Healthcare Budget Request – Estimating Expenses for Tele-Health Services

The Estimated Expenses and Return on Investment (ROI) for Tele-Health Services

Telehealth Expense Estimation & Return on Investment (ROI) Calculation
Equipment & Other Cost (USD)
Telemedicine cart 5000
Routers 10000
Digital camera 12000
Telemedicine software:
For live video conferencing 20000
For store-and-forward telemedicine 18000
For remote monitoring of patient data 15000
Overhead & miscellaneous costs 60000
Training of assisting staff 30000
Computers & related hardware 30000
Total expense 200000
Projected Income Over a Five Year Period
Year 2020 2021 2022 2023 2024
Income (USD) 288000 360000 432000 504000 576000
Total income in USD over 5 Years 2160000
Return on Investment (ROI) Calculation
ROI = Net Income
Cost of Investment
ROI = 2160000 – 200000
200000
ROI = 1960000
200000
ROI = 9.8
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Summary of Analysis and Interpretation of Results

The return on investment or ROI is a financial profitability ratio that indicates the financial benefit gained by an investor with regard to the initial cost of their investment. A high ROI ratio means that the financial benefit from the investment is also high. For instance, a ROI of 1.0 means that there is a return on investment of 100% on the initial financial outlay. The ROI ratio assists an investor to make the decision whether to invest in a venture or not. It can also be negative in value, meaning a negative return on investment or a lack of gain (CFI Education, Inc., 2020) Healthcare Budget Request – Estimating Expenses for Tele-Health Services.

In this calculation, the initial projected financial outlay or expenses amount to USD 200000. Most of this will go into the purchase of the equipment necessary for the virtual patient visits (Hayes, n.d.). The equipment include amongst others a telemedicine cart which can be wheeled from one office to another while carrying the telemedicine paraphernalia, a high resolution digital camera, and telemedicine software to run the operation (eVisit, 2018).

In calculating the income, some assumptions have been made. First, it is assumed that the average number of patients that will be seen daily in the first year will be twenty. The clinician will be working for five days in a week on telemedicine consultations. Second, it is assumed that the number of patients will increase by five per day in each subsequent year up to a total 40 patients per day in the fifth year (2024). Using the formula for calculating ROI (net income minus cost of investment), we get a net income of USD (2160000-200000) which is USD 1960000 and divide it by 200000 to get 9.8. Healthcare Budget Request – Estimating Expenses for Tele-Health Services This investment therefore has the potential of bringing a return of 980% in a span of 5 years. It is therefore a worthwhile healthcare investment for the organization to put money in.

References

CFI Education Inc. (2020). ROI formula (Return on Investment). Retrieved 18 March 2020 from https://corporatefinanceinstitute.com/resources/knowledge/finance/return-on-investment-roi-formula/

eVisit (May 25, 2018). Telemedicine equipment. Retrieved 19 March 2020 from https://evisit.com/resources/telemedicine-telehealth-equipment/

Hayes, H. (n.d.). What should you charge for telemedicine visits? Retrieved 18 March 2020 from https://blog.evisit.com/charge-telemedicine-visits

For this Assignment you will calculate estimated expenses associated with a proposed new healthcare product or service (tel-health). You will also estimate revenues and calculate a return on the proposed investment.

To Prepare
• Reflect on the healthcare product or service solution you have proposed for your healthcare organization. Consider expenses (including any capital expenditures) that will be required to implement your product or service.
• Reflect on the estimated revenues (if any) that your proposed solution will generate.
• Reflect on the need for financing to meet the estimated expenses associated with your idea.
• For each of the above, consult with your internal financial counselor as needed.

Healthcare Budget Request – Estimating Expenses for Tele-Health Services

The Assignment: Estimating Expenses
Conduct an analysis of estimated expenses and revenues associated with your product or service idea by completing the following:

Part 1: Expense/Revenue/ROI Analysis:Excel Document
Open your Healthcare Budget Request workbook that you created in Week 2, and navigate to the “Estimated Expenses” worksheet. Using the Healthcare Budget Request Workbook Step-by-Step Guide for guidance, create a worksheet that records the following:
• Each of the estimated expenses associated with your proposed idea, including startup expenses. Be sure to label each appropriately, with enough description to make it clear what the item is and what the estimated cost involves.
• Each of the estimated revenues associated with your proposed idea. Be sure to label each appropriately, with enough description to make it clear what the item is and any necessary details regarding sources of revenues (including reimbursements) Healthcare Budget Request – Estimating Expenses for Tele-Health Services.
• Calculate the total estimated expenses and revenues for the next 5-year period.
• Calculate the Return on Investment (ROI) for your proposed idea.

NOTE: You will copy your worksheet and analysis onto the Healthcare Budget Request Template (Word document) for submission.

Part 2: Summary of Analysis and Interpretation of Results:
Create a brief (1- to 2-page) description of your analysis that clearly describes the estimated financial impact of your proposed idea. Interpret the results by explaining what your ROI calculation means to the organization Healthcare Budget Request – Estimating Expenses for Tele-Health Services.

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