By Jon Warner and Jomo Kenneth Starke
For decades, the primary metric used to measure success and guide investment decisions for almost all industries and sectors, but particularly in health and healthcare, has been Return on Investment, or ROI. ROI focuses narrowly on financial returns, calculating the net benefits or profits realized from an investment relative to the costs of that investment. While ROI remains an important consideration, many experts argue it is an incomplete and potentially misleading metric, especially as the goals and priorities of health systems evolve. A more holistic approach is needed to capture the full value created across multiple dimensions.
Enter Return on Value, or ROV. ROV expands the traditional ROI framework to encompass returns in the form of innovation, new information, quality, impact, and outcomes in addition to financial returns. By taking a broader view of value that incorporates both quantitative and qualitative factors, ROV provides a more comprehensive picture of success. This allows organizations to align investments with their true missions and priorities, which increasingly extend beyond financials alone.
Although many factors can be included, ROV essentially encompasses three key components: Return on innovation, return on impact, and traditional return on investment. Return on innovation measures the value generated through new solutions, technologies, care models, and other innovations that advance health and healthcare. This could include things like the development of new treatments, the application of digital health tools, or innovative care delivery approaches. Return on impact assesses the value created through improved health outcomes, experiences, and equity. Metrics might capture things like reductions in disease burden, patient satisfaction, care quality or access. Traditional return on investment continues to evaluate the direct financial returns and costs.
Taken together, these three lenses provide a more holistic view of value across the quintuple aim of improving patient experience, population health outcomes, reducing costs, planning and improving the work life of healthcare providers and staff, and creating great health equity. By considering returns across innovation, impact, and investment, organizations (and investors) can better align their activities with their true purpose of enhancing people's health and wellbeing - not just their bottom line.
An ROV approach is particularly well-suited for health systems and organizations with social or clinical missions. For example, a non-profit hospital may willingly accept a lower financial ROI on a new program if it generates significant returns in improved outcomes, access, or care quality for underserved groups. Or a research institution may pursue high-risk projects with uncertain commercial potential but large potential returns in new scientific discoveries or innovative technologies. Considering multiple dimensions of value allows such organizations to justify investments that advance their missions even if financial returns are uncertain or long-term.
ROV also encourages a longer-term perspective that recognizes value is created over time through iterative innovation, not just immediately. For instance, the development of a new digital health platform may have minimal financial returns initially but lay the groundwork for numerous future applications generating substantial returns in outcomes, experiences, and cost savings down the road. Viewing value as an ongoing process helps justify “patient capital” willing to support innovations that create value incrementally as opposed to expecting an immediate financial payoff.
Critically, ROV provides a framework not just for evaluating past investments, but also guiding future ones. By establishing clear metrics for assessing returns across innovation, impact, and investment, organizations can systematically prioritize where to direct resources. They can fund those initiatives most likely to generate value according to their specific missions and priorities. This strategic, evidence-based approach to investment helps ensure activities are optimally aligned with desired outcomes over the long run.
Of course, systematically measuring and quantifying returns across multiple dimensions presents challenges. Not all value is easily quantified in dollar terms or captured by traditional metrics. Qualitative factors and intangible returns require thoughtful frameworks to assess meaningfully (encompassing both ‘hard’ or tangible and ‘soft’ or less tangible savings). In addition, determining clear causal links between investments and outcomes can be difficult, requiring sophisticated analysis. However, many experts argue the benefits of a comprehensive ROV approach outweigh these challenges. Standardized ROV frameworks and measurement methodologies continue to evolve and improve.
As health systems increasingly recognize their responsibility for whole population health, the need for new care and payment models, and the opportunities of digital technologies, a narrow focus on financial returns alone is counterproductive. An ROV lens encourages these organizations to view their work in the context of their true purpose - enhancing people's wellbeing - and to align activities accordingly. While still in early stages, ROV shows promise as a framework to guide strategic decision making, resource allocation, partnership formation, and more in ways that maximize overall value to both individuals and society. As the goals of health and healthcare continue to broaden, ROV may become the new North Star for measuring health and healthcare success.
This article was written by Jon Warner, Executive Chair of Citizen Health Strategies (CHS) and Jomo Kenneth Starke, Expert Advisor at CHS. CHS optimizes the end-to-end care experience with advisory, consulting, and product-building services to help deliver the Quintuple Aim – enabling better, faster, and more personalized well and sick care for all.
Comments