Return on Investment, Budget Development and …...Calculating the Return on Investment Special thanks to Sara Sack of Assistive Technology for Kansans, Barclay Shepard of Virginia

Return on Investment, Budget Development and Measuring Outcomes

Moderator: Lindsey Bean Kampwerth, ParaquadPresenters: Joy Kniskern and Trish Redmon,

Pass It On CenterLindsey Bean Kampwerth, Paraquad

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Calculating the Return on Investment

Special thanks to Sara Sack of Assistive Technology for Kansans, Barclay Shepard of Virginia Assistive Technology System and Sonja Schaible of the FREE Foundation for their work in this area.

For more information, see Making the Business Case for AT Reuse in the Pass It On Center Webinar archive.

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Moving beyond anecdotal evidence to make the business case for reuse

The beginning: tracking volumes and equipment valuesAdding business analysis: return on investment (ROI)Considering the value of avoided outcomesCalculating societal impactsWorking toward a more comprehensive calculation

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Basic: Tracking volumesReuse projects track:

Number of usable devices donatedValue of donated devices based on MSRP or some percentage thereof Number of devices reassignedNumber of individuals servedValue of reassigned AT

Most helpful tool: a good inventory system with flexible reporting capabilities (Kansas, Paraquad, Project MEND and others)

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Using business analysisKansas led the way in recommending that programs apply a standard business practice and calculate Return on Investment.

This calculation requires only the total program expenses and the value of equipment made available for reuse.Calculation:Divide NET value (value of reused equipment minus total program expenses) by expenses to derive return percentage or return for each dollar invested.

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Cost benefit vs. return on investmentCost Benefit and ROI are similar but slightly different terms:

Cost Benefits – a general listROI – performance measure to compare efficiency of different investmentsROI/Business Case – Has stated definitions and assumptions, and yields some insights on how to improve business in the future.

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Example of simple ROIApplication of business model of return-on-investment analysis to Kansas AT reuse program in 2010:ROI: (Value of donated equipment minus program expenses) divided by program expenses

Example: $960,004 - $271,487 = $668,517divided by $271,487 = 2.46

or a return of $2.46 for each dollar invested

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Using ROI to make program decisions: Collection Drive ROI

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Collection Drive Adjusted ROI

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Collection Drive: Complex ROIIntangible benefits of the collection drive:

Increased DME provider and network partner involvement.Increased public awareness of the program resulting in increased donations and requests.

ROI-based program decision: Accept only lightly-used, high-cost or bariatric DME.

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ROI is a useful tool for:1. Making program decisions:

pickup and delivery,shipping, collection drives, methods of cleaning and sanitization (volunteers, paid staff, contractor, purchase of sanitizing equipment)

2. Measuring the impact of the use of taxes and public donations for reuse.

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Identifying avoidable healthcare costsWhat does the availability of an AT device avoid?FREE Foundation of Virginia examined what the availability of an AT device avoided in healthcare outcomes.

(More about that methodology shortly)Healthcare costs related to avoided falls:

Physician office visits, ER visitsStays in skilled nursing or assisted living facilities

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FREE assesses avoidable outcomesProblem

• 20% of Virginians were uninsured persons, no access to healthcare or needed AT

• Some insured persons unable to get needed equipment or get in a timely manner

Consequences

• Unable to recover fully

• Falls• Repeated

hospital stays, Dr. visits

• ER visits• Stays in SNFs

and ALFs• Lost wages of

patient and caregivers

Measurable Costs

• Typical office visit

• Average daily cost of hospital stay

• Average cost of an ER visit

• Cost of typical stay in SNF for recovery

• Financial impact of a job loss

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FREE’s methodologyObjectives in collecting data:

Show equipment donors the therapeutic and financial impactShow financial supporters the impact of fundingTest and monitor the service model

Surveyed AT recipients to determine if they:Had become more independentHad fewer fallsReduced number of medical visits, servicesBeen able to remain at home

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Example of FREE survey questionsYes/No and Open‐Ended Questions:

• How is the equipment working for you?

• Do you feel this equipment has increased your independence when used?

• Were you mobile (able to walk) before receiving this equipment?

• Are you mobile (able to walk) with the use of this equipment?

Quantitative Responses:

• How many falls a week did you have before receiving the equipment?

• How many falls a week are you having since you received this equipment?

• How many Emergency room visits per month did you have before receiving this equipment?

• How many Emergency room visits have you had per month since you received this equipment?

• How many Hospital stays per monthdid you have before receiving this equipment?

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No data. No money. No mission!Statistics:

– Demographics, Number of Persons Served, Devices Gifted, Savings, Diagnoses, etc.

– Who we were NOT serving (or underserved) and why?• Children, Vocationally Oriented, Less Complex – More Complex

Diagnoses,• OPPORTUNITY!

Outcomes:– FREE’s Outcome Survey

• Cost Savings, Therapeutic Benefits, Quality of Life, Opportunity Cost, etc.

Compared Virginia to AT Act Programs Nationally:– 2008 Virginia Reuse Network:

• 2,534 Individuals, 3,548 Devices, $1.2 Million– 2008 AT Act Programs:

• 24,805 Individuals, 31,069 Devices, $17.3 Million

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Other strategies: VATS uses data to sustain the reuse network

Virginia Medicaid (DMAS)– Members of AT Advisory Council– DME Pilot Program

• Collaboration among VRN, DME Vendors, DMAS• Education Medicaid Recipients about benefits of reuse• Increase inventory of gently used equipment; DME vendors

apply equipment stickers with 1-800 number

Virginia General Assembly / Governor’s Budget “Fact Sheets”

– DME reuse benefits individuals statewide– DME reuse provides significant cost savings to

communities (decreased falls, ER visits, unnecessary hospitalizations, etc.)

– Reuse programs are highly effective and provide significant ROI

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Statistics and outcomes data tell the story better!

Acceptable…• In FY 2010, the Virginia

Reuse Network served 502 individuals.

• The Virginia Reuse Network is a good steward of its money.

• The Virginia Reuse Network helps individuals with disabilities to be more independent.

Better!

• Since 2006, Virginia’s formal network of reuse programs served 6,882 Virginians with disabilities, gifting 8,585 AT devices valued at $3,208,922.

• For every $1.00 spent by FREE on its mission, $33.40 is returned to the community.

• Recipient outcome surveys show 80% -100% decrease in falls, ER visits and hospitalizations.

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Identifying avoidable societal impact

What other costs does reuse of AT avoid?Lost income due to missed work for customer or caregiverLandfill costs for disposal

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Exploring a better measure of ROIQuantitative outcomes measures use numerical data under standardized conditions

Volume tracking (donations, devices assigned, value of donated devices) – AT Act ProgramsUse of business tools, from cost-benefit to ROI analysis (Kansas)Calculation of avoided costs (e.g., lost work time avoided, healthcare expenses avoided, environmental impact minimized) based on customer follow-up: FREE Foundation/VATSCombining those and more to identify a more accurate calculation of the financial impact of reuse

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Expanding ROI analysis to include more than the value of reused equipment

Calculation of an Approximate Value of Investment in AT Reutilization

Value of Reusable

Equipment

Value of Avoided

Healthcare Costs

Environmental Impact Savings

Economic Value of Work

CAVIAR1. Sum values2. Subtract

program expenses

3. Divide result by program expenses

Improved ROI

KS: ROI VA KS, GA VA

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Compiling Values for CAVIARValue of Reusable AT

Track value of donated AT devices in a standardized manner (e.g., MSRP or a percentage thereof)

Value of PreventionUse specific healthcare costs for customer populationCollect survey data to show avoided expenditures

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Compiling values for CAVIAREnvironmental Impact Savings

Track the weight (use some standard tables for simplicity and ease of calculation) of AT diverted from landfill (that is, reused)Determine cost (per ton) of landfill disposal in program area

Economic Value of WorkDetermine number of lost work days avoidedUse minimum wage for the state or use federal poverty guideline to be conservative

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Calculating Environmental ImpactDetermine average weight of items kept from landfillsIdentify landfill costs in your areaCalculate savings for tonnage kept from landfills

Add the landfill savings to the value

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Recalculating for Kansas

Original ROI

Using only the value of the donated equipment:FY 2011 data resulted in a Return on Investment (ROI) of $3.49 for each dollar invested.

Adding avoided healthcare costs

For FY 2011, assuming that only one percent of Kansans who received DME delayed or avoided a move to assisted living (versus 8% in Virginia), the ROI increased to $4.13 for every dollar invested.

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What we need:More programs engaged in systematic data collection related to outcomesResearch-based analysis of the proposed CAVIAR

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Questions?

Preparing Budgets for a Reuse Program

See PIOC Knowledge Base for budget preparation guide and sample worksheets.

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Building a budget to manage the program

Working document predicts income and expenses for specific period (at least one year)

Forecasts the organization’s needs for the year (and coming years if a multi-year budget)

Provides long-range focus of 3-5 years

Serves as base from which to monitor and modify based on important events and new information

Purpose of the budget:

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Annual operating budget

Service Goals

Before budgeting, set goals consistent with the program’s mission and resources

Budget

Build a budget to achieve the goals

Contingency Plan

Make a contingency plan to deal with income shortfalls or unanticipated expenses

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Best practices for building a budget• Involve all managers• Focus on program goals• Think of the budget as a useful tool, not a chore• Follow good accounting principles

Involve key operational staff. Buy-in will help hold down costs, strengthen sustainability plan

Build a multi-year budget that is realistic and achievable

Immediately begin thinking about sustainability

Management team sets customer service goals before the budget is built

Identify new or expanded services, or changes to community or state forecast

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Budgeting for an existing program:Ask for help from organization’s accountant or accounting

department.

Review anticipated increases or decreases in services for the coming year.

Discuss possible increases or decreases in program income; identify portions that are solid, those vulnerable to cuts.

Consider known increases/decreases in costs.

Consider salary additions or increases.

Prepare a capital equipment budget.

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Budgeting for the first time

Begin by identifying program income.

(It’s more fun and will ground the management team.)

-- List the categories that might be included under program income (see the worksheet)

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Budgeting for first time, cont.’Use tools from the PIOC Knowledge Base:

Unified Chart of Accounts (not ours; a great

tool from a California nonprofit support group)

Brand and Valdez presentations

Try to diversify funding sources:

Many suggest a 1/3, 1/3, 1/3 model.

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Sample operating budget: Income

INCOME CATEGORY AMOUNTSUBTOTAL TOTALCONTRIBUTIONS AND SUPPORTFederal Grant 50,000Foundation Grant (Jones Company) 62,000State Grant 30,000Corporate Contribution--BestBuy 10,000Individual and small business contribution 2,500

Sub-total contributions & support 154,500

EARNED INCOMEProgram service fees 6,000Special events 20,000

Sub-total Earned Income 26,000

TOTAL INCOME 180,500

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Feedback from program leadersTrend toward expense-based or subcontract- driven

budgets

Some budgets included both Contributions and Earned Income within the Income section

Some were more detailed and broke out the Contribution section by source — including contributions from churches, corporations, foundations, government, individuals, and organizations (FODAC)

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Cautions regarding contributionsTry to avoid too many restrictions being placed on the money.

One way to respond is to suggest that a “priority” be given to the population or geographic area being served, but ask contributor to agree that if the particular need is being served that the funds/equipment can be utilized on short-term basis for other populations.

Consider the reporting requirements associated with the contributions; make sure time and effort are compensated adequately.

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Building the expense portion

Begin by identifying/estimating all known expenses.

Identify expense categories—Personnel related expenses, contract service expenses (accounting, auditing, legal, professional), and operating expenses.

-- Identify expenses for your program (worksheet)

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Expenses: Salaries and benefitsSALARIESDirector 2,700Coordinator 0.5 16,500Technician 1 31,000 Sub‐total Salaries 50,200

PAYROLL TAXESSocial Security (6.2%) 3,112Medicare (2.9%) 1,456 Sub‐total Payroll Taxes 4,568

FRINGE BENEFITS Life Insurance Subsidy 1,431Pension Contribution 8,745Health Insurance Subsidy 16,430 Sub‐total Fringe 26,606

TOTAL SALARIES 81,374

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Expenses: Contract ServicesEXPENSES

CONTRACT SERVICE EXPENSESAccounting fees 600Legal fees 1,500Professional fees‐other Sub‐total Contract Service Expenses 2,100

TRAVELIn‐state 500 Sub‐total Travel 500

CONTRACTUAL 3 subcontracts @$15,000/each 45,000 Sub‐total Contractual 45,000

TOTAL CONTRACT SERVICES 47,600

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Expenses: OtherProject supplies 750Toll‐free Telephone 1,000Website 500Printing 500Photocopy 500Shipping 1500Refurbishment Account 20,000Rent 20,000Training Materials 500 Sub‐total Operating Expenses 45,250

TOTAL EXPENSES 167,556

PROJECTED NET INCOME 6,276

In an operating budget, income and expenses are always equal: no “leftovers”. If income exceeds anticipated expenses,allocate the balance for some purpose or create a Contingency Fund on the Expense side to balance the budget.

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What we learned from our peers:1Or, the T-Shirt Sizing Model for AT Reuse

Reviewed operating budgets and reports from all sizes (except XXL) of exchange and reassignment programs

Small = 50 items or less (reassigned)Medium = more than 50 but less than 200Large = more than 200 but less than 500X-Large = more than 500 but less than 1000XXX-Large = more than 2000

1Budget research by Dr. Sara Sack, University of Kansas, 2009.

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Projected expenses by program size Category Small Medium Large Super SizedPersonnel 40,000 70,000 80,000 140,000Travel –in-state

500 500 1,000-2,000 3,000

Project supplies

200 500 1,000 1,500

Web site hosting

900 500-5,000 500 ---------------

Phone 500 500 1,000-1,500 1,500Printing 500 500 500-750* **Public Rel./Marketing

200 ----- 4,650 2,500

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Additional budgeted amountsEquipment shipping/transportation = $100 (S), $1,500 (M), $1,000 (L), $2,000 (XXL)Refurbishment supplies = $20,000 (M), $41,000 (XL), $42,000 (XXL)Technician or Sanitization Technician = $45,000 (salary and fringe)Rent ranged from $4,500 to $20,000 if charged

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Contingency planning

You have completed an operating budget that is based on assumptions about program income and expenses.

What will you do if you fail to receive all of the anticipated income or have a major emergency expense? Who will decide how to cut the expense budget? What will the priorities be?

A contingency plan is a pre-defined coping strategy for financial emergencies. Make it a standard part of the budgeting process. If you wait until it happens, the situation is more stressful, more emotional and less likely to be objective.

PLAN FOR THE UNEXPECTED!

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Creating the contingency plan

Identify potential shortfalls/ losses of income by percentage or amounts.

Brainstorm with the managers or key staff about actions to be taken.

Put the plan in writing. File it with your budget.

If triggered: Implement the plan as written unless some new circumstance has altered priorities.

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Contingency planning, cont.’Define several levels of possible income shortfall. Reaching that level

automatically triggers the implementation of the pre-defined expense cuts. May be percentages of total, or amounts from vulnerable sources.

How much expense must be cut to compensate for that loss of income?

What can be cut with the least impact on the program? If an entire service must be eliminated, are there volume-related reductions in expense (e.g., staff, supplies, parts, transportation)?

If staff must be cut, consider how the function will be performed, and how difficult it will be to replace that role in the future. Compute both salary and fringe benefits in reduction.

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Contingency scenario: Income loss

INCOME Category Amount Subtotal Total

CONTRIBUTIONS AND SUPPORT

Federal Grant 50,000

Foundation Grant (Jones Company) 62,000(3) Reduced

$12,000

State Grant 30,000

Corporate Contribution--BestBuy 10,000 (2) Not renewed

Individual and small business contribution 2,500

Sub-total contributions & support 154,500

EARNED INCOME

Program service fees 6,000

Special events 20,000(1) Down

5,000

Sub-total Earned Income 26,000

TOTAL INCOME 180,500

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Coping with income loss: Amount in Contingency Fund (Expense Budget): $6,276

Level 1 contingency:

Less than estimated from special event (5,000)$ 1,276


Best Buy contribution cancelled, $10,000 (10,000)

Must find this amount to cut …………………………………….. $8,729


Foundation grant reduced (12,000)

Must find this amount to cut …………………………………….. $12,000

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Questions?

Measuring Outcomes

Lindsey Bean Kampwerth

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Study Design Timeline:May 2006 – April 2008

Phase 3: Retrospective Study

• Purpose: To use the revised AT Reutilization Survey to address the following issues:

– Are participants using the reutilized equipment?• If no, why? (CORE)• If yes, what activities are participants using their

equipment? (PARTS/G)

– Is the provided AT reducing falls? (CORE)

– How satisfied were the participants with the device and program services? (QUEST)


• Participant Inclusion Criteria– Individuals who received AT through Paraquad’s Reutilization Program (purposive sample) at any time

– Received a power wheelchair, manual wheelchair, wheelchair cushion, scooter, cane, crutches, walker, raised toilet seat, commode, grab bars, or shower chair/bench

– 18 years of age and older


• Method & Procedures– Mailing list of 338 participants compiled

• shower chair/bench (n=84) 24.7%• raised toilet seat/commode(n=60) 17.6%• mobility devices (n=194) 53.6%

– Each participant was mailed a cover letter, written information sheet, reimbursement form, return envelope and survey

– Reminder and follow‐up phone calls

– Data Check & SPSS data analysis (v16.0)


• Returned surveys (N=117) 34.6%– shower chair/bench (n=38) 32.5%– raised toilet seat/commode (n=17) 14.5%– mobility devices (n=62) 53.2%

• Age 28‐93 (Mean 56.0)

• Currently Use– Yes (n=93) 79.5%

Phase 3: Retrospective Study Demographics of Total Group (N=117)

• Gender– Female (72.6%)

• Race– Black (47.9%)– White (47.0%)

• Impairment– Mobility (93.2%)– Visual (35.0%)– Mental Health (29.9%)– Cognitive (17.1%)– Hearing (13.7%)

• Income– $0‐$14,999 (56.4%)

• Benefits– Social Security (84.6%)– Medicaid (58.1%)– Medicare (54.7%)

Phase 3: Retrospective StudyDemographics of Total Group (N=117)

• Have you fallen in the past month? (n=116)– No (n=81) (69.2%)– Yes (n=35) (29.9%)

• Have falls limited participation in activities in the past month? (n=35)

– Not at all (20.0%)– A little (25.7%)– A moderate amount (34.3%)– A great deal (20.0%)

• Has the AT prevented you from falling? (n=35)– Never (20.6%)– A little of the time (5.9%)– Some of the time (11.8%)– Most of the time (26.5%)– All of the time (35.3%)


Satisfaction with Device

0

20

40

60

80

100

Not Satisfied More or Less Satisfied

Dimensions Weight Safe/SecureDurability Ease of Using ComfortEffective Ease in Adjusting

Percent


Satisfaction with Services

0

20

40

60

80

100


Service DeliveryRepairsQuality of professional services

Percent


Satisfaction with Services

0

20

40

60

80

100


Service DeliveryRepairsQuality of professional services

Percent

Phase 3: Retrospective StudyMobility Group (n=62)

• Age: 28‐93 – Mean 57.7

• Gender:– Females (72.6%)

• Race:– White (51.6%)– Black (45.2%)

• Currently use:– Yes (79%)

• Income:– $0‐$14,999 (53.2%)

• Benefits:– Social Security (85.5%)– Medicaid (53.2%)– Medicare (59.7%)

• Impairments:– Mobility (96.8%)– Visual (40.3%)– Mental Health (19.4%)– Cognitive (16.1%)– Hearing (14.5%)

Phase 3: Retrospective StudyResults: Mobility Group

• Reasons mobility devices were not used (n=11):– “Other wheelchair repaired”– “Replaced by family member”– “Use it when primary isn’t working”– “Not needed anymore”– “Need something easier”– “Not comfortable (too small)”– “Too complicated‐can’t get it in & out”– “Broken‐ base broke from cane”– “Difficult for family members”

Phase 3: Retrospective StudyResults: Mobility Group

• How often do you use the AT from the program when….– moving around your

home?• Never (15.5%)• Rarely (13.8%)• Often (25.9%)• Always (44.8%)

– leaving your home?• Never (15.5%)• Rarely (13.8%)• Often (25.9%)• Always (44.8%)

– doing leisure activities?• Never (17.0%)• Rarely (20.8%)• Often (32.1%)• Always (30.2%)

00.5

11.5

22.5

33.5

Moving Around Your HomeLeaving Your HomeLeisure Activities

Phase 3: Retrospective StudyDifficulty With and Without AT

Dif

ficu

lty

Ave

rag

e

Least Difficult

p<.001

*significant

Most Difficult

Without AT With AT


• Limitations– Unable to know if participant correctly understood survey

questions

– Individuals who no longer used their AT from the program may have not filled out survey

– Reason for not responding• Death• Wrong address and/or phone number

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Questions?

CONTACT US:

Joy Kniskern [email protected] Bean Kampwerth [email protected] Redmon [email protected]

DISCLAIMERPass It On Center is supported under cooperative agreement #H235V060016 awarded by the U.S. Department of Education, Office of Special Education and Rehabilitative Services, and is administered by Tools for Life, Georgia’s Assistive Technology Act Program, a program of the Alternative Media Access Center of The Georgia Institute for Technology (Georgia Tech.) However, the contents of this publication do not necessarily represent the policy or opinions of the Department of Education or Georgia Tech, and the reader should not assume endorsements of this document by the Federal government or Georgia Tech.

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Return on Investment, Budget Development and …...Calculating the Return on Investment Special thanks to Sara Sack of Assistive Technology for Kansans, Barclay Shepard of Virginia

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