Estimating Cost of an Activity: EHR Farrokh Alemi, Ph.D. Lee Baliton

Estimating Cost of an Estimating Cost of an Activity: EHRActivity: EHR

Farrokh Alemi, Ph.D.Farrokh Alemi, Ph.D.

Lee Baliton Lee Baliton

Course on Project Management

Cost of Electronic Health Cost of Electronic Health RecordRecord

Purchase costPurchase cost True costTrue cost


Cost of Electronic Health Cost of Electronic Health RecordRecord Software licensesSoftware licenses Master patient indexMaster patient index Pharmacy linkPharmacy link Drug-drug interaction decision aidDrug-drug interaction decision aid Laboratory implementationLaboratory implementation Outpatient implementationOutpatient implementation HardwareHardware Network infrastructureNetwork infrastructure Yearly support and maintenanceYearly support and maintenance TrainingTraining


Cost of Electronic Health Cost of Electronic Health RecordRecord Software licensesSoftware licenses Master patient indexMaster patient index Pharmacy linkPharmacy link Drug-drug interaction decision aidDrug-drug interaction decision aid Laboratory implementationLaboratory implementation Outpatient implementationOutpatient implementation HardwareHardware Network infrastructureNetwork infrastructure Yearly support and maintenanceYearly support and maintenance TrainingTraining



Cost of buildingCost of building Cost of personnelCost of personnel Cost of operationCost of operation Cost of insuranceCost of insurance Cost of management & other Cost of management & other

overheadsoverheads Cost of financingCost of financing



Cost of buildingCost of building Cost of personnelCost of personnel Cost of operationCost of operation Cost of insuranceCost of insurance Cost of management & other Cost of management & other

overheadsoverheads



Impact on productivityImpact on productivity



Purchase costPurchase cost Economic cost Economic cost Impact on productivityImpact on productivity


True Cost Depend on Many True Cost Depend on Many FactorsFactors

Size of operationSize of operation Number of patientsNumber of patients Number of cliniciansNumber of clinicians

Location of clinicLocation of clinic Property valuesProperty values Network infrastructureNetwork infrastructure

Local area wagesLocal area wages Management of the organizationManagement of the organization


Project Manager’s Cost Project Manager’s Cost Estimation ProblemEstimation Problem

True cost are hiddenTrue cost are hidden Cost are over timeCost are over time Cost depend on many factorsCost depend on many factors Cost depend on events outside Cost depend on events outside

of organizationof organization Scope of project changes over Scope of project changes over

timetime





timetime





timetime





timetime





timetime


Approaches to Cost Approaches to Cost EstimationEstimation

Statistical analysis of cost Statistical analysis of cost across organizationsacross organizations

Unit cost for quantitiesUnit cost for quantities Bottom upBottom up

Activity Based CostingActivity Based Costing Top downTop down











Some costs maybe missed






Cost of time of training personnel

.vs.Cost of time of employees

going through training










Activity Based Costing (ABC)Activity Based Costing (ABC) Top downTop down


Example of Unit Cost of Example of Unit Cost of QuantitiesQuantities

1500 patients/day1500 patients/day 365 days/year365 days/year $55/Hour pay for Administration$55/Hour pay for Administration 15 minutes/visit15 minutes/visit $250 reimbursement/visit$250 reimbursement/visit

Cost of an EHR Depends on Size of the Operations

Based on Calaudine Beron’s lecture in 2007



Costs of Total Year 1 Year 2 Year 3 Year 4 Year 5

Internet/Network 212,000 17,667 8,833 5,889 4,417 3,533






Software 200,000 16,667 8,333 5,556 4,167 3,333






Software 200,000 16,667 8,333 5,556 4,167 3,333

Hardware 425,000 17,708 17,708 11,806 8,854 7,083






Software 200,000 16,667 8,333 5,556 4,167 3,333

Hardware 425,000 17,708 17,708 11,806 8,854 7,083

Implementation 652,000 27,167 27,167 18,111 13,583 10,867






Software 200,000 16,667 8,333 5,556 4,167 3,333

Hardware 425,000 17,708 17,708 11,806 8,854 7,083

Implementation 652,000 27,167 27,167 18,111 13,583 10,867

Maintenance 15,000 625 625 417 313 250






Software 200,000 16,667 8,333 5,556 4,167 3,333

Hardware 425,000 17,708 17,708 11,806 8,854 7,083

Implementation 652,000 27,167 27,167 18,111 13,583 10,867

Maintenance 15,000 625 625 417 313 250

Training 200,000 8,333 8,333 5,556 4,167 3,333






Software 200,000 16,667 8,333 5,556 4,167 3,333

Hardware 425,000 17,708 17,708 11,806 8,854 7,083

Implementation 652,000 27,167 27,167 18,111 13,583 10,867

Maintenance 15,000 625 625 417 313 250

Training 200,000 8,333 8,333 5,556 4,167 3,333

Total cost 1,492,000 88,167 70,999 47,335 35,501 28,399





Software 200,000 16,667 8,333 5,556 4,167 3,333

Hardware 425,000 17,708 17,708 11,806 8,854 7,083

Implementation 652,000 27,167 27,167 18,111 13,583 10,867

Maintenance 15,000 625 625 417 313 250

Training 200,000 8,333 8,333 5,556 4,167 3,333

Total cost 1,492,000 88,167 70,999 47,335 35,501 28,399

A lot is missing





Software 200,000 16,667 8,333 5,556 4,167 3,333

Hardware 425,000 17,708 17,708 11,806 8,854 7,083

Implementation 652,000 27,167 27,167 18,111 13,583 10,867

Maintenance 15,000 625 625 417 313 250

Training 200,000 8,333 8,333 5,556 4,167 3,333

Total cost 1,492,000 88,167 70,999 47,335 35,501 28,399

Building cost





Software 200,000 16,667 8,333 5,556 4,167 3,333

Hardware 425,000 17,708 17,708 11,806 8,854 7,083

Implementation 652,000 27,167 27,167 18,111 13,583 10,867

Maintenance 15,000 625 625 417 313 250

Training 200,000 8,333 8,333 5,556 4,167 3,333

Total cost 1,492,000 88,167 70,999 47,335 35,501 28,399

Over head cost





Software 200,000 16,667 8,333 5,556 4,167 3,333

Hardware 425,000 17,708 17,708 11,806 8,854 7,083

Implementation 652,000 27,167 27,167 18,111 13,583 10,867

Maintenance 15,000 625 625 417 313 250

Training 200,000 8,333 8,333 5,556 4,167 3,333

Total cost 1,492,000 88,167 70,999 47,335 35,501 28,399

Management cost





Software 200,000 16,667 8,333 5,556 4,167 3,333

Hardware 425,000 17,708 17,708 11,806 8,854 7,083

Implementation 652,000 27,167 27,167 18,111 13,583 10,867

Maintenance 15,000 625 625 417 313 250

Training 200,000 8,333 8,333 5,556 4,167 3,333

Total cost 1,492,000 88,167 70,999 47,335 35,501 28,399

Vacation time





Software 200,000 16,667 8,333 5,556 4,167 3,333

Hardware 425,000 17,708 17,708 11,806 8,854 7,083

Implementation 652,000 27,167 27,167 18,111 13,583 10,867

Maintenance 15,000 625 625 417 313 250

Training 200,000 8,333 8,333 5,556 4,167 3,333

Total cost 1,492,000 88,167 70,999 47,335 35,501 28,399

Retirement benefits





Software 200,000 16,667 8,333 5,556 4,167 3,333

Hardware 425,000 17,708 17,708 11,806 8,854 7,083

Implementation 652,000 27,167 27,167 18,111 13,583 10,867

Maintenance 15,000 625 625 417 313 250

Training 200,000 8,333 8,333 5,556 4,167 3,333

Total cost 1,492,000 88,167 70,999 47,335 35,501 28,399



Jac ValancyJac Valancy Family physician clinicFamily physician clinic

How Much Will That EMR System Really Cost? By Jack Valancy, MBA



Hardware DescriptionInitial Unit

cost QuantityYear

1Years

2-5

Servers Main server $12,324 1 $1,107 $1,476

Backup server $11,874 1 $1,071 $1,428

Data storage RAID array $3,523 1 $315 $420

Data backup DAT drive and cartridges

$2,155 1 $0 $2,580

Input devices Desktop computers $987 6

Laptop computers $1,582 3 $282 $564

Printers Laser $1,545 1

Inkjet $359 2

Other Scanner $250 1

Network Router & switches $2,587 1

Cable installation $1,500 1




HardwareDescription

Initial Unit cost Quantity

Year 1

Years 2-5

Servers Main server $12,324 1 $1,107 $1,476

Backup server $11,874 1 $1,071 $1,428

Data storage RAID array $3,523 1 $315 $420

Data backup DAT drive and cartridges $2,155 1 $0 $2,580

Input devices Desktop computers $987 6

Laptop computers $1,582 3 $282 $564

Printers Laser $1,545 1

Inkjet $359 2

Other Scanner $250 1

Network Router & switches $2,587 1

Cable installation $1,500 1





Software DescriptionInitial

Unit cost Quantity Year 1Years

2-5

Operating system Unix $249 1 $0 $288

Applications EMR application $12,000 1 $720 $1,440

Interface modules $2,000 2




DescriptionInitial

Unit cost Quantity Year 1Years

2-5

Training Staff travel $500 2

Interface(s) Vendor time $50 16

Ongoing data entry Scan in data from other sources

$8 500 $2,000 $2,000




Initial Year 1 Year 2 Year 3 Year 4 Year 5

Date paid 01/01/02 07/01/02 07/01/03 07/01/04 07/01/05 07/01/06

Amount $71,020 $7,283 $11,984 $11,984 $11,984 $11,984




Initial Year 1 Year 2 Year 3 Year 4 Year 5

Date paid 01/01/02 07/01/02 07/01/03 07/01/04 07/01/05 07/01/06

Amount $71,020 $7,283 $11,984 $11,984 $11,984 $11,984

Net Present Value$73,973


Is this cost analysis accurate?Is this cost analysis accurate?

YesYes NoNo



YesYes NoNo



YesYes NoNo

We cannot always be active, sometimes we have to be idle to get ready for next task.



YesYes NoNo

Time before and after a call


Example of Activity Based Example of Activity Based CostingCosting

Top downTop down Includes costs typically missedIncludes costs typically missed

No showNo show VacationVacation Retirement benefitsRetirement benefits



240 200 760

Visits Visits Visits

Laboratory Radiology Dr. A Dr. B Dr. C

Direct $1,500 $600 $500 $400

Payroll Adm $1,000 $119 $39 $337 $254 $251

Supervision $2,000 $238 $79 $673 $508 $502

Advertising $600 $200 $200 $200

Rent $1,000 $125 $125 $250 $250 $250

Utilities $200 $25 $25 $50 $50 $50

Office supplies $300 $100 $100 $100

Insurance $100 $12 $13 $25 $25 $25

Telephone $600 $200 $200 $200

Equipment $300 $100 $100 $100

Cost per visit 1111 1111 33

Adapted from Schuneman P. Master the 'ABCs' of Activity-Based Costing MANAGED CARE May 1997. ©1997 Stezzi Communications

Sa

laries



240 200 760



Direct $1,500 $600 $500 $400

Payroll Adm $1,000 $119 $39 $337 $254 $251

Supervision $2,000 $238 $79 $673 $508 $502

Advertising $600 $200 $200 $200

Rent $1,000 $125 $125 $250 $250 $250

Utilities $200 $25 $25 $50 $50 $50


Insurance $100 $12 $13 $25 $25 $25

Telephone $600 $200 $200 $200

Equipment $300 $100 $100 $100



Sa

laries



240 200 760



Direct $1,500 $600 $500 $400

Payroll Adm $1,000 $119 $39 $337 $254 $251

Supervision $2,000 $238 $79 $673 $508 $502

Advertising $600 $200 $200 $200

Rent $1,000 $125 $125 $250 $250 $250

Utilities $200 $25 $25 $50 $50 $50


Insurance $100 $12 $13 $25 $25 $25

Telephone $600 $200 $200 $200

Equipment $300 $100 $100 $100



Sa

laries



240 200 760



Direct $1,500 $600 $500 $400

Payroll Adm $1,000 $119 $39 $337 $254 $251

Supervision $2,000 $238 $79 $673 $508 $502

Advertising $600 $200 $200 $200

Rent $1,000 $125 $125 $250 $250 $250

Utilities $200 $25 $25 $50 $50 $50


Insurance $100 $12 $13 $25 $25 $25

Telephone $600 $200 $200 $200

Equipment $300 $100 $100 $100



Sa

laries



240 200 760



Direct $1,500 $600 $500 $400

Payroll Adm $1,000 $119 $39 $337 $254 $251

Supervision $2,000 $238 $79 $673 $508 $502

Advertising $600 $200 $200 $200

Rent $1,000 $125 $125 $250 $250 $250

Utilities $200 $25 $25 $50 $50 $50


Insurance $100 $12 $13 $25 $25 $25

Telephone $600 $200 $200 $200

Equipment $300 $100 $100 $100



Sa

laries



240 200 760



Direct $1,500 $600 $500 $400

Payroll Adm $1,000 $119 $39 $337 $254 $251

Supervision $2,000 $238 $79 $673 $508 $502

Advertising $600 $200 $200 $200

Rent $1,000 $125 $125 $250 $250 $250

Utilities $200 $25 $25 $50 $50 $50


Insurance $100 $12 $13 $25 $25 $25

Telephone $600 $200 $200 $200

Equipment $300 $100 $100 $100



Sa

laries



240 200 760



Direct $1,500 $600 $500 $400

Payroll Adm $1,000 $119 $39 $337 $254 $251

Supervision $2,000 $238 $79 $673 $508 $502

Advertising $600 $200 $200 $200

Rent $1,000 $125 $125 $250 $250 $250

Utilities $200 $25 $25 $50 $50 $50


Insurance $100 $12 $13 $25 $25 $25

Telephone $600 $200 $200 $200

Equipment $300 $100 $100 $100



Sa

laries



240 200 760



Direct $1,500 $600 $500 $400

Payroll Adm $1,000 $119 $39 $337 $254 $251

Supervision $2,000 $238 $79 $673 $508 $502

Advertising $600 $200 $200 $200

Rent $1,000 $125 $125 $250 $250 $250

Utilities $200 $25 $25 $50 $50 $50


Insurance $100 $12 $13 $25 $25 $25

Telephone $600 $200 $200 $200

Equipment $300 $100 $100 $100



Sa

laries



240 200 760



Direct $1,500 $600 $500 $400

Payroll Adm $1,000 $119 $39 $337 $254 $251

Supervision $2,000 $238 $79 $673 $508 $502

Advertising $600 $200 $200 $200

Rent $1,000 $125 $125 $250 $250 $250

Utilities $200 $25 $25 $50 $50 $50


Insurance $100 $12 $13 $25 $25 $25

Telephone $600 $200 $200 $200

Equipment $300 $100 $100 $100



Sa

laries


Example of Activity Based Example of Activity Based CostingCosting 240 200 760



Direct $1,500 $600 $500 $400

Pay Adm $1,000 $119 $39 $337 $254 $251

Supervision $2,000 $238 $79 $673 $508 $502

Advertising $600 $200 $200 $200

Rent $1,000 $125 $125 $250 $250 $250

Utilities $200 $25 $25 $50 $50 $50


Insurance $100 $12 $13 $25 $25 $25

Telephone $600 $200 $200 $200

Equipment $300 $100 $100 $100


Sa

laries


230 190 600



Direct $1,500 $600 $500 $400

Payroll Admin $333 $40 $13 $112 $85 $83

Supervision $2,000 $238 $79 $673 $508 $502

Advertising $600 $200 $200 $200

Rent $1,000 $125 $125 $250 $250 $250

Utilities $220 $25 $25 $50 $50 $70


Building insurance $100 $12 $13 $25 $25 $25

Telephone $700 $200 $200 $300

Equipment $1,300 $200 $400 $700

Cost per visit $10 $12 $4


Sa

laries


230 190 600



Direct $1,500 $600 $500 $400

Payroll Admin $333 $40 $13 $112 $85 $83

Supervision $2,000 $238 $79 $673 $508 $502

Advertising $600 $200 $200 $200

Rent $1,000 $125 $125 $250 $250 $250

Utilities $220 $25 $25 $50 $50 $70



Telephone $700 $200 $200 $300

Equipment $1,300 $200 $400 $700



Sa

laries


230 190 600



Direct $1,500 $600 $500 $400

Payroll Admin $333 $40 $13 $112 $85 $83

Supervision $2,000 $238 $79 $673 $508 $502

Advertising $600 $200 $200 $200

Rent $1,000 $125 $125 $250 $250 $250

Utilities $220 $25 $25 $50 $50 $70



Telephone $700 $200 $200 $300

Equipment $1,300 $200 $400 $700



Sa

laries

A cost saving

of $1/visit


230 190 600



Direct $1,500 $600 $500 $400

Payroll Admin $333 $40 $13 $112 $85 $83

Supervision $2,000 $238 $79 $673 $508 $502

Advertising $600 $200 $200 $200

Rent $1,000 $125 $125 $250 $250 $250

Utilities $220 $25 $25 $50 $50 $70



Telephone $700 $200 $200 $300

Equipment $1,300 $200 $400 $700



Sa

laries

A cost increase

of $1/visit


230 190 600



Direct $1,500 $600 $500 $400

Payroll Admin $333 $40 $13 $112 $85 $83

Supervision $2,000 $238 $79 $673 $508 $502

Advertising $600 $200 $200 $200

Rent $1,000 $125 $125 $250 $250 $250

Utilities $220 $25 $25 $50 $50 $70



Telephone $700 $200 $200 $300

Equipment $1,300 $200 $400 $700



Sa

laries

A cost increase

of $1/visit


230 190 600



Direct $1,500 $600 $500 $400

Payroll Admin $333 $40 $13 $112 $85 $83

Supervision $2,000 $238 $79 $673 $508 $502

Advertising $600 $200 $200 $200

Rent $1,000 $125 $125 $250 $250 $250

Utilities $220 $25 $25 $50 $50 $70



Telephone $700 $200 $200 $300

Equipment $1,300 $200 $400 $700



Sa

laries

Accounts for all costsShows impact of volume changes

Take Home LessonTake Home Lesson

Activity Based Costing is an effective Activity Based Costing is an effective method of monitoring cost of electronic method of monitoring cost of electronic

health recordshealth records

Documents

Estimating Cost of an Activity: EHR Farrokh Alemi, Ph.D. Lee Baliton