Return on investment: a practical calculation tool to convince your institution.

INTRODUCTION

The significant investments necessary to integrate a new technology or service often create a financial barrier. To convince a hospital board to invest, it is important to demonstrate a return on investment (ROI). As many pharmacists are not used to estimating an ROI, this short report proposes a simple methodology and a free practical tool to download.

METHODS

Determining an ROI requires a calculation of all the expenses linked to the initial investments and the annual running costs of the equipment or service. When possible, real costs must be used in this calculation, but the costs of some parameters can only be estimated. The methodology involves three steps: (A) calculation of the initial balance (on shot costs and savings), (B) calculation of the annual balance (valid in the years after the investment) and (C) final calculation of time to recovery (duration until the initial investments are reimbursed by the annual savings) and ROI (the net benefit in euros at the end of the amortisation period).

RESULTS

This methodology was applied to the installation of automated dispensing cabinets in our hospital. The initial balance (€32 500±€4200) included equipment acquisition costs, installation costs and initial savings (stock-value reduction and non-investment in traditional ward pharmacy). The annual balance (€8622±3564) included amortisation and maintenance costs as well as human resources, medication, logistics and safety savings. We estimated a 3.8-year (min 2.7-max 6.4) time to recovery and an ROI of €36 476 (min €7964-max €64 988) after 8 years.

CONCLUSIONS

Large investments for innovative equipment or service will be harder and harder to obtain if no economic evaluation is provided. The method proposed here is simple and provides useful input for discussions with a hospital board. The case study highlights a positive ROI related to automated dispensing cabinets.