Eric Scorsone, Ph'D'

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Return on Community Investment (ROCI) Strategy

• Eric Scorsone, Ph.D.
• Director, State Local Government Program
• Department of Agricultural Economics
• Michigan State University
• scorsone_at_msu.edu

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ROCI Framework

• General concepts that structure the analysis

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The ROCI Philosophy Accountability

• ROCI measures the value your community enterprise
  delivers to its constituents
• ROCI is about being accountable to the community
  and constituents you serve
• ROCI is the tool to translate accountability
  theory into action

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Return on Community Investment-Accountability Link

• Constituents expect community enterprises to be
  accountable and deliver value
• Value is defined as having a measurable community
  impact
• ROCI is a set of tools for translating the
  concept of accountability into reality (measuring
  value)
• Specifically designed to address multiple
  constituency viewpoints

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Steps in the ROCI Framework

• Identify and prioritize constituencies
• Measure your return on investment or value
  creation
• Communicate to these constituencies
• Create a process to voice feedback
• Build management systems to respond to feedback
• (Emerson, 2001)

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ROCI in Pictures
Feedback Process
Identify Constituents
Measuring Return on Investment (Value) Cost-
Benefit analysis
Management Response system
Communicate Results
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How do we use ROCI Information?

• Treat donors as social investors
• Base your arguments on solid evidence of program
  effectiveness
• Seek out a marketing or advertising firm to craft
  message
• Pro-bono community work

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Do We Have Management/Staff Support?

• Do staff and management know what ROCI is and how
  it works?
• Do they know why they should care?
• Need buy-in from frontline staff
• Navigators, disease managers, etc
• Best data collection entry points
• How and where will information be used?

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Who should be involved?

• Health Community
• Hospitals, clinics, physicians, county or city
  health officials, hospital association groups,
  other nonprofit groups
• Business and Economic Development Community
• Chamber of Commerce, City and County government,
  local foundations

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Building a Team

• ROCI Deal Team should have a diverse set of
  members from collaborative and community
• Make sure everyone is on the same page
  regarding ROCI process and needs
• Keep team engaged and motivated with short term
  goals and tangible results

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Implement Quickly

• Delay can cause team to lose momentum
• If data needs to be gathered, engage in monthly
  meetings and report progress
• Set a goal to produce first ROCI report within
  six months followed by stakeholder meetings

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ROCI Accountability to whom must be answered?

• Clients
• Donors and funders
• Client advocacy groups
• Federal government
• Local or state government
• Local community
• Board and staff members

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Measuring Return on Investment (Value)

• ROCI uses economic cost-benefit analysis to
  measure value
• Community Value is measured for
• Community or Aggregate Value
• Broken out among Constituent and Partner Value
• Prospective
• To assess the potential return and risks of
  proposed investment strategies
• Retrospective
• To assess the effectiveness of previous
  investments

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Communication of return on investment (value)
measures

• Who do we need to communicate to and how?
• Traditional Forms
• Annual report
• Meetings
• Nontraditional Forms
• Website
• Town hall meetings
• Budget documents

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Return on Community Investment Measuring
Community Value

• This section describes the issues and challenges
  of measuring value for Community enterprises

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What is Return on Community Investment (ROCI)

• A method to measure value for potential and
  existing constituents or stakeholder
• Translates accountability theory and words into
  action
• Uses a community accounting standard as opposed
  to a program accounting standard
• ROCI is a structured conversation which will
  build the business case or strengthen
  partnerships within your collaborative or
  consortium

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What is measured in Return on Community
Investment (ROCI)?

• Community Value community benefits - community
  Costs
• Community Benefits Program benefits from the
  standpoint of society not just the program or
  organization
• Community Opportunity Costs Program costs from
  the standpoint of society not organization or
  program

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Return on Community Investment in a table
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Steps in Measuring Community or Social Returns

• Defining Community
• Creating or using an existing Logic model
• With and Without Comparisons
• Benefits and Costs
• What is a Benefit
• Private
• Community
• What is an Opportunity Cost
• Private
• Community
• Key Community Opportunity Cost Adjustments
• What is a Shadow Price
• Cash Flow analysis
• Inflation
• Sensitivity Analysis

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Defining Community

• What geography
• Nation
• State
• Region
• City/County
• Why Does it Matter
• Helps define the relevant costs and benefits in
  the analysis

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Link with Logic Model Framework
Resources
Activities
Outputs
Impact
Outcomes
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Identifying Benefits and Costs

• Benefits (monetary or physical health units)
• Private
• Shadow Price
• External
• Opportunity Costs
• Private
• Shadow Price
• External

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Program Benefits

• Represent the direct, immediate or intended
  benefits of the program
• For example, medications for uninsured, avoidance
  of ER, free or reduced cost medical care
• Typically measured by program using some type of
  methodology
• Monetary value
• Non-monetary value/physical units

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Community Benefits

• Represent benefits of program to community or
  society, both intended and unintended
• Measured as
• community benefits () private benefits /-
  unintended benefits
• community benefits (non ) number of health
  units or clients served
• Examples of monetary unintended benefits
• Economic impact of program expenditures on local
  businesses in community
• Providing access to medical care improves local
  labor market

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Two types of Benefits

• Cost Savings
• Revenue Enhancement

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What is an Opportunity Cost?

• Opportunity Cost is what you must forego to
  consume something of value
• Expressed in monetary terms
• Provide insurance access versus.other needs
• Private opportunity cost what SKYCAP foregoes in
  making a resource allocation decision
• community opportunity cost What society foregoes
  in when individuals/companies make decisions

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Community Opportunity Cost

• Measures foregone next best opportunity of
  resource use by community or society
• Measured as
• Community opportunity cost private opportunity
  cost /- Community adjustments
• Community adjustments
• Unemployed versus employed workers
• Empty or vacant commercial building

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ROCI Spreadsheet
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Missing or Incomplete Data

• Key data required is client intake and budget
  data
• Program operation can be compared to other
  programs and research to assess
  cost-effectiveness
• (i.e.) Other programs using Navigators have
  reduced health care costs by 10 with a similar
  patient population

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Other Data Issues

• Need an assessment of what data we have collected
  and how
• Health status, charges/costs for patients,
  sociodemographics, insurance status, referral
  patterns, ER avoidance
• Do we before and after data?
• How do we manage data relationships and sharing
  with other partners?
• What if we dont have the data we need?

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Counterfactual thinking

• Counterfactual What would have happened if we
  were not in existence
• Patient health status and health costs before and
  after program
• Try to measure other externalities
• Educational achievement improvement
• Housing improvement
• Work productivity

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Return on Community Investment Summary

• ROCI Tells the community and funders if the
  program investment has paid off (accountability)
• Documents the level and robustness of the
  payoff
• Can be forward or backward looking
• Several important principles must be followed in
  conducting the analysis

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ROCI Measurement of Value Step by Step Guide and
Example

• Presents a Step by Step guide using the Southeast
  KY Community access Program as an example

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SKYCAP (Southeast Kentucky Community Access
Program)

• Program designed to improve access to care for
  uninsured in Perry, Harlan, Letcher counties
• Collaboration between
• University of Kentucky Center for Rural Health
• Harlan Countians for a Healthy Community, Inc.
• Hazard Perry County Community Ministries
• Data Futures, Inc. Harlan, KY

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SKYCAP Stats
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What Data is needed?

• Hospitalization and emergency room cost savings
• Other benefits (education, environment and
  housing, etc..)
• SKYCAP budgets (grant and in-kind contributions)
• Budget detail
• Volume or number of cases

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SKYCAP Private Community Benefits

• Private benefits
• Hospital and ER cost savings
• Shadow Price
• Non applicable
• External Benefits
• Economic impact of federal grant money
• Total Community Benefits
• Economic impact
• Unadjusted Health care cost savings

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SKYCAP Private Benefits

• Cost savings estimated using previously
  described methodology
• Compare patients before and during program
  participation
• This gives us our with and without comparison and
  private benefit estimation

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SKYCAP Cost Savings (Yr 1 Perry County)
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SKYCAP Cost Savings (Yr 1 Harlan County)
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SKYCAP Community Benefits

• Direct Benefit
• Reduction in Emergency room and In-Patient costs
  to local health care providers
• In-Direct Benefit
• SKYCAP spending on employees and supplies
  reverberates through local economies creating
  jobs

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SKYCAP Private Community Costs

• Private Opportunity Costs
• Administration and Labor
• Drugs and other supplies
• Rent, utilities, etc.
• Community Opportunity Costs
• Labor
• Unemployed workers who were hired have a
  Community cost less than their private
  opportunity cost
• Federal grant Money
• It is provided by money from outside the
  communities and has a zero Community opportunity
  cost to community

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Economic Impact Analysis

• Federal grant money (1st two years)
• 1.34 million dollars
• Economic Impact
• Spillover effect to create new local jobs and
  income
• Results
• 1.3 million turns into 1.7 million dollars
• 400,000 economic impact of SKYCAP

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Backward Looking Rate of Return Value

• ROR (Total benefits Total Costs) 100
• Total Costs
• SKYCAP ROR (1,381,690 - 1,297,305) 100 6.5
• 1,297,305

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SKYCAP ROCI Benefits Costs
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Conclusion

• SKYCAP has produced a healthy Return on
  Community Investment
• Important assumption Federal Grant is zero
  Community value to community external money
• Even w/ federal investment , SKYCAP appears to
  have produced a positive return on investment
• ROCI can be produced for other programs, but data
  availability is a critical issue

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Community and Constituent Presentation of ROCI
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Preparing your idea for public presentation

• Who are the key partners or stakeholders you are
  seeking to work with?
• What is the enterprise that will produce these
  outcomes?
• What will you offer?
• What will you ask for?
• What is the timeline of the request?
• What information or data do you have to back up
  this deal?

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What is your two minute elevator pitch?

• Other advertising or public relation messages?
• Radio
• Television/Video
• Internet
• Newspaper
• Public speeches
• Who will be in charge of the message?

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Is the community ready to hear the message?

• Go back to identified constituencies
• Major questions to ask?
• How will we bring them together? (as a group,
  individually)
• Where does each one stand on the program?
• What are there concerns?
• What is their personal or organizational
  self-interest?

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Questions Comments

• Contact information
• Dr. Eric Scorsone
• Dept. of Agricultural Economics
• Michigan State University
• scorsone_at_msu.edu