Determining the Return on Investment (ROI)

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Determining the Return on Investment (ROI)

The increased demands for efficiency and patient safety will drive histology labs to seek automation for cost savings, error reduction, and efficiency. Financial considerations such as the economy , regulatory considerations, and other demands will require the increased efficiency and cost containment that automation can help provide. It is clear that the management of the histology laboratory of the future will require efficiency in both its process and personnel to meet escalating demands from all angles.
Few, if any, articles have scientifically documented the justification for capital expenditures with respect to pay back or the return on investment (ROI) for implementation of laboratory automation. Of the few existing figures from American laboratories that did cost analysis both before and after automation implementation, the most important impact of the combined effects of laboratory redesign and automation implementation seems to have been the reduction in the necessary full time equivalent (FTE) of the laboratory.
The second most significant impact documented has been in the reduction of errors. The reduction in errors has been most likely be attributed to both the uniformity created through standardization, as well as the implementation of automated systems. It has been well established that particular automated technology, such as bar coding, along with work flow standardization, can reduce certain error types in the histology process by over 50% and slide errors by nearly 90%. Therefore, there are very sound patient safety reasons for the adoption of technology, no matter the cost. The clear improvements seen from automated standardization in test quality, delivery times, and accuracy are also easy ideas to promote.
The reality is that laboratory managers must also consider the financial investments involved when making an acquisition decision regarding technology implementation. The costs of acquisition and implementation have historically been viewed as some of the most important barriers to automation adoption. However there are several sound financial and operational considerations which, when viewed in relation to long term benefit, may help to justify technology investments, such as:
  • Reduction in cycle times and turnaround time (TAT): Using automation and process improvement that can improve TAT by more than 50%
  • More efficient delivery of services: Improves customer satisfaction, while achieving reduction of operating costs, primarily through waste reduction
  • Increased productivity of technical staff: Improvements have seen an increase in productivity between 20-40%
Determining ROI
A common way to consider purely the financial cost of investment in technology is to estimate the cost of the investment over the anticipated rate of return. This calculation is referred to as the "payback period" or ROI. When considering the financial constraints in acquiring automation, the question becomes, "what is the value of the reduction in inefficient use of laboratory resources (such as productivity of personnel) that would be gained through technology and automation over time?"
By way of example, one laboratory was able to utilize the cost per test to determine productivity ROI. By using the full time equivalent (FTE), they compared output by FTE both before and after the addition of automation. By dividing the number of staff FTE's by the number of cases that year after their changes, this example laboratory was able to show an average cost savings of $2.50 to $3.00 per case following implementation. Other laboratories have reported similar successes, such as an 8.8% reduction in cost per slide in routine H&E slide production alone, over a 3.6 year payback period. This savings was accomplished through a combination of using automated H&E staining instrumentation and lean process improvement methods.