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RETURN ON INVESTMENT STUDY FOR MEDICAL SIMULATION TRAINING

This study is the first attempt to quantify the return on investment for medical simulators - because to justify a capital equipment purchase, a hospital or training institution needs both a clinical and a cost-benefit justification. Immersion Medical engaged Frost & Sullivan to do this study in conjunction with The Health Research and Educational Trust (HRET), the research affiliate of the American Hospital Association. This paper reports on the results. To learn more about Immersion Medical, visit www.immersionmedical.com (PDF format - click here to download the latest version of acrobat reader)

From October 2003 to March 2004, Frost & Sullivan conducted a return on investment (ROI) study for three Immersion Medical training simulators:


• CathSim Vascular AccuTouch System

• Endoscopy AccuTouch System

• Laparoscopy AccuTouch System with LapSim1 modules


These simulators have been in use by hospitals and training programs for a sufficient period of time to allow an in-depth evaluation of their performance.


The study included detailed interviews and surveys of 237 attending staff physicians, residency directors, nursing directors, nurses, risk managers, and CFOs or controllers in hospitals, universities, and community colleges across the U.S. The Health Research and Educational Trust (HRET), the research affiliate of the American Hospital Association, provided access to the study's control group—145 medical personnel who did not use Immersion Medical simulators.


The study data was used to build ROI calculation models. Using the median values from the survey data, the models calculate first year totals for the simulators as:


Vascular

Access Endoscopy Laparoscopy


Benefits $219,825 $352,532 $168,767

Costs2 $34,000 $124,000 $76,000

Payback Period 57 days 131 days 169 days



Of the 85% of survey respondents who reported that their institution performs financial analysis prior to making a purchase, the desired payback period for capital expenditures

ranged from one to more than six years.


The aim of the study was to identify factors that contribute to ROI and to build interactive ROI calculation models. Institutions can use the calculation models to determine ROI for their own situation. The models allow them to compare their input data to the median values of more than 200 separate institutions, and they provide several financial metrics: payback period, net present value, internal rate of return, and return as a percentage of the initial cost of the simulators.


Factors found to be important in determining ROI for a training simulator are listed below. Survey results were used to quantify the financial benefits, which are detailed in the body of this report for each simulator.


Financial Benefits

• Operating room (O.R.) or procedural time savings – This benefit is based on the premise that practicing on a simulator improves technique resulting in faster procedures with fewer errors, which supplies the opportunity to perform more procedures.


• Instructor time savings – There is a financial benefit when less personal instruction is needed because trainees have learned independently on the simulator.


• Reduction in errors that cause complications and cancellations – If learning on simulators rather than live patients results in fewer complications and cancellations, the costs associated with errors will be reduced. In addition, while the cost of a complication may be as small as a single I.V. kit, it may be as large as a multimillion dollar malpractice suit.


• Financial value of faster time to competence – Many believe that the faster a trainee can achieve proficiency, the more valuable they are to the institutions that employ them.

Users of Immersion Medical simulators believe that, not only do their residents and nurses achieve competence faster as a result of their simulator training, they are able to supply a larger financial benefit because of it.


• Reduction in equipment repair and spoilage costs –

Learning basic scope handling techniques on the training simulator results in reduced laparoscope and endoscope repair costs. For the CathSim Vascular AccuTouch System, improved I.V. access skills are likely to result in reduced spoilage of I.V. kits.


• Reduction in alternative training costs – These may include cadavers, mannequins or other models, and animal labs or tissues.


• Revenues from selling practice time on the simulator –

Medical educational units (MEUs) are required for continued certification, and several institutions generate revenue through sponsoring training courses or workshops that incorporate simulator use. While the average amount included for this opportunity in all three models is $23,250, some institutions have realized revenue streams of up to $150,000 per year.


Costs


• Costs associated with deploying the simulator – Includes the initial purchase price or leasing program cost, along with any monthly maintenance fees, cost of time to integrate the simulator into the training program, and the cost of the space the simulator occupies.

Non-financial Benefits


• Recruiting – One of the unexpected benefits of owning an Immersion Medical simulator was the interest shown in them by potential recruits. Survey participants confirmed this benefit:

» 88% of participants reported that recruiting was a priority at their institution


» 55% of participants indicated that they believe students consider the quality of training euipment when selecting a training program


» 75% of Immersion Medical simulator users reported using their simulator as a recruiting tool


• Evaluating trainees – Providing an objective assessment of trainees as they progress is a challenge to many training directors. Immersion Medical simulators provide a possible solution by tracking trainee progress using an evaluation module.


» 76% of participants reported tracking the progress of trainees

» 83% of participants desire an objective measurement of trainee progress


• Credentialing new hires – Another benefit identified during early interviews and quantified by survey results was the simulator's usefulness in evaluating the skills of potential new hires.

» 74% of participants currently evaluate the skills of new hires

» 69% of participants expressed a desire for an objective measurement of new hires' skills

• Better quality of care – One of the top priorities for all hospitals is to provide better quality of care. For example, hospitals certified by the Joint Commission on Accreditation of Healthcare Organizations (JCAHO), on average set aside approximately $40,000 annually for quality of care initiatives, particularly medication safety and staff training and education.


» Staff training and educational efforts are consistent with medical simulator training

» Competency evaluations (ranked fourth by participants) and RN retention and recruiting efforts (ranked sixth by participants) may also benefit from in-house medical simulator training


• Trainee satisfaction – The study found that most trainees were thrilled to be able to develop their skills on a simulator prior to trying their technique on patients.


» 89% of participants reported that trainee satisfaction is a priority to their institution

» 88% of participants reported that the quality of training equipment is an important component of trainee satisfaction

» 94% of participants reported that trainees would prefer to train on medical simulators prior to live patients

» 75% of Immersion Medical simulator users believe that the use of medical training simulators has contributed to improved trainee satisfaction


Benefits to the Patient

Due to the many benefits of minimally invasive procedures, their use continues to rise. Reduced hospital stays, reduced postprocedure pain, shorter recoveries, and reduced costs have all resulted. And because most such procedures require advanced surgical skills, devices that help teach the necessary techniques are likely to be increasingly valued. Users of Immersion Medical simulators report that they value their system's haptics TouchSense® technology for teaching the

"feel" of procedures and believe it contributes directly to a reduction in costs. Immersion Medical simulators provide a safe learning environment that also includes objective feedback and a wide variety of patient presentations that supply exposure to many conditions. Besides experiencing a wide range of patients, clinicians can repeat cases and practice at will, which can deepen their understanding and skill. In addition to the financial and non-financial benefits already cited, patients may also receive benefits from simulator training. Although this study did not focus on quantifying patient benefits, some of the expected qualitative benefits include:


• Shorter operating times, based on increased opportunity for residents to train on simulators and become proficient. The less time a patient spends in the O.R., the less risk of harmful anesthesia effects and complications and the better chance of reduced recovery time.


• Fewer complications, which reduce patient discomfort and lead to:

» Shorter recovery time

» Less cost for pain medications, infection control, etc.

» Avoidance of emergency surgery to mitigate the complication

• Reduced inconvenience, less chance of complications, or less chance of losing the benefit of a procedure because it was cancelled due to a clinician's inability to complete it.


The purpose for the Frost & Sullivan study:


• To find what factors contribute to ROI for the three simulators

• For each ROI factor, determine the median value through surveys, then

• Build an interactive ROI calculation application, so that

• Anyone considering the purchase of an Immersion Medical simulator could calculate the payback period for their unique situation and consider the experience of other institutions


The first page of each model sets out the categories and more specific factors contributing to ROI. The model allows users to input their own numbers, such as the "Number of I.V. access procedures required to develop competence (per trainee)," then automatically calculates the payback period for the Immersion Medical simulator. Additional pages of the models reveal more detailed findings from the study. Medical simulation is a relatively new technology, and to its proponents, a necessary one. Immersion Medical simulators can help clinicians acquire and maintain motor skills and cognitive abilities, and they can also be used to measure and certify competency. A training regimen using Immersion Medical simulators allows medical professionals to experience the sight, sounds, and touch sensations of a variety of medical situations. Many throughout the industry hope that simulators will prove to be as useful in training clinicians as they have been in training airline pilots.


While most people will concede the logic of using simulators as training devices in medicine, a comprehensive cost-benefits analysis of their use has not yet been produced. This study is the first attempt to quantify the return on investment for medical simulators—because to justify a capital equipment purchase, a hospital or training institution needs both a clinical and a cost-benefit justification. Immersion Medical engaged Frost & Sullivan to do this study with the reasoned assumption that the results would help hospitals and other training institutions verify the cost, benefits, and ROI for Immersion Medical simulators. (See also Appendix A, Desired Payback Period vs. Study Results.) This paper reports on the results found for all three simulators. For access to the ROI models, please contact the Marketing department at Immersion Medical.


Study Design and Participants

The study was comprised of two phases to provide the most accurate and complete evaluation of the data. In the first phase, in-depth interviews with users of Immersion Medical simulators identified the factors that contribute to ROI. In addition, their opinions were used to identify a number of other nonfinancial benefits to be considered in

a larger data collection phase.


In the second phase, representatives from hospitals and teaching institutions, divided into control and Immersion Medical simulator user groups, completed online surveys that provided the median values used in the ROI models. (See Appendix B, Values for ROI Models.) The Health Research and Educational Trust, the research affiliate of the American Hospital Association, provided access to the control group for this study's purposes. The total number of participants in each phase is shown in Figure 2.




Figure 2: Study Participants


Platform Phase 1 Phase 2

No. of Interviews No. of Surveys


Vascular Access 10 39

Laparoscopy 3 10

Endoscopy 15 15

Control 1 45

TOTAL 28 209


Results for CathSim Vascular AccuTouch System

The CathSim Vascular AccuTouch System with Immersion patented TouchSense technology, emulates the feel of inserting a needle and catheter into skin and gaining entry into the vein lumen. Users of the system report that they value this haptics technology for teaching the "feel" of vascular access procedures, and they believe it contributes directly to a reduction in costs. In

addition, the CathSim Vascular AccuTouch System includes a variety of patient types, from neonates to geriatric cases, and even simulates complications to provide a realistic experience to

achieve effective, efficient training without patient risk


CathSim Vascular AccuTouch Systems are used primarily in training nurses, however, more hospitals are incorporating them into resident training. The system produced financial contributions in the areas of:


• Time savings – both procedural and instructional

• Reduction in errors – comprised of complications and cancellations

• Financial value of faster time to competence

• Reduction of I.V. kit spoilage costs

• Reduction in alternative training costs

• Revenues from selling practice time on the simulator

• Costs associated with deploying the simulator – including cost of the simulator, monthly maintenance fee, time to integrate the simulator into the training program, and cost of the room



Procedural Time Savings

Procedure time savings requires a calculation of time saved per trainee per year when CathSim Vascular AccuTouch Systems are used to gain proficiency and therefore speedier technique. Users need to estimate the number of additional procedures that each trainee could perform per year because of the benefit of realistic simulator training. The number of additional procedures is

multiplied by the number of trainees and the average revenue generated per procedure to calculate the total procedure time savings benefit.


» Based on median values from the survey data, the annual financial benefit in procedure time savings for the CathSim Vascular AccuTouch System is $39,000.


Instructor Time Savings

Two factors are required to evaluate instructor time savings— instruction time saved per trainee, calculated from survey results, and cost of instructor time. The instruction time saved per trainee multiplied by the number of trainees and the cost of instructor time determines the total instructor time savings benefit.


» Based on median values, the annual financial benefit in instructor time savings for the CathSim Vascular AccuTouch System is $78,975.

Reduction in Errors

Reduction in errors determines the financial contribution of fewer complications3 and ancellations that can be attributed to better training in I.V. access procedures. Several inputs to the ROI model are required:


• Number of I.V. access complications per year

• Average cost of complications

• Estimated percentage of complications that can be attributed to inexperience

• Reduction in the number of cancelled procedures per year

• Cost of a cancelled procedure


The final value is calculated by determining the financial value of fewer complications and adding that to the financial value of fewer cancelled procedures.


» Based on median values, the annual financial benefit in reduction in errors for the CathSim Vascular AccuTouch System is $16,760.


Faster Time to Competence

Faster time to competence relates to the notion that the faster a nurse or resident can achieve proficiency at vascular access, the more valuable they are to the institutions that employ them. The value of faster time to competence is dependent on the number of trainees and the estimated financial impact of having a larger pool of competent staff.


» Based on median values from the survey data, the annual inancial benefit in faster time to competence for the athSim Vascular AccuTouch System is $48,750.


Equipment Spoilage Costs

Another financial benefit of better training is a reduction in wasted I.V. kits due to errors.

» Based on the survey values, the median annual financial benefit in kit spoilage savings for the CathSim Vascular AccuTouch System is $11,990.


Other Financial Benefits

An additional benefit identified through the course of this study was the increased revenue from selling practice time on the simulator. Medical educational units are required for continued

certification, and several institutions have found that running workshops that incorporate simulator use is of great financial benefit. In addition, simulator training reduces the costs for

other training tools, such as models.


» Based on the survey's median values, the financial benefit in "Other" for the CathSim Vascular AccuTouch System is $24,350.


Costs Associated with Deploying the Simulator

In the interactive ROI model, the cost of owning the simulator can be set to function for either simple purchases or leasing programs. The information required includes the purchase price

and monthly maintenance fee. The default price is based on the CathSim Vascular AccuTouch System with all available software modules.4 Entries for the time taken to integrate the simulator

into the training program and the cost of space that the simulator occupies are also included. The user also enters any additional annual costs associated with owning a simulator.


» Based on median values from the survey data, the costs associated with deploying a CathSim Vascular AccuTouch System total $34,000.

Using the median values from the survey data (see Appendix B, Values for ROI Models), the ROI model calculates that the first year totals for the CathSim Vascular AccuTouch System are:


» Benefits – $219,825

» Costs – $34,000

» Payback Period – 57 days


Frost & Sullivan and Immersion Medical invite you to use the interactive ROI model to help determine your own payback period. For a description of the Monte Carlo simulation of the ROI

model and its key output – payback period – see Appendix C, Calculating Payback Period with Monte Carlo Simulation.


Results for Endoscopy AccuTouch System

The Endoscopy AccuTouch System with Immersion patented TouchSense technology, teaches and assesses motor skills and cognitive knowledge. Physicians experience the appropriate resistance as they virtually navigate while viewing a continuous, real-time endoscopic image. They can also deploy sampling and therapeutic tools through which they feel appropriate tissue

density.


Users of the Endoscopy AccuTouch System report that they value the benefits of the haptic TouchSense technology for teaching the "feel" of procedures, and they believe that it contributes directly to a reduction in costs. In addition, the Endoscopy training modules for various procedures include cases representing a wide range of patients, which helps build mastery in a shorter time period.


Endoscopy AccuTouch Systems are used primarily for training physicians in the procedures of fiber optic endotracheal tube placement, bronchoscopy, and upper and lower gastroenterology

endoscopies. The study found that the Endoscopy AccuTouch System produced financial contributions in the areas of:


• Time savings – both procedural and instructional

• Reduction in errors – comprised of complications and cancellations

• Financial value of faster time to competence

• Reduction of equipment breakage costs

• Reduction in alternative training costs

• Revenues from selling practice time on the simulator

• Costs associated with deploying the simulator – including cost of the simulator, monthly maintenance fee, time to integrate the simulator into the training program, and costof the room


Procedural Time Savings

Procedural time savings requires a calculation of time saved per trainee per year when the Endoscopy AccuTouch Systems are used to gain proficiency and therefore speedier technique. Since this time may accrue in either the O.R. or in less expensive procedural rooms, users must choose whether to use the cost of O.R. time or the increased number of procedures in the

calculation.


If cost of O.R. is chosen, the total amount of time saved is multiplied by the cost of O.R. time to determine the total benefit in O.R. time savings. If procedure time savings is chosen, the

number of additional procedures that could be performed in the procedure room(s) per year is also needed, and multiplied by the average revenue generated per procedure to calculate the

total benefit for this section.

» Based on median values from the survey data, the annual financial benefit in procedural time savings for the Endoscopy AccuTouch System is $228,800.


Instructor Time Savings

Two factors are required to evaluate instructor time savings— instruction time saved, calculated from survey results, and cost of instructor time. The instruction time saved is multiplied by the cost of instructor time to determine the total instructor time savings benefit.


» Based on the survey's median values, the annual financial benefit in instructor time savings for the Endoscopy AccuTouch System is $6,750.


Reduction in Errors

Reduction in errors5 results in a financial contribution from fewer complications and cancellations that can be attributed to better early training in endoscopy procedures. Several additional inputs are required:


• Number of complications due to endoscopic procedures per year

• Average cost of complications

• Estimated percentage of complications that can be attributed to inexperience

• Reduction in the number of cancelled procedures per year

• Cost of a cancelled procedure


The final value is calculated by determining the financial value of fewer complications and adding that to the financial value of fewer cancelled procedures.


» Based on median values, the annual financial benefit in reduction in errors for the Endoscopy AccuTouch System is $25,575.


Faster Time to Competence

Faster time to competence relates to the notion that the faster a resident, fellow, or other trainee can achieve proficiency at endoscopic procedures, the more valuable they are to the institutions that employ them. The value of faster time to competence is dependent on the number of trainees and the estimated financial value of having a larger pool of competent staff. Since the concept that trainees provide a financial benefit to the training institution is not universally accepted, users may opt to disregard this benefit and remove it from the ROI model’s calculation.


» Based on median values from the survey data, the annual financial benefit in faster time to competence for the Endoscopy AccuTouch System is $60,000.


Equipment Breakage Costs

Another financial benefit of better training is a reduction in endoscope repair costs. The calculation is based on the facility's annual endoscope repair budget and an estimate of the percentage that it would be reduced if trainees had access to a medical simulator that teaches better scope handling techniques


» Based on median values, the annual financial benefit in equipment breakage costs for the Endoscopy AccuTouch System is $7,057.


Other Financial Benefits

Two additional benefits that have been identified through the course of this study are reduction in alternative training costs and increased revenue from selling practice time on the simulator.

» Based on the median values from the survey, the annual financial benefit in "Other" for the Endoscopy AccuTouch System is $24,350.


Costs Associated with Deploying the Simulator

In the interactive ROI model, the cost of owning the simulator can be set to function for either simple purchases or leasing programs. The information required includes the purchase price and any monthly maintenance fees. The default price is based on the Endoscopy AccuTouch System with all available software modules. The calculation includes costs for the time needed to integrate the simulator into the training program, the space the simulator occupies, and any additional annual costs associated with owning a simulator.


» Based on median values, the costs associated with deploying an Endoscopy AccuTouch System total $124,000. Using the median values from the survey data (Appendix B, Values for ROI Models), the ROI model calculates that the first year totals for the Endoscopy AccuTouch System are:


» Benefits – $352,532

» Costs – $124,000

» Payback Period – 131 days


Frost & Sullivan and Immersion Medical invite you to use the interactive ROI model to help determine your own payback period.


For a description of the Monte Carlo simulation of the ROI model and its key output – payback period – see Appendix C, Calculating Payback Period with Monte Carlo Simulation.


Results for Laparoscopy AccuTouch System

The Laparoscopy AccuTouch System provides an effective learning experience by digitally recreating the procedures and environment of abdominal keyhole surgery. The system uses

advanced 3D technology and graphics synchronized to the user's actions to provide a realistic virtual working environment. To train for a number of real-life scenarios, practice sessions can

vary in graphic complexity and difficulty.


The study found that the simulator produced financial contributions in the areas of:


• Time savings – both procedural and instructional

• Reduction in errors – comprised of complications and cancellations

• Financial value of faster time to competence

• Reduction in equipment breakage costs

• Other financial benefits – including reduction in alternative training costs and revenues from selling practice time on the simulator

• Costs associated with deploying the simulator – including cost of the simulator, monthly maintenance fee if any, time to integrate the simulator into the training program, and cost of the room


Procedural Time Savings

Operating room or procedural time savings requires a calculation f time saved per trainee per year when the Laparoscopy AcuTouch System is used to gain proficiency and therefore speedier technique. Since this time may accrue in either the O.R. or in less expensive procedural rooms, users must choose whether to use the cost of O.R. time or the increased number of procedures in the calculation.

If cost of O.R. is chosen, the total amount of time saved is multiplied by the cost of O.R. time to determine the total benefit in O.R. time savings. If procedure time savings is chosen, the number of additional procedures that could be performed in the procedure room per year is multiplied by the average revenue generated per procedure to calculate the total benefit for procedural time savings.


» Based on median values from the survey data, the annual financial benefit in procedure time savings for the Laparoscopy AccuTouch System is $114,400.


Instructor Time Savings

Two factors are required to evaluate instructor time savings— instruction time saved, calculated from survey results, and cost of instructor time. The instruction time saved multiplied by the

cost of instructor time determines the total benefits for this factor.


» Based on the survey's median value, the annual financial benefit in instructor time savings for the Laparoscopy AccuTouch System is $5,760.


Reduction in Errors

Reduction in errors7 results in a financial contribution from fewer complications and cancellations that can be attributed to better early training in laparoscopy procedures. Several additional inputs are required:


• Number of complications due to laparoscopic procedures per year

• Average cost of complications

• Estimated percentage of complications that can be attributed to inexperience

• Reduction in the number of cancelled procedures per year

• Cost of a cancelled procedure


The final value is calculated by determining the financial value of fewer complications and adding that to the financial value of fewer cancelled procedures.


» Based on median values, the annual financial benefit in reduction in errors for the Laparoscopy AccuTouch System is $3,400.


Faster Time to Competence

Faster time to competence relates to the notion that the faster a resident, fellow, or other trainee can achieve proficiency at laparoscopic procedures, the more valuable they are to the institutions that employ them. The value of faster time to competence is dependent on the number of trainees and the estimated financial impact of having a larger pool of competent staff. Since the concept that trainees provide a financial benefit to the training institution is not universally accepted, users may opt to disregard this benefit and remove it from the ROI model's calculation.


» Based on median values from the survey data, the annual financial benefit in faster time to competence for the Laparoscopy AccuTouch System is $19,500.


Equipment Breakage Costs

Another financial benefit of better training is reduction in laparoscopic repair costs incurred because of improper tool handling. The calculation is based on the facility's annual laparoscopic repair budget and an estimate of the percentage that it would be reduced if trainees had access to a medical simulator that teaches better handling technique.


» Based on the survey's median values, the annual financial benefit in equipment breakage costs for the Laparoscopy AccuTouch System is $1,357.


Other Financial Benefits

Two additional benefits that have been identified through the course of this study are reduction in alternative training costs and increased revenue from selling practice time on the simulator.


» Based on median values from the survey, the annual financial benefit in "Other" for the Laparoscopy AccuTouch System is $24,350.


Costs Associated with Deploying the Simulator

In the interactive ROI model, the cost of owning the simulator can be set to function for either simple purchases or leasing programs. The information required includes the purchase price and any monthly maintenance fees. The default price is based on the Laparoscopy AccuTouch System with all available software modules. The calculation includes costs for the time needed to integrate the simulator into the training program, the space the simulator occupies, and any additional annual costs associated with owning a simulator.


» Based on median values from the survey, the costs associated with deploying a Laparoscopy AccuTouch System total $76,000.


Using the median values from the survey data (Appendix B, Values for ROI Models), the ROI model calculates that the first year totals for the Laparoscopy AccuTouch System are:

» Benefits – $168,767

» Costs – $76,000

» Payback Period – 169 days


Frost & Sullivan and Immersion Medical invite you to use the interactive ROI model to help determine your own payback period.


For a description of the Monte Carlo simulation of the ROI model and its key output – payback period – see Appendix C, Calculating Payback Period with Monte Carlo Simulation.


Appendix A

Desired Payback Period vs. Study Results

The participants in the data collection portion of this project were asked a number of general questions in addition to questions specific to the ROI models.


One of the most important and basic questions asked of all participants was whether or not their hospital performed any sort of financial analysis prior to purchasing capital equipment.


» 85% of respondents reported that their hospital performs financial analysis prior to purchasing capital equipment.


When asked to identify the desired payback period for capital expenditures the responses ranged from one to more than six years. Approximately 45 percent of respondents indicated that desired payback period varied depending on the type of equipment.


» The payback period calculated for the CathSim Vascular AccuTouch System, based on median data from survey responses, was 57 days.

» The payback period calculated for the Endoscopy AccuTouch System, based on median data from survey responses, was 131 days.


» The payback period calculated for the Laparoscopy AccuTouch System, based on median data from survey responses, was 169 days.


Appendix B

Values for ROI Models


The factors identified by interviewees as important to include in an ROI study, the median values from the survey, and the minimum and maximum range of responses for those factors are shown. The right-hand column indicates whether the factor was treated as a variable or a fixed input in the Monte Carlo simulation (see Appendix C, Calculating Payback Period with Monte Carlo Simulation). When the factor is variable, numbers from within the range of survey responses were used in the Monte Carlo iterations.


· See the table in the pdf version of the report.


Appendix C

Calculating Payback Period with Monte Carlo Simulation

Frost & Sullivan used Monte Carlo simulation in Immersion Medical's ROI-based models. Monte Carlo simulation allows for changing multiple input variables at the same time and predicting the impact on a key output. The number of surveys completed in Phase 2 provided sufficient data to perform a Monte Carlo simulation of the model and its key output—payback period. The individual factors used to determine the payback period were assigned median values and set as either fixed or variable inputs. For variable inputs the range of values collected from the surveys was entered. Simulation of the payback period using over 10,000 iterations was performed. Results of this simulation yielded several key statistics surrounding the payback period, Figure 4. Figures 5, 6, and 7 show the distribution of results for the three simulators.


· See the table in the pdf version of the report


About Frost & Sullivan

Frost & Sullivan was founded in 1961 with a specific mission: To work with clients to create value through innovative growth strategies. The firm helps clients achieve their growth objectives through its unique Growth Consulting process based on 40 years of experience working with companies across most major technology industries. The process begins with the definition of client needs and growth objectives and culminates in the delivery of strategic recommendations based on comprehensive primary research. Focusing on clients’ core objectives and market

opportunities, Frost & Sullivan provides strategic insights and recommendations that maximize clients’ success.


About the American Hospital Association and HRET

The American Hospital Association (AHA) is the national organization that represents and serves all types of hospitals, health care networks, and their patients and communities. Close to 5,000 hospitals, health care systems, networks, other providers of care, and 37,000 individual members come together to form the AHA.


The research affiliate of the American Hospital Association, the Health Research and

Educational Trust (HRET), has the goal of advancing ideas and practices beneficial to health care practitioners, institutions, consumers, and society at large. Its principal activities focus on identifying, exploring, demonstrating, and evaluating key strategic health care issues affecting innovative health care delivery systems, educating the field about the implications of changing health policies, and developing strategies for community health improvement.


About Immersion Medical, Inc.

Immersion Medical designs, manufactures, and markets computer-based medical training simulation systems worldwide. The systems integrate proprietary computer software and tactile feedback robotics to create highly realistic medical procedure simulations that help train clinicians. The company’s four key product lines are the CathSim Vascular AccuTouch System, Endoscopy AccuTouch System, Endovascular AccuTouch System, and Laparoscopy AccuTouch System.


About Immersion Corporation

Founded in 1993, Immersion Corporation is a recognized leader in developing, licensing, and marketing digital touch technology and products. Bringing value to markets where man-machine interaction needs to be made more compelling, safer, or productive, Immersion helps its partners broaden market reach by making the use of touch feedback as critical a user experience as sight and sound. Immersion’s technology is deployed across personal computing, entertainment, medical training, automotive, and 3D simulation markets. Immersion and its wholly-owned

subsidiaries hold more than 230 issued patents worldwide.


The information presented in this publication is based primarily on surveys and interviews and therefore is subject to fluctuation. Frost & Sullivan and Immersion Corporation take no responsibility for any incorrect information supplied to us by end-users. All copyright and other proprietary notices must be retained. No license to publish, communicate, modify, commercialize, or alter this document is granted.

©2004 Frost & Sullivan. Immersion, the Immersion logo, AccuTouch, CathSim, and TouchSense are trademarks of Immersion Corporation. All other trademarks are the property of their respective owners. All rights reserved.



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