OR directors and business managers alike are expected to have the tools to develop and present an effective business plan for new services, facilities, equipment, technology, and supplies or staff; however, surgery programs are extensive and fraught with complexities. As programs grow and change over time, investments are often required. In order to obtain the investment, a justification or business case must be developed and clearly communicated. Most perioperative leaders are not versed in or trained to answer the tough financial questions presented when trying to garner investment for new programs or technology or how to strike a balance between stakeholders.
Balancing Competing Demands
OR Directors continue to face competing demands. Surgeons and other providers demand the latest and greatest in technology and supplies, while the hospital and finance push harder and harder to reduce costs and constrain spending as volume increases. Many perioperative leaders are highly skilled clinicians with little training in business or finance. When asked to justify an investment prior to approval, they are often left with “the surgeons want it” as the business case. They are then presented by the administration with concepts of cost/benefit analysis, break-even point, revenue impact, risk mitigation strategies, and other financial analytic concepts that are akin to a foreign language.
Understand why business cases are necessary today, the essential elements of a business case and how to develop each of them.
Making the Case, the Business Case
Put simply, a business case is a formalized statement that delineates the costs, revenues, benefits and risks of any investment, such as new/renovated facilities, services or programs, equipment, technology, supplies and staffing.
A business case is usually made at the department level and should not be used interchangeably with a business plan. Business plans differ from a business case and are larger documents used to describe a major initiative or the strategy of an entire organization. Both tools support decision-making and planning but each serves a different purpose and answers different questions.
Components of a Well-Designed Business Case
- Executive Summary
- Project Outline
- Project Timeline
- Potential Risks
- Detailed Costs
- Return-on-investment (ROI)
- Final Recommendation
How Do Business Cases Vary for Different Types of Investments?
The depth of analysis that is documented in support of your case will be based on the size and complexity of the total investment. The larger the investment, the more in-depth and robust the business case will need to be. For example, an investment of $5M or less may be more straightforward than the business case for an investment of $500M or more. Some investments are easy to justify with clear returns, little risk, and clear costs. Others may have a more qualitative return, perhaps the most difficult return to quantify and justify is the “better patient care” or “improved quality” benefits of many investments.
While quality and patient care must be taken into account and delineated whenever possible, from a business case standpoint it can be difficult to assign a “value” to these benefits.
Common Mistakes & Errors in Business Cases
- The business case vision wasn’t communicated across the organization
- Stakeholders did not provide buy-in
- Ignoring personnel costs
- Underestimating time to completion
- Failed to develop governance framework to support the project through each stage and ensure that benefits are realized
A well-documented business case will provide confidence and a level of certainty that the considered proposal will be successful, enabling leaders to make confident investment decisions.
Realistic, Achievable & Sustainable Outcomes
Sullivan Healthcare Consultants (SHC) is a team of seasoned, leading-edge perioperative experts who help healthcare organizations manage to higher margins by optimizing surgical services.
Our process is straightforward: assess and benchmark all perioperative services and their interdependencies, clearly identify what isn’t working, build consensus for a best-practice-based solution, and help all stakeholders work together to correct it. SHC recommendations are always realistic, achievable and sustainable over the long haul.
Find out how our perioperative consultants can move your organization forward and increase operational efficiency. Contact our team of experts today.