides data for the costs element of the calculation. Calculating the benefits throughout the life of a project is often required as part of the continuous review of the project status and to inform the decision as to where the project continues, is refined or closed.