Financial Management and Dissemination of Evidence-Based Practice (3 credits)
Cost Benefit Analysis (70 points/ 15% of final grade)
Supports SLO 1 & 2
What are the cost benefits (e.g., increased reimbursement, decreased length of stay, reduced readmissions which will increase reimbursement, reduced staffing needs, improved wait times so more patients can be seen):
Implementing an educational program led by nurse leaders to enhance awareness of adolescent depression screening in primary care, sponsored by healthcare insurance companies, offers several cost benefits. According to Siniscalchi et al. (2020), improving staff knowledge and skills in recognizing and screening for depression using tools like the PHQ-9 helps achieve early detection, leading to timely intervention and treatment. The intervention can reduce the severity of depression cases, decreasing hospital admissions and readmissions related to untreated mental health issues, which would increase reimbursement for the clinic. Early intervention also helps prevent complications like suicide attempts or substance misuse, which further reduces the need for emergency care and long-term psychiatric treatment, saving on healthcare costs (Le et al., 2021). In addition, effective depression management can lead to shorter lengths of stay for patients requiring acute care. Improved screening can streamline clinic workflows, leading to better patient flow and shorter wait times, allowing more patients to be seen and treated efficiently. These outcomes benefit the clinic and the insurance companies through reduced healthcare expenditures and increased reimbursement tied to positive health outcomes.
How could the benefits of this project cover the implementation costs over the next five years (e.g., How will this project save your organization money)?
Potential advantages of the nurse-led educational program for adolescent depression screening include the fact that by decreasing long-term healthcare costs, such a program can get over its start-up expenditures within five fiscal years. Singh et al. (2022) found that recognizing depression at the onset and escalating the treatment of the disorder help stop the worsening, thus lowering the levels of expensive subsequent care, including hospitalization, psychiatric care, or even emergency services. With improved efficiency and accuracy of the screening process, the number of adolescents who succumb to unwanted incidents related to failure to seek appropriate treatment for their mental disorders will reduce, hence cutting the number of readmissions and associated costs. The enhanced screening methodology has the potential to raise insurers’ payment for preventative and quality care services. Since the proposed program will also decrease the number of appeals to specialists or emergency attendants and increase the clinic’s income by serving more patients at a lower cost and in less time, the program will enhance organizational effectiveness. Gradually, such expenses and improved payback will cover the costs of staff training, which would contribute to the long-term financial viability of the program.
How would implementing this project affect the organization’s competitiveness in the marketplace (e.g., what new opportunities could arise from the implementation and sustainability of the project)?
The specified project would improve the organization’s competitive advantage in the marketplace by promoting it as a leading provider of mental health care to adolescents. Proprietary and accurate screening services integrating available research evidence would appeal to various families seeking proper mental health care in primary clinics, hence enhancing friendliness and customer retention. The clinic would offer great preventive care for the patients, thus increasing the rate of recovery and reducing cases of the complications that the general clinic handles. This could open possibilities for cooperation with schools, community agencies, and healthcare insurers and access to new sources of financing. It could also get more referrals from other healthcare practitioners, set itself apart from competitors, and show an effort to solve the mental health epidemic by establishing a stronger market position and guaranteeing its viability in the long run.
What challenges would the organization face if they did not support this project (e.g., loss of clients, disadvantage in the market, etc.)?
If the organization does not receive support for this nurse-led educational program for adolescent depression screening, it could face several challenges, including a loss of clients seeking comprehensive mental health care. With the increased development of mental health consciousness, parents and caretakers tend to focus on providers who take a comprehensive and preventive approach to teenagers. Lack of this initiative may put the clinic in a disadvantageous position against competitors who put such programs into practice, thus deteriorating patient satisfaction. In addition, a lack of proper depression assessment can lead to missed diagnoses, which affect patients’ outcomes, cause more hospitalizations, and increase the cost of care (Colizzi et al., 2020). This could potentially harm the organization’s reputation, create a niche in the market, and lose potentially lucrative partnerships and reimbursement incentives and growth.
Include the studies identified as your evidence base (at least five articles) to support the argument that your proposed project is effective.
Various findings from different research have upheld the nurse-led educational program to promote adolescent depression screening in primary care. According to Castillo (2020), the screening for mental health conditions at an early age with the aid of basic rating instruments such as the PHQ-9 led to early detection and overall enhanced long-term prognosis in adolescents with severe mental health risk indicators. The study acknowledges that community resources and training can enhance adolescent psychological health, promoting better outcomes. Lustig et al. (2022) showed that training the staff in school-based adolescent mental health screening was an efficient intervention for the early identification of children and adolescents with mental health problems, risky behaviors, and related complications. Siniscalchi et al. (2020) also observed that while providing education increased the confidence and competence of healthcare professionals in performing mental health assessments by 25%, it directly enhanced mental health screening across primary care services. In another systematic review, Habtamu et al. (2023) report that enhancing educational efforts for health professionals improves patient outcomes, including better adherence to depression guidelines. Beames et al. (2021) also noted that incorporating staff education and preventive measures for at-risk groups into the prevention of early-onset depressive disorder resulted in a 20% decrease in depressive disorders and prevented complications resulting from missed or delayed diagnosis. In addition, Lange et al. (2022) noted that healthcare practitioners who are involved in educational programs more often were characterized by a more active perspective toward preventive interventions and lesser stigmatization of childhood mental disorders, resulting in more timely diagnoses of children and adolescents’ mental disorders. Collectively, these results demonstrate that staff education for depression screening would improve the identification and treatment of adolescent depression within primary care and result in better patient outcomes.
Include the ROI in table format.
Category
Item
Quantity
Expense
Total
Equipment
Printer
1
$250.00
$250.00
Laptop for presentations
1
$800.00
$800.00
PHQ-9 Screening Software License
1
$300.00
$300.00
Projector for training/presentations
1
$600.00
$600.00
Personnel
Project Manager (30 hours @ $50/hr)
30 hours
$50/hour
$1,500.00
Data Analyst (10 hours @ $40/hr)
10 hours
$40/hour
$400.00
Mental Health Consultant (10 hours @ $70/hr)
10 hours
$70/hour
$700.00
Training
Staff training on PHQ-9 (8 staff)
8 hours
$20/hour
$160.00
Office Supplies
Paper (for pamphlets & forms)
2 cases
$50.00/case
$100.00
Ink cartridges
4
$40.00 each
$160.00
Printing educational materials (100 copies)
100 copies
$1.50 per copy
$150.00
Lunch for presentations (30 people/session x 4 sessions)
120 meals
$10.00 per meal
$1,200.00
Marketing
Social media and local marketing for awareness
2 months
$250.00/month
$500.00
Flyers and posters (design + printing)
50 posters
$2.00 each
$100.00
Miscellaneous
Transportation costs for staff (training + events)
N/A
$300.00
$300.00
Telephone and Internet for project coordination
3 months
$150.00
$150.00
Pamphlets on Adolescent Depression
200 copies
$1.50 per copy
$300.00
Total Costs:
$8,570.00
Benefits
Amount Saved
Savings from improved adolescent mental health outcomes (prevention of hospitalizations, relapses, etc.)
$30,000 per year
Reimbursement for depression screening services
$5,000
Total Benefits
$35,000
Return on Investment (ROI)
Formula
Value
Benefits
$35,000
Project Costs
$8,570
Net Benefit= $35,000-$8,570
$26,430
ROI=
$26,430/$8,570 = 3.08 or 308%
References
Beames, J. R., Kikas, K., & Werner-Seidler, A. (2021). Prevention and early intervention of depression in young people: An integrated narrative review of affective awareness and Ecological Momentary Assessment.
BMC Psychology
,
9
(1).
https://doi.org/10.1186/s40359-021-00614-6
Castillo, E. G. (2020). Community interventions to promote mental health and social equity.
Current Psychiatry Reports
,
21
(5), 1–14.
https://doi.org/10.1007/s11920-019-1017-0
Colizzi, M., Lasalvia, A., & Ruggeri, M. (2020). Prevention and early intervention in youth mental health: Is it time for a multidisciplinary and trans-diagnostic model for care?
International Journal of Mental Health Systems
,
14
(1), 1–14.
https://doi.org/10.1186/s13033-020-00356-9
Habtamu, K., Birhane, R., Demissie, M., & Fekadu, A. (2023). Interventions to improve the detection of depression in primary healthcare: Systematic review.
Systematic Reviews
,
12
(1).
https://doi.org/10.1186/s13643-023-02177-6
Lange, S., Gossmann, E., Hofmann, S., & Fegert, J. M. (2022). Condemn or treat? The influence of adults’ stigmatizing attitudes on mental health service use for children.
International Journal of Environmental Research and Public Health
,
19
(23), 15951.
https://doi.org/10.3390/ijerph192315951
Le, L. K.-D., Esturas, A. C., Mihalopoulos, C., Chiotelis, O., Bucholc, J., Chatterton, M. L., & Engel, L. (2021). Cost-effectiveness evidence of mental health prevention and promotion interventions: A systematic review of economic evaluations.
PLOS Medicine
,
18
(5), e1003606.
https://doi.org/10.1371/journal.pmed.1003606
Lustig, S., Kaess, M., Schnyder, N., Michel, C., Brunner, R., Tubiana, A., Kahn, J.-P., Sarchiapone, M., Hoven, C. W., Barzilay, S., Apter, A., Balazs, J., Bobes, J., Saiz, P. A., Cozman, D., Cotter, P., Kereszteny, A., Podlogar, T., Postuvan, V., & Värnik, A. (2022). The impact of school-based screening on service use in adolescents at risk for mental health problems and risk-behavior.
European Child & Adolescent Psychiatry
,
32
.
https://doi.org/10.1007/s00787-022-01990-z
Singh, V., Kumar, A., & Gupta, S. (2022). Mental health prevention and promotion—A narrative review.
Frontiers in Psychiatry
,
13
(13).
https://doi.org/10.3389/fpsyt.2022.898009
Siniscalchi, K. A., Broome, M. E., Fish, J., Ventimiglia, J., Thompson, J., Roy, P., Pipes, R., & Trivedi, M. (2020). Depression screening and measurement-based care in primary care.
Journal of Primary Care & Community Health
,
11
(11), 215013272093126.
https://doi.org/10.1177/2150132720931261
Economic Justification: Measuring Return on Investment (ROI) and Cost Benefit Analysis (CBA)
Introduction
Your business plan must have some type of economic justification to provide your executives and elected officials with financial information. It will help them know that they are doing the “right thing” by implementing the requested program. A popular economic calculation for the attractiveness of an investment is “Return on Investment” (ROI). ROI is a calculation of the most tangible financial gains or benefits that can be expected from a project versus the costs for implementing the suggested program or solution. Cost Benefit Analysis (CBA) is more comprehensive than ROI, and attempts to quantify both tangible and intangible (or “soft”) costs and benefits. The purpose of this guide is to make these measurement techniques a little more understandable.
Calculating ROI
ROI is represented as a ratio of the expected financial gains (benefits) of a project divided by its total costs. As a formula it appears as:
ROI = (net benefits/total cost)
In the equation above, net benefits equals total benefits minus total cost. It is the incremental financial gain (or loss).
If a parcel mapping project costs $50,000 to implement, and you demonstrate $25,000 in net benefits, then the ROI calculation would appear as follows.
ROI = (25,000/50,000)
The ROI in this example is 50% which represents a positive return on the investment. It takes an ROI ratio greater than zero for a program to be attractive, typically. A sub-zero ratio may not automatically “kill” a project, because it may result in a required capability that doesn’t currently exist. Not all government functions are required to have a positive rate of return as they are in the business world. Government is required to provide certain services to the public, and so is more tolerant of low ROI.
Comparing the ROI of various options will help to ensure that you select the most cost effective technology and approach. You can provide additional support for negative (and positive) rates of return with the qualitative benefits identified by your planning team. Later in this guide, a discount factor will be applied, to show the Net Present Value (NPV) of future costs and benefits, which is an important consideration when comparing alternatives.
NOTE:
Even a project with an outstanding ROI may be controversial or doomed to failure if the investment cost is very high.
Performing CBA
These calculations are more comprehensive than ROI, in that they attempt to quantify both tangible and intangible costs and benefits. Historically, CBA has been applied to large public works projects with societal cost and benefits that are more difficult to quantify than “hard” technology costs. Intangible benefits and costs are very relevant to an overall determination of what is a good investment for the public well-being. SSDI implementation includes both types, and is therefore a candidate for applying CBA, if the expertise and resources are available to support the effort. There are a number of economic methodologies for monetizing benefits and costs that do not have easily discovered market prices, but these can be complex and any estimate derived from them may have relatively high uncertainty.
Like an ROI calculation, the result of CBA is a ratio expressed as a percentage, and economic attractiveness is determined the same way: above zero is attractive, and below zero is not. The equation is the same, although more costs and benefits are included. That is the essential difference between the two methods.
Effect of Time on ROI and CBA Calculations
In most cases, executives and elected officials expect to see an economic justification based on phased benefits and costs over a three to five year window. Being able to show a positive ROI in a one or two year timeframe will probably make your project an instant hit, but this is an unusual circumstance.
Given the time value of money, a dollar is worth more today than it will be tomorrow. To account for this economic fact, future costs and benefits need to be “discounted” in order to calculate today’s value (a.k.a., Net Present Value, or NPV). The discount factor, also known as the cost of capital, might be specified by various state authorities, and usually reflects the interest rate the state pays to borrow money when it issues general obligation bonds. By comparison, the federal Office of Management and Budget (OMB) recommends the following nominal discount rates for federal programs, depending on the length of the program.
Duration
3 Yrs
5 Yrs
7 Yrs
10 Yrs
Discount Rate
2.7%
3.3%
3.7%
4.2%
Source: OMB Circular A-94 Appendix C, as of 12/12/08
In the parcel mapping calculation of ROI, to apply a discount factor to determine the Net Present Value (NPV) of a future stream of benefits and costs, the following equation and factors would be used:
B = Benefits; C = Costs; r = discount rate; t = time period; n = number of time periods.
NPV equals the summation from t = 0 (the initial start-up of the program) to t = n (the final year of the program) of [(B
t
– C
t
) / (1 + r)
t
].
For a 3 year program, the equation would be as follows:
NPV = [(B
0
– C
0
)] + [(B
1
– C
1
) / (1 + r)] + [(B
2
– C
2
) / (1 + r)
2
] + [(B
3
– C
3
) / (1 + r)
3
]
In the table on the parcel mapping example, the above equation was applied, and the resulting NPV calculated out to be $22,120.
The longer the project duration, the greater the risks due to changes in work process flow and other external factors that may lead to a new project design and additional costs.
Initial Costs
Year 1
Year 2
Year 3
Cumulative Total
Total Costs
$35,000
$5,000
$5,000
$5,000
$50,000
Total Benefits
$0
$25,000
$25,000
$25,000
$75,000
Net Benefit
-$35,000
$20,000
$20,000
$20,000
$25,000
Net Present Value
Initial Year
-$35,000
Year 1
$19,512
Year 2
$19,036
Year 3
$18,572
NPV =
$22,120
Discount Factor (2.5 %)
0.025
Initial Period Denominator
1.000
Year 1
1.025
Year 2
1.051
Year 3
1.077
This table feeds our earlier example calculation of ROI = ($25,000/$50,000) where the ROI is calculated to be 50% for the parcel mapping project. By adding a discount factor and calculating NPV (see aforementioned formula), the economic attractiveness diminishes only slightly ($22K vs. $25K), but is still positive, and more meaningful because it accounts for the time value of money.
Calculating Costs
Most organizations have effective methods for identifying their costs. Information on personnel costs can be obtained from fiscal officers, there are often contracts in place (or as historical references) for certain services, and managers can turn to their counterparts in other organizations to obtain reasonable cost estimates.
Include the following incremental costs when determining your total cost:
Labor Including Fringe Benefits
Overhead (if appropriate)
Additional Equipment Cost (not including additional costs for existing equipment)
Additional Software Cost (not including additional costs for existing software)
Physical Facilities (if additional space is required)
Contracting Costs
You should also consider the various phases of a project and account for all of the costs incurred during each phase. Many people improperly ignore the “built-in” costs and only account for large contractual expenditures. Examples of built-in costs include:
Project Management
Contract Management
Quality Assurance and Control
Personnel Training
Project Maintenance
Security (if appropriate)
Calculating Benefits
This is the most difficult part of completing an economic justification. There are very few guidelines that provide you with average benefit factors for implementing applications, data development, or coordination activities. NASA reported that adherence to open standards and interoperability specifications during project implementation resulted in 119% ROI as a “savings to investment” ratio. (See http://www.egy.org/files/ROI_Study.pdf)
Items to include in your study include “internal” or “external” costs and benefits to your organization. It is generally much easier to document the internal costs, because you should have a good understanding of the work process flow and where the savings will occur. It can be extremely difficult (or nearly impossible) to identify the “downstream” benefits that are accrued by other users and the general public.
Examples of the internal benefits you should measure include:
Savings from new capabilities
Decreased time to perform repetitive tasks
Decreased travel
Decreased wait times
Fewer mistakes
Increase in billable services
Increased customer base
Improved customer satisfaction
Decreased training costs
Improved regulatory compliance (i.e. reduction of fines)
Reduced reporting requirements
Reduced telecommunications charges
Reduced dependency on consultants
As already noted, accurately identifying benefits can be very difficult and time consuming. It helps to list all of the expected benefits and then prioritize them in terms of your “hunches” on the largest expected paybacks. Explain your assumptions and known biases related to your “hunches” when documenting your approach. After that, make your best guess on the ease of obtaining the information required to complete the calculation. Use these lists to set your priorities for working on economic justification.
Examples of external and downstream benefits that you might measure include:
All of the above benefits that can be quantified in other agencies or levels of government due to the proposed initiative.
Public and Private Sector benefits that can be clearly defined (i.e. by having assessment data on-line, appraisers can perform assessments in their office and not have to drive to county or state tax offices, thereby saving them time and travel expenses)
Private sector benefits from being geospatially enabled (i.e. a company specializing in road centerline data gets access to better road geometry and provides more added values for other customers)
Public benefits from being geospatially enabled (i.e. being able to locate a hotel near a business appointment on a web based mapping system that saves time and travel expenses)
These external and downstream benefits can be very complex to calculate and will probably be beyond the scope of your planning efforts. However, the members of your planning team should think about these benefits; and when they can be readily calculated, include them in your business plan.
Putting it in Perspective
ROI and CBA calculations are useful, because they allow you to examine your options and make more informed choices. They are also an essential component of your business plan, because they become the “proof” that implementing a project is a sound business decision. ROI is useful when costs and benefits are tangible and tightly focused on a specific program with boundaries. CBA is more comprehensive, and is useful when both tangible and intangible costs and benefits need to be considered.
Before you begin development of your business plan, you should determine what statutory or other requirements you have for developing ROI or other types of calculations in prescribed formats. Many states have specific guidance and formats identified in their budget or IT plans. In addition, you should determine the threshold for project value at which you must perform these analyses. The level of effort that you put toward ROI/CBA should be commensurate with the contemplated expenditure. For example, spending a week’s worth of your time to gather information and crunch numbers may not be a wise investment of time in order to justify a project expenditure of $10,000, but it might be if the amount is $100,000.
As already noted, examples of ROI and CBA calculations for geospatial projects can be very elusive. Please share any information, tools, or new concepts with your peers.
NOTE: This overview of ROI and CBA is a companion piece to the
Strategic and Business Plan Guidelines
produced under contract to the Federal Geographic Data Committee (FGDC) Secretariat, in support of the Fifty States Initiative. The Guidelines and related materials are available on both the FGDC and NSGIC websites.
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