ROI’s and the C-Suite

Nebraska Society of Healthcare Engineers

Friday, May 1, 2015, 10:00 – 11:00 am

Holiday Inn Conference Center

Kearney, Nebraska

Presented by Bill Luke

President, Luke and Associates, Inc.

Session Objectives

Help you succeed from the C-Suite perspective

Discuss finance needs – BudgetsReturn on Investment (ROI)

Answer your questions

What the C-Suite Needs from You

Reliability Reduce costs – Acquisition and

Operating Good Return on Investment (ROI) No surprises

ReliabilityPersonally –

Integrity, honesty, job duties get done

Your staff – Same as yours

All of your systems – Building, HVAC, electrical, controls, parking lots, etc.

Master Facility/Campus Plan (MFP) – Comprehensive and 3-5 years out Cover all systems

Compliance – Codes, regulations, The Joint Commission

Reduce Costs -Acquisition and Operating

Budgets – What are they? What is your role? Operating Expenses Capital for acquisition (purchase or lease) Cash Flow (done by Finance) Why do budgets matter? Your financial plan (some say a financial game) Pessimistic, optimistic, realistic – range of

reasonableness

Reduce Costs - AcquisitionBring in new technologies –

Declare where the item is in the product life cycle – New, proven, old, etc.

Present the benefits, and the downsides Push for realizing the full potential of applying the new

technology in your healthcare setting

Negotiate a good deal – Use acquisition support services (eg MD Buyline, GPO,

etc.) Negotiate dollars and other terms (purchase or lease)

Reduce Costs - Acquisition

Be honest and balanced – Pros and cons Principles guiding recommendations Alternatives considered The reality of trade-offs Consider all makes, styles and options, or

disclose why you didn’t

Reduce Costs - Operating

Operating expenses – Energy cost Payroll Supply costs Maintenance and upkeep Staff training and development Contract management (purchase/lease and

maintenance)

Return on Investment – ROI’s

Do the math – Be comprehensive and include all cash flows ROI – simple; can be manipulated Value of all cash flows for the project –

Net present value (NPV) or internal rate of return (IRR) – NPV is better

Payback period Breakeven analysis And more…

Return on Investment – ROI’sDon’t over-do the math

Cliché: “Figures don’t lie, but liars figure” Many ways to get wrong numbers Various ROI formulas because of various scenarios Follow the guidance of your Finance Dept Math teacher: “Show your work” – it’s good advice Formulas – quickly available on-line Computations supported in spreadsheets

No SurprisesCommunication –

Healthcare executives – the C-Suite Your peers Staff of your department(s) Vendors, suppliers, utility companies

Plan implementation – Project management goes smoothly “Change” is intentionally managed well

Questions and

Discussion

Contact information:

Bill Luke, President, Luke and Associates, Inc.

Email - bluke444@gmail.com

Cellular - 308.627.4900