Cost Benefit analysis.pptx

Cost Benefit analysis

1. COST-BENEFIT ANALYSIS PRESENTED BY:- SARTHAK GUPTA AVI KAPOOR MAYANK NARANG HARSH CHAUDHARY

2. introduction A cost benefit analysis(CBA) is an economic evaluation technique that measures all the positive (beneficial) and negative (costly) consequences of an program in monetary terms. The model is built by identifying the benefits of an action as well as the associated costs, and subtracting the costs from benefits Cost is value of money that has been used up to produce something . Benefit are monetary values of desirable consequences of economic policies and decisions.

3. Benefits > cost  Acquire the information Benefits < cost  Not advised to Acquire the information Benefits = cost  Depends on decision of the organization

4. COST BENEIT ANALYSIS QUANTITATIVE ASPECTS QUALITATIVE ASPECTS

5. QUANTITATIVE ASPECTS Quantitative aspects is related to cost of the information. Various cost related in acquiring information are: Hardware Cost: This is normally a fixed or one time cost over a relevant range. Operational Cost: This is basically a variable cost and includes cost of personnel, system maintenance, supplies and support facilities. System Analysis, Design and implementation cost: This is also one time cost. This should include cost for preparation of programs and purchase of software. Cost of space and Environmental Control Factors: this cost may vary time to time. Examples: floor space, air-conditioning, generator , security.

6. QUALITATIVE ASPECTS Value of information is a very slippery concept as information does not have any universal value. Any assessment of the value of information is therefore related to value of the decision- making supported by such information. Value of information may be defined as difference b/w value of change in decision pattern caused by information and cost of information. A decision maker makes decision on basis of information available to him.

7. CATEGORIES OF COST AND BENEFITS Direct cost and benefits: are often associated with an operation. Eg- Cost : cost of running computer system Benefit: increased operational ability and efficiency Indirect cost and benefits: are not associated with an operation. Eg- Cost: insurance or maintenance cost Benefit: timelier customer service Tangible cost and benefits: are easy to measure. Eg- Ex-Cost: cost of acquiring hardware Benefit: time taken to prepare report Intangible cost and benefits: are difficult to identify and measure. Eg- Ex-cost: cost incurred to fix system breakdown in bank Benefit: customer satisfaction

8. STEPS OF COST-BENEFIT ANALYSIS

9. STEP1: BRAINSTORM COSTS AND BENEFITS First , take time to brainstorm the costs associated to the project, and make a list of these. Then, do the same for all of the benefits of the project. When u come with the cost and benefits , think about the lifetime of the project.

10. STEP2: ASSIGN A MONETARY VALUE TO COSTS Cost include: the costs of physical resources (raw materials) as well as the cost of the human effort involved in all phases of project. Costs are often relatively easy to estimate. For example: what will any training cost? People are learning a new system or technology and how much will this cost ?

11. STEP3: ASSIGN A MONETARY VALUE TO BENEFIT S It is often very difficult to predict revenues accurately, especially for new product/services. There are often intangible or soft ,benefits that are important outcomes of the project. For instance, what is the impact on environment, employee satisfaction or health and safety? What is monetary value of that impact?

12. STEP4: COMPARE COSTS AND BENEFITS Finally, compare values of your costs to value of your benefits and use this analysis to decide your course of action. To do this, calculate your total costs and your total benefits and compare 2 values to determine whether your benefits outweigh your cost.

13. Case Study A cost-benefit analysis of electronic medical records in primary care Purpose: Electronic medical record systems improve the quality of patient care and decrease medical errors, but their financial effects have not been as well documented. The purpose of this study was to estimate the net financial benefit or cost of implementing electronic medical record systems in primary care.

14. Methods: We performed a cost-benefit study to analyze the financial effects of electronic medical record systems in ambulatory primary care settings from the perspective of the health care organization. Data were obtained from studies at our institution and from the published literature. The reference strategy for comparisons was the traditional paper-based medical record. The primary outcome measure was the net financial benefit or cost per primary care physician for a 5-year period .

15. Results: The estimated net benefit from using an electronic medical record for a 5-year period was $86,400 per provider. Benefits accrue primarily from savings in drug expenditures, improved utilization of radiology tests, better capture of charges, and decreased billing errors. In one-way sensitivity analyses, the model was most sensitive to the proportion of patients whose care was capitated; the net benefit varied from a low of $8400 to a high of $140,100. A five-way sensitivity analysis with the most pessimistic and optimistic assumptions showed results ranging from a $2300 net cost to a $330,900 net benefit.

16. Conclusion : Implementation of an electronic medical record system in primary care can result in a positive financial return on investment to the health care organization. The magnitude of the return is sensitive to several key factors.

17. THANK YOU