Justifying an information system.

A four-step model for the hospital pharmacist to use in justifying a computerized information system is described. In the first step, costs are identified and analyzed. Both the costs and the advantages of the existing system are evaluated. A request for information and a request for proposal are prepared and sent to vendors, who return estimates of hardware, software, and support costs. Costs can then be merged and analyzed as one-time costs, recurring annual costs, and total costs annualized over five years. In step 2, benefits are identified and analyzed. Tangible economic benefits are those that directly reduce or avoid costs or directly enhance revenues and can be measured in dollars. Intangible economic benefits are realized through a reduction in overhead and reallocation of labor and are less easily measured in dollars. Noneconomic benefits, some involving quality-of-care issues, can also be used in the justification. Step 3 consists of a formal risk assessment in which the project is broken into categories for which specific questions are answered by assigning a risk factor. In step 4, both costs and benefits are subjected to a financial analysis, the object of which is to maximize the return on investment to the institution from the capital being requested. Calculations include return on investment based on the net present value of money, internal rate of return, payback period, and profitability index. A well-designed justification for an information system not only identifies the costs, risks, and benefits but also presents a plan of action for realizing the benefits.