A common argument from the hospital management is that RTLS is too expensive for the hospital to adopt. We asked an expert to provide us a simple ROI analysis for a 350-bed hospital to demonstrate how long it takes for a hospital to break even.

Let’s get the assumptions out

• Current Bed Utilization:
  • 70% of the time, bed utilization is below 70%.
  • Current average bed occupancy is estimated at 65%.
• Time Savings:
  • Implementing RTLS is expected to save 2 hours/day in equipment search time.
• Staff Costs:
  • Average hourly wage of hospital staff is ₹600.
• Increased Revenue from Improved Bed Utilization:
  • By improving patient flow, it’s assumed that the hospital can increase utilization from 65% to an average of 75%, impacting overall admissions positively.
• Operational Costs:
  • Annual operating costs for RTLS maintenance are estimated at ₹8,00,000.

Investment for RTLS

1. Initial Investment

a. RTLS Software and Hardware Costs

• Software Licensing: ₹20,00,000
• Hardware (tags, sensors, etc.): ₹30,00,000
• Installation and Integration: ₹10,00,000
• Training and Support: ₹5,00,000
• Total Initial Investment: ₹65,00,000

2. Annual Operating Costs

• Maintenance and Updates: ₹5,00,000
• Support Services: ₹3,00,000
• Total Annual Operating Costs: ₹8,00,000

Expected Annual Savings

a. Insights into Equipment Usage

• Reduction in Equipment Search Time:
  • Time saved: 2 hours/day
  • Staff cost savings: ₹600/hour x 2 hours x 365 days = ₹4,38,000

b. Insights into Patient Flow

• Improved Bed Turnover Rate:
  • Average occupancy increased from 65% to 75%.
  • Additional revenue from increased admissions:
    • Current Occupancy: 350 beds x 0.65 x 365 days = 84,875 patient days
    • New Occupancy: 350 beds x 0.75 x 365 days = 96,375 patient days
    • Additional patient days: 96,375 – 84,875 = 11,500
    • Average revenue per patient day: ₹2,500 (assumption)
    • Additional revenue: 11,500 patient days x ₹2,500 = ₹28,75,000

c. Improved Workflow Coordination

• Reduction in Staff Overtime:
  • Savings from optimized workflows: ₹3,00,000

d. Operational Efficiency

• Decrease in Equipment Losses and Repairs:
  • Estimated savings: ₹2,00,000

Total Expected Annual Savings

• Total Savings: ₹4,38,000 + ₹28,75,000 + ₹3,00,000 + ₹2,00,000 = ₹38,13,000

Now let’s calculate Return of Investment (ROI)

First Year Costs

• Total Initial Investment: ₹65,00,000
• First Year Operating Costs: ₹8,00,000
• Total First Year Costs: ₹65,00,000 + ₹8,00,000 = ₹73,00,000

b. First Year Savings

• Total Expected Annual Savings: ₹38,13,000

c. Net Cost for the First Year

• Net Cost: ₹73,00,000 – ₹38,13,000 = ₹34,87,000

5. Breakeven Analysis

a. Annual Savings Beyond Year 1

• Annual Savings (after first year): ₹38,13,000
• Annual Operating Costs: ₹8,00,000
• Net Savings per Year: ₹38,13,000 – ₹8,00,000 = ₹30,13,000

b. Breakeven Point

• Total Investment: ₹65,00,000
• Annual Net Savings: ₹30,13,000
• Years to Breakeven: ₹65,00,000 / ₹30,13,000 ≈ 2.16 years (approximately 3 years)

Summary

• Total Investment in the First Year: ₹73,00,000
• Breakeven Year: Year 3

Conclusion

Implementing an RTLS in a 350-bed hospital can significantly enhance operational efficiency and patient care. Despite an initial investment of ₹73,00,000, the hospital can expect to reach breakeven in approximately three years, achieving substantial annual savings thereafter. The expected improvements in bed utilization and workflow coordination are crucial for driving this ROI.