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 –  Budgets  Return 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

Reliability  Personally –  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 - Acquisition  Bring 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’s  Don’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 Surprises  Communication –  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. - Cellular