Richard's Blog

 Posts Tagged ‘cost savings’

I am frequently asked about cost savings from using Therap.  There seem to broadly be at least 3 type of cost savings.

One type of cost savings is reductions in paper, gas costs, mileage reimbursement, copying expenses, mailing expenses and other direct clear third party costs which are clearcut savings. It turns out that just these categories alone can more than pay for the cost of Therap. Plus I once calculated a side benefit of saving one tree per year for 7 individuals who have their documentationo on Therap.

A second cost category of cost savings is sometimes harder for agencies to see.  Agencies tell us nurses can save one to two hours a day. However, if an agency only has 3 nurses, they may not be able to eliminate a nursing position. So the savings are more in improved efficiencies.  A similar situation occurs if a DSP saves an hour driving paper around in the middle of their shift. You can give the DSP time off – but hopefully there are other benefits of this increase in time available from a decrease in driving.

There are many other types of savings which can be problematic to exactly calculate. Allison had an example today she wrote about in her blog.

She visited an agency which said

that since starting the MARs, their med errors have dropped to nearly zero–that would be none, nada, zilch, nothing. It could certainly be attributed to the immediate review that online documentation allows, along with some careful planning and implementation on Pathway’s part…

Obviously there are quality of life benefits to not having med errors. However, what is the cost savings to an agency. What is the cost of reporting med errors. What is the cost of investigating med errors.

My sense is that when agencies are running their cost analysis they are not factoring in these type of benefits when doing a line by line benefit. Agencies are seeing these benefits when looking at the total budget impact of using Therap. I received an email recently from a longtime user who wrote

We continue to use Therap now more than ever as communication is essential when we have Supervisors spread so thin these days.  (we are down to 4 Managers as opposed to the 9 we used to have)

In what ways can we help create relevant cost savings analyses?

jI just read the book “Software as a Service Inflection Point: Using Cloud Computing to Achieve Business Agility”.

A few quotes and thoughts from the book.

Page xxvii:  According to Rob Markezich, Corporate VP of Microsoft, customers of the  SaaS model have saved anywhere from 10% to 80% on the cost of their infrastructure.

Another point he makes is one  I find often when dealing with providers of service to people with developmental disabilities who are analyzing Therap vs other home grown systems.  Agencies do not know how to calculate their costs of various options.

Melvin Greer wrote:

“The second key element in the cost benefit analysis of SaaS applicatinos is the underestimated people costs associated with running premise-based traditional software applications. … “We don’t know how to estimate our people services, so we chose not to consider them when comparing the costs of WebEx vs the premised-based software alternative”.

While this sounds like an inaccurate, poor way to do cost benefit analyses – we see this quite often. Agencies often don’t factor in costs of their committees and people’s time when analyzing alternatives and in particular developing their own system.

One agency once told us they spent $100,000 on a system when our cost to them would have been about $20,000 per year. I then asked what that $100,000 included – they said it only included checks to outside programmers and upfront equipment. They did not count any of their people time or costs to develop. And they had not factored in future development costs.

He finally made the point that

Another argument for “owning” software has been that even with the higher upfront costs, there is a break-even point where traditional software becomes less expensive than the SaaS subscription model. The analyst from IDC reviewed several SaaS versus traditional software deployments and found that when people resources and cost of upgrades are correctly taken into consideration, this break-even point may never be realized.

We have many users who have told use they are saving significant money by using Therap.  The most questions we get on budget affects is actually from non-users who don’t see the full benefit of the system – in large part because they are not doing the proper full cost analysis.

I would be interested in hearing more stories and examples of how agencies are performing their cost saving analysis.

I recently attended a NYSACRA conference in Saratoga Springs, NY. The big topic of conversation was a recently announced 5% rate cut by OMRDD. We have heard of similar cuts in other states – and these cuts are affecting other areas of government services including parks, schools and other social services.

The statistics I have seen from presentations and materials from the National Association of State Budget Officers and their website show this is really a national situation.

For the first time on record, states’ overall spending has declined in back-to-back years, sinking 4.8 percent last fiscal year and at least 4 percent in the current fiscal year,according to the National Association of State Budget Officers (NASBO). The spending drop reflects a plunge in tax revenues last year that is expected to continue for at least two more years. The National Conference of State Legislatures (NCSL) has estimated that $60 billion in shortfalls are looming for 2011 and $50 billion for 2012.

My response to these cuts probably reflects my experience in developing technology to address societal problems. I feel this is also an opportunity for the states and providers to review their systems and processes. HHS and the Obama administration (and also John McCain in his campaign) all talk about using technology to improve record keeping while reducing costs. Agencies using Therap are reporting savings in many areas.

We received one analysis from an agency that even after allocating 80% of computer and internet costs to Therap – and only factoring in savings from paper, faxes, storage, binders and document storage they were still savings money using Therap. We have seen invoices from agencies on reductions in their Xerox bill of 33% from before using Therap.

Agencies are reporting reductions in nursing or QA staff while reporting higher quality of analysis using Therap because of the speed of generating information and the reduction in driving to look at papers. In fact a number of agencies have said that it is using Therap which is letting them meet their budget cuts.

One major difference between the general community and providers serving people with developmental disabilities with regards to implementing technology is the tight requirements from Medicaid and state funding sources on looking at expenses for reimbursement. So an agency cannot just for example say they are adding technology and paying for that from savings in efficiency from shortened annual meetings because families can already see the data or an agency cannot replace nurses costs with internet or computers because they are savings nurses driving time. There are many complex budget and reimbursement issues which need to be considered. But perhaps this budget crisis will allow a good discussion of how to really have efficiencies rather than just cost cutting.

When representatives from OMRDD presented at the NYSACRA meetings they mentioned several times that they wanted to work with agencies to find efficiencies in their operations. When I discussed this with providers – a couple basically said that they really felt that they weren’t looking for efficiencies but just cost reductions. Thomas Friedman often writes about the difficulty in changing the mindset and attitudes of countries which have long opposed each other in military or cultural spheres. Is there a similar difficultly in bridging some of the gaps between providers and funders?

Working together I think agencies, funders, families and other interested parties can improve the quality of life for people with developmental disabilities – but working separately – they will just see and experience painful spending cuts. We are working with may providers and states which are making real positive progress in many areas. So I have seen that new ways of thinking and interacting are possible.

Last night Jeremy and Dana cooked the elk and bison sausage we bought at the farmer’s market. We have been watching all these food channels recently – so they each made a separate dish with the same food. Jeremy made a sausage patty and Dana made a tomato sauce (recipe at the bottom). We were joking around about how nice having local elk and bison was and Jeremy made a comment regarding the last episode of The Next Food Network Star.

The last episode was an episode on budgeting. Basically they had $60 to shop and make a gourmet meal for 12 people. As is typical of these shows, they had different types – chefs, restaurant consultants, a mom, personal chefs, and finally a nutritionist highly focused on local and organic food as they presented her on TV. And after they cook the meals, they have to give a brief summary of what they cooked in an entertaining manner which is related to the theme.

As we were discussing that the elk and bison sausage we had was relatively lean, Jeremy commented how the contestant Katie Cavuto had talked about the health benefits of using chicken saugage over pork saugages in a budget show. Nobody on the show seemed to give Katie credit for making a point that had anything to do with budgets or cost savings.

As I thought about this – on one hand it really reminded me a bit of some of the price quotes and rfps we have been submitting lately. One category is always price. In one rfp we saw recently 40% of the points were for price. In other instances, agencies just look at what they have budgeted and see who has the lowest price that meets the budget.

What is interesting to me is that agencies (and the food network) should be looking at the lifecycle cost of a project including all savings. So the real price should be the net cost or even in Therap’s case the net savings.

On the other hand, I should point out that most agencies seem to realize that they have to look at the full set of costs and benefits in an economic analysis. Therap is quite price and budget conscious and our price generally is lower than any other feasible or viable option.
In the case of chicken vs pork sausages, if Katies point was that chicken is healthier – then it would seem that over time there would be a difference in medical costs, in sick time, in other items that actually can be quantifiable. I realize that during a severe recession it can be difficult to say to spend extra money each week on food because at some point in the future there might be a health difference. But society has done that with items such as eliminating trans fat from most packages.

Perhaps the Food Network could do society (and their viewers) a service by focusing on the full lifecycle cost rather than just the short term analysis.

Dana Free Range Sausage Tomato Sauce
½ Lb Elk Sausage and ½ Lb Bison Sausage (meat was loose sausage, almost like ground beef)
2 Cans Muir Glen Oranic Fire Roasted Crushed Tomato Sauce (or equivalent)
4 Cloves Carlic
2 Little Onions (I am not sure what kind)
Salt
Pepper
Olive Oil
Parsley
Basil
Basically- first Brown the meat with 3 or 4 tablespoons of olive oil with 2 chopped cloves of garlic and a little salt and pepper to taste. After the meat was brown add the tomato sauce and everything else.

I recently send the following memo to Therap Users regarding cost savings. I thought I would post it here – as i have some other points regarding cost savings to make – and I thought some of this would be useful background information.

Memo from: Richard A. Robbins, Chief Executive Officer, Therap Services
Date: February 23rd, 2009
Subject: Therap Users report savings of up to $300,000 per year.

Providers serving people with developmental disabilities who use Therap’s individual support applications are reporting savings of between $1500 and $2500 annually. Those savings are being realized by providers who have fully implemented Therap’s applications and the savings are coming from various tasks and costs including reduced time for meetings,less paper, less collating, less driving, less copying and posting documentation, and so on. Just as importantly reducing the time for those task results in the opportunity to increase the time staff spends with the people they support.

The results reported by Therap users means that agencies supporting 150 individuals full-time have seen savings of $300,000 or more.

When we started Therap Services six years ago, we had three major goals

1) Improve supports for people with developmental disabilities

2) Reduce costs

3) Improve compliance

Over the years, we have heard so many stories of Therap improving the quality of life for individuals and their caregivers.

However, in the current economic environment, we recognize the impact of budget cuts and reductions in endowments and donations.

We have been having conversations with our users about their cost savings from using Therap.

These savings are occurring while agencies are improving quality.

The savings are coming from various forms of reductions in time for meetings, paper, collating, driving and other activities that staff spends time on. This does not include any reduction in direct time spent with the individuals you support, in fact agencies are increasing direct contact in many cases.

To our users, we would be happy to work through a savings analysis with you. We would also be happy to discuss with you ways you might further increase your savings while improving quality.

We also would be happy to work with you to report to your board or funding agencies regarding your expenditures and cost savings.

If you are not yet using Therap, we would be happy to discuss with you how you can save significant money while improving care and support.

Therap is offering a Free Savings Analysis for providers interested in seeing if they might experience some of these savings by implementing Therap Services.

Please feel free to contact us to discuss this important issue. In this perilous economic climate, we are pleased to see that our commitment to improving your quality of supports while significantly reducing costs is having positive results.

Richard