The Total Economic Impact Of IBM Patient Portal … Total Economic Impact Of IBM Patient Portal...

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Prepared for IBM Healthcare and Life Sciences October 2007

The Total Economic Impact Of IBM Patient Portal Powered By WebSphere

Project Team Jon Erickson, Senior Consultant Amit Diddee, Consultant

The Total Economic Impact Of IBM Patient Portal

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Table Of Contents Executive Summary ............................................................................................................................... 3

Purpose .............................................................................................................................................. 3

Methodology ....................................................................................................................................... 3

Approach ............................................................................................................................................ 4

Key Findings ...................................................................................................................................... 4

Disclosures ......................................................................................................................................... 5

IBM Patient Portal: Overview ................................................................................................................. 6

Analysis ................................................................................................................................................... 8

Interview Highlights ............................................................................................................................ 8

TEI Framework .................................................................................................................................. 9

Costs .................................................................................................................................................. 9

Benefits ............................................................................................................................................ 11

Risk ................................................................................................................................................... 14

Flexibility ........................................................................................................................................... 18

TEI Framework: Summary............................................................................................................... 19

Study Conclusions ................................................................................................................................ 20

Appendix A: Customer Organization Description ................................................................................ 21

Appendix B: Total Economic Impact™ Overview ............................................................................... 22

Appendix C: Glossary ........................................................................................................................... 23

© 2007, Forrester Research, Inc. All rights reserved. Forrester, Forrester Wave, RoleView, Technographics, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. Forrester clients may make one attributed copy or slide of each figure contained herein. Additional reproduction is strictly prohibited. For additional reproduction rights and usage information, go to www.forrester.com. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change.


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Executive Summary In September 2007, IBM commissioned Forrester Consulting to examine the total economic impact and potential return on investment (ROI) enterprises may realize by deploying IBM Patient Portal powered by WebSphere. IBM Patient Portal is a customized Web site developed for healthcare institutions that functions as a point of access to patient medical information housed in disparate corporate systems. This study illustrates the financial impact of IBM Patient Portal deployed at Duke Medicine, a consortium integrating Duke University Health System, Duke University School of Medicine, and Duke University School of Nursing that provides research, clinical care, and education in Durham, North Carolina.

This study only evaluates costs, benefits, and options associated with the billing and account management module of the portal, since other modules had not been deployed at the time of this writing.

Forrester conducted in-depth interviews with key stakeholders and project managers and found that Duke Medicine achieved several benefits during the nine months since the portal was deployed. These included improved collection rates through faster billing and account closure, reduced cost to collect on outstanding accounts, and reduced burden on call center operations.

Purpose The purpose of this study is to provide readers with a framework to evaluate the potential financial impact of IBM Patient Portal on their organizations. Forrester’s aim is to clearly show all calculations and assumptions used in the analysis. Readers should use this study to better understand and communicate a business case for investing in IBM and the IBM Patient Portal.

Methodology IBM selected Forrester for this project because of its industry expertise in Web portals and Forrester’s Total Economic Impact™ (TEI) methodology. TEI not only measures costs and cost reduction (areas that are typically accounted for within IT) but also weighs the enabling value of a technology in increasing the effectiveness of overall business processes.

For this study, Forrester employed four fundamental elements of TEI in modeling IBM’s Healthcare Portal:

1. Costs and cost reduction.

2. Benefits to the entire organization.

3. Risk.

4. Flexibility.

Given the increasing sophistication that enterprises have regarding cost analyses related to IT investments, Forrester’s TEI methodology serves an extremely useful purpose by providing a complete picture of the total economic impact of purchase decisions. Please see Appendix B for additional information on the TEI methodology.


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Approach Forrester used a four-step approach for this study:

1. Forrester gathered data from existing Forrester research relative to healthcare and life sciences and the Web portals market in general.

2. Forrester interviewed IBM marketing and sales personnel to fully understand the potential (or intended) value proposition of healthcare Web portal solutions.

3. Forrester conducted a series of in-depth interviews with Duke Medicine, which, at the time of this writing, had been using the billing and account management module of IBM Patient Portal for nine months.

4. Forrester constructed a financial model representative of the interviews. This model can be found in the TEI Framework section below.

Key Findings Forrester’s study yielded several key findings:

• ROI. Based on extensive interviews with an existing customer, Forrester constructed a TEI framework and the associated ROI analysis illustrating the financial impact areas. As seen in Table 1, the risk adjusted ROI for Duke Medicine is 11% with a breakeven point (payback period) of between 1.68 and 2.17 years after deployment.

• Benefits. Forrester found that organizations can quickly realize benefits in the form of increased revenue from improved streamlined collections, cost savings from reduced burden on call center operations, and improved collection efficiency. These short-term benefits are estimated to be about $1.1 million for the three-year period of analysis. Organizations may also realize more significant, albeit long-term, benefits in the form of increased patient satisfaction and higher retention rates and an improvement in the quality of data through consolidation across corporate silos.

• Costs. The cost for the portal licenses in this implementation was $96,000. The cost for hardware necessary to run the portal was $100,000. Upfront professional services and internal implementation costs amounted to $230,000. Initial training costs amounted to $16,000. Annual maintenance is charged at 20% of the license cost, or $19,200. Costs for ongoing site maintenance, customer support, and training update sessions totaled $190,500. Total initial costs for the IBM Patient Portal implementation equaled $442,000, plus $209,700 for the first year of implementation and $97,200 for each subsequent year.

Table 1 illustrates the risk-adjusted cash flow for the customer organization, based on data and characteristics obtained during the interview process. Forrester risk-adjusts these values to take into account the potential uncertainty that exists in estimating the costs and benefits of a technology investment. The risk-adjusted value is meant to provide a conservative estimation, incorporating any potential risk factors that may later impact the original cost and benefit estimates. For a more in-depth explanation of risk and risk adjustments used in this study, please see the “Risk” section.


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Table 1: Customer Organization ROI, Original And Risk-Adjusted

Original Risk-adjusted

Total cost (PV) $785,995 $867,663

Total savings (PV) $1,061,388 $965,562

Net impact (PV) $275,393 $97,899

ROI 35% 11%

NPV $275,393 $97,899

IRR 40% 20%

Payback (years) 1.68 2.17

Source: Forrester Research, Inc.

Disclosures The reader should be aware of the following:

• The study is commissioned by IBM and delivered by the Forrester Consulting group.

• IBM reviewed and provided feedback to Forrester, but Forrester maintains editorial control over the study and its findings and does not accept changes to the study that contradict Forrester’s findings or obscure the meaning of the study.

• The customer interviewed for this study was referred to Forrester by IBM.

• Forrester makes no assumptions as to the potential return on investment that other organizations will receive. Forrester strongly advises readers to use their own estimates within the framework provided in the report to determine the appropriateness of an investment in IBM or IBM Patient Portal.

• This study is not meant to be used as a competitive product analysis.


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IBM Patient Portal: Overview According to IBM, implementation of the Enterprise Patient Portal allows organizations to quickly share accurate time-sensitive information with all participants in the healthcare delivery process regardless of their role, whether as a patient, a clinician or an administrator. IBM’s portal solutions can address many needs, from a variety of applications and use case scenarios. The patient portal deployment at Duke is one example of how IBM’s Websphere Portal can deliver value to a customer in a patient self-service environment.

IBM’s Websphere Portal, Websphere Forms, Portlet Factory, and Websphere Enterprise Content Manager were assembled into a solution which allowed for secure delivery of information to patients and administrators. Billing and customer service representatives can now see an individual’s billing history on one screen, rather than searching multiple billing systems individually to create a complete financial view. Patients can see their bills from Duke’s systems in a secure environment, providing updates to their financial and demographic information, insurance, and view their lab results. IBM’s services team assisted with the deployment of the hardware and servers required to support the implementation, as well as assisted with the integration and implementation of IBM’s tools needed to deliver information to the portal.

While IBM can provide services to implement solutions, IBM also works with a number of Business Partners who specialize in this industry. IBM delivers a comprehensive and customizable solution including IBM Business Partner application software, Services, and IBM middleware products to meet your business needs.

IBM Business Partners

Our wide network of committed partners teams with IBM to help conquer many of your most prevalent business challenges.

Axolotl

The Elysium product suite improves community health, information exchange, workflow and communications by automating all phases of health information connectivity, exchange, and management for hospitals, clinics, labs, radiology centers, and their affiliated physicians.

Carefx Unityfx Portal Enabler and Carefx Fusionfx Context Manager

This is integrated with IBM WebSphere Portal to provide standards-based secure context-driven portals creating a highly intuitive workflow solution for healthcare professionals.

DataGlider

Data Glider specializes in Web-based Enterprise Healthcare Portal Solutions that provide knowledge-driven, process-improving solutions to major healthcare providers.

Orion Health

Orion Health provides a universal, easy to use solution that delivers accurate patient information and results where and when you need it increasing diagnostic accuracy and improving patient safety.


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IBM middleware

IBM middleware are key building blocks of the IBM business solutions for this industry, delivering business flexibility through people, information and process integration. We team with partners and service providers to solve your business problems, built from the enabling products listed below.

IBM WebSphere Application Server

– IBM WebSphere Portal Server

– IBM WebSphere Portlet Factory

– IBM Workplace Forms

– IBM Tivoli Directory Server

– IBM Rational Application Developer

At the time of this writing, only the billing and account management module of the portal was completed and fully deployed at the customer site. The customer organization consequently was able to provide hard data and findings only for this module, which is the focus of this study.


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Analysis As stated in the Executive Summary, Forrester took a multistep approach to evaluate the impact that implementing IBM Patient Portal can have on an organization:

• Interviews with IBM marketing and sales personnel.

• In-depth interviews of key stakeholders at Duke Medicine currently using the patient portal.

• Construction of a detailed financial framework for the implementation of IBM Patient Portal.

Interview Highlights Duke Medicine, the customer described in this study, is a $1.7 billion consortium that integrates Duke University Health System, Duke University School of Medicine, and Duke University School of Nursing. Duke University Health System is a full-service healthcare institution that includes several general and specialty-care facilities located across Central North Carolina. Please see Appendix A for more information about this customer.

A total of four interviews were conducted for this study, involving representatives from Duke Medicine. The customer interviews uncovered a number of valuable insights:

• Duke Medicine was looking for a way to innovate around the way it provides information to its patients. In the past, account and billing information was provided either through a customer call center or directly through mail.

• With the growth in patient and customer requests, the organization wanted to create a new and flexible communication channel for its patients. Duke believed that this new channel could offer its patients simpler access to their medical information, as well as easier appointment booking.

• For Duke, having a scalable platform was a key part of the success of the overall investment. The organization wanted the portal to grow organically, focusing on billing and account management first with the ability to add additional services around scheduling and clinical reports (including lab reports) access in later phases.

• Two key critical success factors for adoption of the patient portal were the ability to improve the services offered to its patients, leading to increased retention while at the same time maximizing the efficiency of delivering information to patients.

• Duke noted the initial rollout of the portal was completed without an investment in advertising and promotion. Subsequent rollout phases are expected to have an investment in advertising, potentially increasing user adoption above existing levels.


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TEI Framework

Introduction From the information provided in the in-depth interviews, Forrester has constructed a TEI framework for those organizations considering implementation of IBM Patient Portal. The objective of the framework is to identify the cost, benefit, flexibility, and risk factors that affect the investment decision.

Customer Organization Based on the interviews with the four executives from Duke Medicine, Forrester constructed a TEI framework and an associated ROI analysis that illustrates the areas impacted financially.

Framework Assumptions Table 2 lists the discount rate used in the PV and NPV calculations and time horizon used for the financial modeling.

Table 2: General Assumptions

General assumptions Value

Discount rate 10%

Length of analysis Three years


Organizations typically use discount rates between 8% and 16% based on their current environment. Readers are urged to consult with Finance to determine the most appropriate discount rate to use within their own organizations.

Costs The cost of the IBM Patient Portal includes: 1) the upfront initial costs of portal license fees, hardware, implementation, and training; and 2) the ongoing costs to maintain the system, which include the costs of annual portal license maintenance fees, site maintenance and support, continuing education for support staff, and customer support. Since only the billing module of the project was completed and fully deployed at the customer site at the time of this writing, the following discussion only focuses on the costs related to the billings module that were incurred by the customer organization.

The project is measured on a three-year basis. The actual cost of the solution will vary depending on the complexity of the development and implementation effort required during the project. The following are the cost inputs to the financial analysis.

Portal Licensing Fees The cost of licensing represents a portion of the overall investment cost of the solution. This fee is charged at the time of sale and is based on the number of internal staff members who will be administering or actively using the portal. Duke Medicine purchased the billing functionality of the portal for a one-time cost of $96,000, which includes discounts provided to Duke from IBM.


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Hardware Costs In addition to the cost of licensing, the organization indicated that it needed to incur roughly $100,000 in infrastructure costs associated with the investment. These costs included the cost of additional servers to run IBM Patient Portal, as well as necessary infrastructure upgrades to facilitate development and implementation.

Implementation Costs The cost to implement the IBM Patient Portal includes the cost of IBM resources to design, develop, and implement the portal. In discussions with the interviewed customer, Forrester estimates that IBM professionals devoted roughly 1,200 hours to implementation. If the billing functionality accounts for 30% of the entire portal, then, assuming an hourly cost of $250 per hour, the total professional services cost to implement the billing module of the IBM Patient Portal for the interviewed organization comes to $90,000.

In addition to the professional services, implementation also required internal resources for planning, architecture design, data analyses, and infrastructure modification activities. Duke Medicine estimated that key stakeholders, project managers, developers, and other internal staff allocated 1,400 hours during implementation. Assuming a conservative cost of $100 per hour, the total labor cost to implement the IBM Patient Portal for the interviewed organization was approximately $140,000.

Initial Training Costs The cost to train the individual developers, administrators, and call center support staff on the new portal was another cost cited by the interviewed organization. The organization indicated that it had trained 80 individuals on the use of the portal for 4 hours each. At a cost of $50 per hour of training, which includes the formal cost of training, the lost productivity from participating in the training session, as well as the indirect cost of informal training, the total initial training costs for the IBM Patient Portal amount to $16,000.

Annual Portal License Maintenance Fees Duke Medicine incurred annually recurring license maintenance costs. Based on interviews with stakeholders, these fees are approximately 20% of the initial portal licensing fees, which amounts to $19,200.

Site Development And Support Costs The interviewed organization allocated one full-time employee for site development and support activities such as bug-fixing and feature enhancements. Using market rates for fully loaded compensation estimates, this cost amounts to $70,000.

Continuing Education For Support Staff Costs Forrester found that with regular site maintenance and support came the need for continuing education and training for support staff. The interviewed organization provided 2 hours of training for 80 administrators and call center employees each year. At a cost of $50 per hour of training, which includes the formal cost of training, the lost productivity from participating in the training session, as well as the indirect cost of informal training, the annual continuing education costs amount to $8,000.


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Customer Support Costs The interviewed organization witnessed an increase in the number of customer support calls after the deployment of IBM Patient Portal. This increase amounted to 2,500 additional calls per month for three months during the winter season when patient visits to doctors and hospitals are highest. Assuming these calls are diverted to the technical support staff and the average cost per call is $15, customer support costs equal $112,500.

Total Costs The costs described above are summarized in Table 3.

Table 3: Total Costs

Cost Initial Year 1 Year 2 Year 3 Total Present value

Portal licensing fees $96,000 $96,000 $96,000

Hardware $100,000 $100,000 $100,000

Professional services $90,000 $90,000 $90,000

Internal implementation $140,000 $140,000 $140,000

Initial training $16,000 $16,000 $16,000

License maintenance fees $19,200 $19,200 $19,200 $57,600 $47,747

Site development and support costs $70,000 $70,000 $70,000 $210,000 $174,080

Continuing education for support staff costs $8,000 $8,000 $8,000 $24,000 $19,895

Customer support $112,500 $112,500 $102,273

Total cost $442,000 $209,700 $97,200 $97,200 $846,100 $785,995


Benefits Duke Medicine described a range of benefits experienced from the implementation of the IBM Patient Portal. Though not immediately measurable, the most significant benefits described to Forrester included improved patient satisfaction, enhanced patient-doctor relationships, and data consolidation across disparate systems.

The IBM Patient Portal empowers patients to manage and track their own care and health through customized views of their own medical and financial information. This has lead to increased patient satisfaction rates and improved quality of care and patient safety as a result of greater transparency of patient care records. The customer organization also described how physicians have been able


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to build deeper and more informative relationships with patients through the unified and direct communication and loyalty channels provided by the portal.

Additionally, implementing the IBM Patient Portal presents data from multiple sources in a single view, replacing the need to have multiple portals across the company, each designed separately for patients, doctors, and administrators. This consolidation not only reduced the number of data silos and provided for a single point of access to each system through an integrated portal — it also increased the general accuracy and precision of the data and information generated from that data, and it enabled administrators to more efficiently answer patients’ questions.

The following is a description of the immediate benefits mentioned by the customer since its implementation of the IBM Patient Portal. Since at the time of this writing only the billing module of the project was completed and fully deployed at the customer site, the following discussion only focuses on the benefits related to the billings module..

Increased Revenue From Web-Based Channel Duke Medicine noted that the implementation of IBM Patient Portal potentially increased the revenue collections rate by introducing a streamlined Web-based billing collection channel and improving the collection rate through faster billing and account closure. This was one of the key drivers for the organization in implementing the patient portal; it recognized the need to offer patients an easy-to-use and quick way of paying bills shortly after care is rendered. For the purpose of this analysis, the Web portal led to an annual increase in revenue collected of $1.2 million (by year-end), representing approximately 10,000 collections from patients. Forrester attributes 18% of the amount collected as a direct result of having such a Web-based billing and payment channel in place, as it avoids or reduces the chances of lost bills and missed payments. As Table 4 indicates, this benefit increases annual revenues by $216,000.

Table 4: Increased Revenue From Web-Based Channel

Ref. Metric Calculation Benefit

L1 Collections channeled through portal 10,000

L2 Total value $1,200,000

L3 % not collected 18%

L4 Total savings L2*L3 $216,000


Reduced Burden On Call Center Operations Duke Medicine described a reduction in the number of peak calls handled throughout the year. Prior to having the patient portal in place, the organization’s call center normally witnessed a seasonal increase of 5,000 calls per month for four months during the winter. Since the implementation of the Web portal, the call center has reported a 50% reduction in these peak calls, presumably freeing up time and allowing the call center staff to focus on more value-added questions. Assuming that the fully loaded cost to handle each call is $20 within the external facing call center this reduction amounts to a net annual savings of $200,000 as shown in Table 5 below.


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Table 5: Reduced Burden On Call Center Operations


K1 Total monthly calls 20,000

K2 Calls during peak months 25,000

K3 Number of months 4

K4 Total yearly peak calls (K1-K2)*K3 20,000

K5 Estimated reduction between peak call and normal 50%

K6 Cost per call $20

K7 Total savings K4*K5*K6 $200,000


Reduced Cost To Collect Duke Medicine also reported cost savings from IBM Patient Portal’s automated and more efficient collections process by reducing the cost to collect on outstanding accounts using manual processes. Assuming for the purpose of this analysis the Web portal led to an annual increase in revenue collected to amount to $1.2 million representing approximately 10,000 collections from patients. Forrester estimates that the cost to collect each patient bill using the Web portal is $6, which is approximately 18% less than the cost to collect each bill using the manual paper-based method employed by the billing department. Table 6 indicates the net annual cost savings from this benefit, which Forrester calculated to be $10,800.

Table 6: Reduced Cost To Collect


M1 Collections channeled through portal 10,000

M2 Total value $1,200,000

M3 Average collection value M2/M1 $120

M4 Average cost to collect-% of value 5%

M5 Cost to collect M3*M4 $6

M6 Estimated reduction in cost to collect 18%

M7 Total savings M5*M1*M6 $10,800



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Total Benefits The benefits described in the tables above are summarized in Table 7 below.

Table 7: Total Benefits

Benefit Year 1 Year 2 Year 3 Total Present value

Increased revenue from Web-based channel $216,000 $216,000 $216,000 $648,000 $537,160

Reduced burden on call center operations $200,000 $200,000 $200,000 $600,000 $497,370

Reduced cost to collect $10,800 $10,800 $10,800 $32,400 $26,858

Total savings $426,800 $426,800 $426,800 $1,280,400 $1,061,388


Risk Risk is the third component within the TEI model; it is used as a filter to capture the uncertainty surrounding different cost and benefit estimates. If a risk-adjusted ROI still demonstrates a compelling business case, it raises confidence that the investment is likely to succeed because the risks that threaten the project have been taken into consideration and quantified. The risk-adjusted numbers should be taken as “realistic” expectations, since they represent the expected values considering risk. In general, risks affect costs by raising the original estimates, and they affect benefits by reducing the original estimates.

For the purpose of this analysis, Forrester risk-adjusts cost and benefit estimates to better reflect the level of uncertainty that exists for each estimate. The TEI model uses a triangular distribution method to calculate risk-adjusted values. To construct the distribution, it is necessary to first estimate the low, most likely, and high values that could occur within the current environment. The risk-adjusted value is the mean of the distribution of those points.

For example, in the case of the benefit calculation for reduced cost to collect (see Table 6); the $10,800 annual benefit value used in this analysis can be considered the “most likely” value. This benefit will vary based on the actual cost to collect using a manual process and the number of hours spent by the billing specialists in tracking down delinquent payments. Since variability in the estimated cost reduction takes into account each of these factors, a high and a low estimate are used instead of the more complex triangular distribution to estimate risk.

This method typically has the effect of increasing the cost estimates to take into account the fact that original cost estimates are more likely to be revised upward than downward, while it has the opposite effect on benefits — risk adjustments for benefits reduce the original benefits estimates — resulting in a conservative filter for financial assumptions. The end result is a lower risk-adjusted ROI than the original ROI estimate.

The following tables show the values used to adjust for uncertainty in cost and benefit estimates. Different costs and benefits estimates have different levels of risk adjustments. Readers are urged


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to apply their own risk ranges based on their own degrees of confidence in the cost and benefit estimates.

Costs

Scale Of Billing Module As described earlier, the costs described in this study only focus on the costs related to the billing module of the portal. Certain costs such as licensing fees and hardware costs are shared costs that cannot easily be attributed to a single module or functionality. However, based on discussions with Duke Medicine, Forrester calculated the cost of implementing the billing module by estimating the percentage of the functionality billing is expected to make up of the entire portal. The most likely value is estimated to be 30%, but it can range from a low of 25% to a high of 50%. Because of this variability, the risk-adjusted costs of portal licensing fees and professional services costs can be lower or higher depending on the scale of the billing module.

Project Management All implementation projects run the risk that a proposed technology investment may deviate from original resource requirements needed to implement and integrate the investment, resulting in higher costs than anticipated. Although Forrester’s original estimate of 1,400 hours is conservative already, the number of actual internal resources needed to implement the IBM Patient Portal can vary depending on the complexity of the needs of the customer, maturity of the underlying technical architecture, and quality and quantity of data being fed into the portal. Because of this, implementing the IBM Patient Portal may require up to 1,600 hours of internal implementation support, leading to higher internal implementation costs.

Internal Training From interviews with the customer, Forrester estimated 4 hours needed to train a call center professional on the use and support of the IBM Patient Portal. Since up to 6 hours of training may be needed for more complex or feature-rich portals, the actual internal training costs may be higher.

Site Maintenance And Support Duke Medicine allocated a single FTE for ongoing site maintenance and support. However, given the number of change requests and ongoing development post implementation, 1.5 FTEs could be allocated for this activity.

Customer Support Forrester’s estimate of fielding an end user customer support call is $15, which is based on industry averages from Forrester’s research. However, this cost may be as high as $20 for some organizations.

Total Costs Taking into account the risk associated with each cost category, Forrester has assigned the following risk adjustments to the original cost estimates.


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Table 8: Cost Risk Adjustments

Cost Risk adjustment

Portal licensing fees 109%

Hardware 100%

Professional services 117%

Internal implementation 105%

Training 117%

License maintenance fees 117%

Site development and support costs 117%

Continuing education for support staff costs 100%

Customer support 111%


The three-year risk-adjusted costs are summarized in the following table.

Table 9: Total Risk-Adjusted Costs

Cost Initial Year 1 Year 2 Year 3 Total Present value

Portal licensing fees $105,000 $105,000 $105,000

Hardware $100,000 $100,000 $100,000

Professional services $105,000 $105,000 $105,000

Internal implementation $146,667 $146,667 $146,667

Initial training $18,667 $18,667 $18,667

License maintenance fees $22,400 $22,400 $22,400 $67,200 $55,705

Site development and support costs $81,667 $81,667 $81,667 $245,000 $203,093

Continuing education for support staff costs $8,000 $8,000 $8,000 $24,000 $19,895

Customer support $125,000 $125,000 $113,636


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Total cost $475,333 $237,067 $112,067 $112,067 $936,533 $867,663


Benefits

Uncollected Revenue From Patient Bills In quantifying the benefit of increased revenue from Web-based channels, the original estimate of 18% of total revenue from patient bills as uncollected may be very different for the organizations with differences in the number of automated billing systems already in place, the efficiency of manual processes that handle billing, and patient demographics. Since this percentage can range from 10% to 20%, the actual increase in revenue of uncollected revenue from patient bills will be different.

Reduced Burden On Call Center Operations Duke Medicine witnessed a 50% reduction in the number of peak calls during the winter post-implementation. Since other organizations may experience a less significant reduction, Forrester’s risk-adjustment reduction to 47% decreases the net savings an organization is likely to experience from this benefit.

Reduced Cost To Collect The customer organization’s estimated reduction in the cost to collect via IBM Patient Portal was 18%. However, Forrester realizes that other organizations implementing the patient portal may witness a lower reduction in the cost to collect, yielding a more conservative amount in annual cost savings from this benefit.

Total Benefits Taking into account the risk associated with each benefit category, Forrester has assigned the following risk adjustments to the original benefit estimates.

Table 10: Benefit Risk Adjustments

Benefit Risk adjustment

Increased revenue from Web-based channel 89%

Estimated reduction in calls 93%

Cost per call 89%



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The three-year risk-adjusted benefits are summarized in the following table.

Table 11: Total Risk-Adjusted Benefits

Benefit Year 1 Year 2 Year 3 Total Present value

Increased revenue from Web-based channel $192,000 $192,000 $192,000 $576,000 $477,476

Reduced burden on call center operations $186,667 $186,667 $186,667 $560,000 $464,212

Reduced cost to collect $9,600 $9,600 $9,600 $28,800 $23,874

Total savings $196,267 $196,267 $196,267 $588,800 $488,086


Flexibility Flexibility, as defined by Forrester’s TEI methodology, represents an investment in additional capacity or capability today that could be turned into future business benefits for some future additional cost. Flexibility benefits typically increase with the scalability of the technology investment. This provides an organization with the “right” or the ability to engage in future initiatives but not the obligation to do so.

As explained earlier, an important and useful by-product of the IBM Patient Portal is an advanced technology platform and associated infrastructure that allows an organization to add additional functionality and services easily over time. Because the platform is a services-oriented architecture (SOA) solution based on J2EE and industry-specific Web services, organizations can rapidly add new services to the enterprise platform. At the time of this writing, Duke Medicine was building off of its successful implementation of the billing module of IBM Patient Portal by adding the following features:

• Appointment reminders.

Access to Outpatient Lab Results / Clinical Information, which Duke Medicine just put into production now.

Express Check-In allowing patients to complete registration and forms prior to their visit and the use of kiosk in clinics.

Scheduling management that allows patients to cancel and schedule their own appointments on-line. Duke Medicine is currently implementing this functionality in an effort to reduce the number of calls associated with appointment scheduling with primary care physicians.

Portal governance

Referral Management


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Secure doctor to patient communication including eVisits

Patient education

• Prescription renewal

Since the potential benefits significantly improve the quality and scalability of the corporate Web infrastructure, Forrester believes that the range of flexibility options available to an organization is only limited by what it can do with better consolidated and more accurate data accessible on an easily scalable platform.

TEI Framework: Summary Considering the financial framework constructed above, the results of the costs, benefits, risk, and flexibility sections using the representative numbers can be used to determine a return on investment, net present value, and payback period. Table 12 shows the consolidation of the original estimates and risk-adjusted values for the customer organization.

Table 12: Customer Organization ROI, Original And Risk-Adjusted

Original Risk-adjusted

Total cost (PV) $785,995 $867,663

Total savings (PV) $1,061,388 $965,562

Net impact (PV) $275,393 $97,899

ROI 35% 11%

NPV $275,393 $97,899

IRR 40% 20%

Payback (years) 1.68 2.17


It is important to note that values used throughout the TEI Framework are based on in-depth interviews with Duke Medicine. Forrester makes no assumptions as to the potential return that other organizations will receive within their own environment. Forrester strongly advises that readers use their own estimates within the framework provided in this study to determine the expected financial impact of implementing IBM Patient Portal.


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Study Conclusions Forrester’s in-depth interviews with Duke Medicine yielded several important observations:

• Based on information collected in interviews with Duke Medicine, Forrester found that organizations can quickly realize benefits in the form of increased revenue from improved streamlined collections, cost savings from reduced burden on call center operations, and improved collection efficiency. Organizations can also expect to realize more significant, albeit long-term, benefits in the form of increased patient satisfaction and higher retention rates and an improvement in the quality of data through consolidation across corporate silos.

• Despite the high initial investment, the IBM Patient Portal provides a healthy ROI and a relatively quick payback. The rapid implementation time leads to fast benefit accrual.

• The IBM Patient Portal is a highly scalable solution that offers organizations seemingly limitless options to easily and quickly develop additional systems and processes around an advanced technical platform.

The financial analysis provided in this study illustrates the potential way an organization can evaluate the value proposition of IBM Patient Portal. Based on information collected from the in-depth customer interviews, Forrester calculated a three-year risk-adjusted ROI of 11% for this customer with a payback period of about two years. All final estimates are risk adjusted to incorporate potential uncertainty in the calculation of costs and benefits.

Based on these findings, companies looking to implement IBM Patient Portal can see substantial increases in revenue and cost savings. Using the TEI framework, many companies may find the potential for a compelling business case to make such an investment.


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Appendix A: Customer Organization Description Duke Medicine is a consortium that integrates the Duke University Health System, the Duke University School of Medicine, and the Duke University School of Nursing. All three institutions are highly regarded for their quality of care and attention to research. Of these, Duke University Health System is the largest, with $1.7 billion in annual revenues and 12,037 full-time employees. It treats 60,935 inpatients and 1,417,723 outpatients and conducts 83,959 surgical procedures throughout the year.

Duke Medicine provides a complete range of medical and surgical specialties to meet patient needs across several academic and community facilities in the central North Carolina area. Many of its clinical programs are regarded as among the very best.

Duke UniversityHospital

Duke UniversityMedical Center

(Entities historically centeredon the Duke Campus)

School of Medicine(including the educational programs

for Physician Assistant, Physical Therapy, etc. the research efforts of all School of Medicine Faculty, and

the Duke Clinical Research Institute)

School of Nursing

Duke University Health System(Includes entities below)

Duke Health Raleigh Hospital

Durham Regional Hospital

Patient Revenue Management Org.

DUHS Labs

Duke Health Community Care

Duke Univ. Affiliated Physicians

Private Diagnostic Clinic(The Private Diagnostic Clinic, PLLC,

is a for profit physician practice owned by the faculty of Duke

University School of Medicine)

In purchasing the IBM Healthcare Portal, Duke Medicine’s main objectives were to reduce costs on inefficient activities while improving patient satisfaction and service levels through better and more efficient use of its resources. A major criterion for achieving these objectives was to put in place an integrated portal for patients, doctors, and administrators running off of an enterprise platform that could interconnect the disparate clinical systems.


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Appendix B: Total Economic Impact™ Overview Total Economic Impact is a methodology developed by Forrester Research that enhances a company’s technology decision-making processes and assists vendors in communicating the value proposition of their products and services to clients. The TEI methodology helps companies demonstrate, justify, and realize the tangible value of IT initiatives to both senior management and other key business stakeholders.

The TEI methodology consists of four components to evaluate investment value: benefits, costs, risks, and flexibility. For the purpose of this analysis, the impact of flexibility was not quantified.

Benefits Benefits represent the value delivered to the user organization — IT and/or business units — by the proposed product or project. Often product or project justification exercises focus just on IT cost and cost reduction, leaving little room to analyze the effect of the technology on the entire organization. The TEI methodology and the resulting financial model place equal weight on the measure of benefits and the measure of costs, allowing for a full examination of the effect of the technology on the entire organization. Calculation of benefit estimates involves a clear dialogue with the user organization to understand the specific value that is created. In addition, Forrester also requires that there be a clear line of accountability established between the measurement and justification of benefit estimates after the project has been completed. This ensures that benefit estimates tie back directly to the bottom line.

Costs Costs represent the investment necessary to capture the value, or benefits, of the proposed project. IT or the business units may incur costs in the forms of fully burdened labor, subcontractors, or materials. Costs consider all the investments and expenses necessary to deliver the proposed value. In addition, the cost category within TEI captures any incremental costs over the existing environment for ongoing costs associated with the solution. All costs must be tied to the benefits that are created.

Risk Risk measures the uncertainty of benefit and cost estimates contained within the investment. Uncertainty is measured in two ways: the likelihood that the cost and benefit estimates will meet the original projections and the likelihood that the estimates will be measured and tracked over time. TEI applies a probability density function known as “triangular distribution” to the values entered. At a minimum, three values are calculated to estimate the underlying range around each cost and benefit.

Flexibility Within the TEI methodology, direct benefits represent one part of the investment value. While direct benefits can typically be the primary way to justify a project, Forrester believes that organizations should be able to measure the strategic value of an investment. Flexibility represents the value that can be obtained for some future additional investment building on top of the initial investment already made. For instance, an investment in an enterprisewide upgrade of an office productivity suite can potentially increase standardization (to increase efficiency) and reduce licensing costs. However, an embedded collaboration feature may translate to greater worker productivity if activated. The collaboration can only be used with additional investment in training at some future point in time. However, having the ability to capture that benefit has a present value that can be estimated. The flexibility component of TEI captures that value.


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Appendix C: Glossary Discount rate: The interest rate used in cash flow analysis to take into account the time value of money. Although the Federal Reserve Bank sets a discount rate, companies often set a discount rate based on their business and investment environment. Forrester assumes a yearly discount rate of 10% for this analysis. Organizations typically use discount rates between 8% and 16% based on their current environment. Readers are urged to consult their organization to determine the most appropriate discount rate to use in their own environment.

Net present value (NPV): The present or current value of (discounted) future net cash flows given an interest rate (the discount rate). A positive project NPV normally indicates that the investment should be made, unless other projects have higher NPVs.

Present value (PV): The present or current value of (discounted) cost and benefit estimates given at an interest rate (the discount rate). The PV of costs and benefits feed into the total net present value of cash flows.

Payback period: The breakeven point for an investment. The point in time at which net benefits (benefits minus costs) equal initial investment or cost.

Return on investment (ROI): A measure of a project’s expected return in percentage terms. ROI is calculated by dividing net benefits (benefits minus costs) by costs.

A Note On Cash Flow Tables The following is a note on the cash flow tables used in this study. The initial investment column contains costs incurred at “time 0” or at the beginning of Year 1. Those costs are not discounted. All other cash flows in Years 1 through 3 are discounted using a discount rate at the end of the year. Present value (PV) calculations are calculated for each total cost and benefit estimate. Net present value (NPV) calculations are not calculated until the summary tables and are the sum of the initial investment and the discounted cash flows in each year.

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