How do I show a hospital buyer the return on a medical device? Build it from their numbers, and count only what turns into cash

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By Saroj Jha · November 2, 2026 · 14 min read

Show a hospital the return on your device by building the case from the hospital’s own numbers, in its own budget, and by counting only savings that turn into cash. Start with who will judge it: a clinical champion wants the patient result, the value analysis committee wants evidence and total cost, supply chain wants the contract price and what it replaces, and finance wants cash it can check. Report the clinical result and the financial result separately, because they rest on different evidence. Then count every cost of using the device, split savings into hard cash and freed time, and lead with a conservative case that still pays when the soft savings are left out. A case that works only on time freed or days saved is a case most finance teams will discount.

In three numbers

  • 84% of one large public teaching hospital’s 1993 budget was fixed in the short term; 16% varied with patient volume[1]
  • 65% for a device, the most a Medicare new-technology add-on payment covers, of the technology’s cost or of the case’s cost above the standard payment, whichever is less[2]
  • 1% the cut to Medicare inpatient payments for hospitals in the worst-performing quarter on hospital-acquired conditions[3]

Here is how I would build the case, from the people who judge it to the page they read.

Running case: Example Co. Fictional

Example Co. is a fictional seed-stage company with an FDA-cleared bed-exit alert system: a sensor pad and bedside unit that alerts nurses when a patient at risk of falling starts to leave the bed. It charges $1,000 a bed a year, with sensor pads included, plus a one-time $4,000 for installation. Its first target is one 32-bed medical unit at a 300-bed community hospital, where the unit uses about 5,000 hours a year of one-to-one patient sitters. Example Co., the hospital and every number about them are fictional.

Who in a hospital judges the value of a device?

Several people, each asking a different question, and in my view the case has to answer all of them on one page. The clinical champion, often a nurse leader or physician, asks whether the device helps patients and fits the workflow. The value analysis committee, which in many hospitals brings clinicians, supply chain and finance together, asks whether the evidence is credible and what the device costs in total. Supply chain asks which contract it sits on and what it replaces on the shelf. Finance, up to the CFO for larger commitments, asks whether the money it saves is real.

The public data on these committees is thin. AAJ’s report on how US hospitals buy medical devices found no representative source on what share of hospitals run a formal committee, who sits on it or how long it takes, and it sets out the two studies that do exist on what buyers weigh. So ask your champion for the committee’s own form and answer it in the committee’s order.

In my view, the most common mistake is to write one return-on-investment number for everyone. A single figure that blends patient outcomes, nurse time and supply spend satisfies none of these readers, because each can see the part of it they do not believe.

Figure 1 Four readers, four questions, four kinds of proof
  • Reader Their question The proof they need
  • Clinical champion Does it help patients and fit the workflow? Clinical evidence inside the indication
  • Value analysis committee Is the evidence credible, and what does it cost in total? An evidence summary and the total cost per patient
  • Supply chain Which contract is it on, and what does it replace? The price against the current product
  • Finance Is the saving real cash? Hard savings at the hospital’s volume, and a conservative case

AAJ’s working model, not a finding from a study: the public data on value analysis committees is thin.

Do this

Ask your champion for the value analysis committee’s submission form, its next meeting date and the name of the finance member who reviews new products, before you write a single number.

How does the hospital’s payment shape the case?

For most inpatient care, the hospital’s revenue does not rise when it buys your device. Under Medicare’s inpatient rules, hospitals “are paid a predetermined amount per discharge”, and that payment is the total Medicare payment for inpatient operating and capital costs[4]. Your price therefore comes out of a payment that stays the same, so the case has to show that the device lowers the cost per case or protects revenue, not that it adds billing.

New payment is narrow. For a device, a new-technology add-on payment pays at most the lesser of 65% of the technology’s cost or 65% of the amount by which the case’s cost exceeds the standard payment, and only for cases whose costs exceed the full payment[2]. In my view, build the first case on the payment the hospital already gets and treat any add-on as upside.

Some Medicare programs do put revenue at stake. Hospitals in the top quartile on hospital-acquired conditions are paid 99% of what they would otherwise receive for their discharges, a 1% cut[3]. Under the readmissions program, the adjustment applied to the hospital’s base operating DRG payment can go as low as 0.97, a cut of up to 3% of that base payment[5]. If your device addresses a condition these programs measure, the finance team will want to know, but in my view count it as revenue protected only if the hospital tells you it is near a threshold, and only with evidence that your device moves the measure.

Example Co., step 1 Fictional

The bed-exit system is used on a general medical unit, where patients are paid per discharge whatever equipment the unit uses. Example Co. does not claim add-on payment or penalty relief. Its case rests on what the unit already spends on sitters, which comes out of the same fixed payment.

Do this

Write one sentence on how the hospital is paid for the patients your device touches, and build the case on that payment before you mention any new payment route.

Figure 2 For most inpatient care the payment is set in advance, and the levers on it are narrow
Medicare payment per dischargeBar: the total Medicare payment for inpatient operating and capital costs Set in advancea predetermined amount per discharge New-technology add-on paymentBar: the technology’s cost or the excess cost, whichever is less At most 65%for a device, only for cases whose costs exceed the full payment Hospital-acquired condition programBar: what the hospital would otherwise be paid for its discharges −1%paid 99%, for hospitals in the top quartile Readmissions programBar: the base operating DRG payment Up to −3%adjustment floor 0.97
  • Payment the hospital keeps
  • Cut: 1% and up to 3%
  • Most the add-on can pay
Show the numbers as a table
Lever Size Measured against
Medicare payment per discharge Set in advance Total payment for inpatient operating and capital costs
New-technology add-on payment, for a device At most 65% The technology’s cost or the excess cost, whichever is less
Hospital-acquired condition program, top quartile −1% (paid 99%) What the hospital would otherwise be paid for its discharges
Readmissions program Up to −3% (floor 0.97) The base operating DRG payment

Payment per discharge: 42 CFR 412.2[4]. Add-on payment: 42 CFR 412.88, the lesser of 65% of the technology’s cost or 65% of the amount by which the case’s cost exceeds the standard payment[2]. Hospital-acquired conditions: 42 CFR 412.172[3]. Readmissions: 42 CFR 412.154, an adjustment factor of no less than 0.97 on the base operating DRG payment, so a cut of up to 3%[5]. Each bar is drawn to scale on its own base, named under the lever, so read each lever against its own bar, not against the others.

Why keep clinical outcomes apart from financial results?

Because they rest on different evidence and are judged by different people. A clinical result, such as fewer falls or fewer infections, needs a study a clinician would accept, inside the indication your device is cleared for. A financial result, such as fewer supplies or fewer agency shifts, needs the hospital’s own volumes and costs. When the two are blended, a weakness in one discredits the other.

There is a regulatory reason too. A claim about patient outcomes is a claim about what the device does, and it has to stay inside your clearance and be supported by evidence. AAJ’s report on clinical evidence in device marketing covers what each kind of claim needs, and the claims step of the MedTech Marketing Playbook covers the wording. In my view, an outcome you cannot claim in your marketing should not be turned into dollars in your return case either.

So present two columns. One shows the clinical measure, its baseline and the result, with the study behind it. The other shows the financial measure, priced at the hospital’s own costs. Put a dollar value on the clinical outcome only if the hospital supplies its own cost for that event and the evidence supports a change in it.

Example Co., step 2 Fictional

Example Co.’s clearance covers alerting staff when a patient starts to leave the bed, not preventing falls. In a 90-day evaluation on the unit, falls went from 3.4 to 2.6 per 1,000 patient-days, against 3.3 to 3.2 on a comparison unit, a difference of −0.7 ((2.6 − 3.4) − (3.2 − 3.3)). Example Co. reports that as an observation from one unit, outside its marketing claims, and puts no dollar value on it. The financial case rests on sitter hours alone.

Do this

Split your return case into a clinical column and a financial column, and remove any dollar figure that depends on an outcome your clearance and evidence do not support.

How do I build the case from the hospital’s own numbers?

Use the hospital’s volumes, prices and costs, and say where each came from. The ISPOR task force on budget impact analysis says a budget impact analysis “should use data that reflect values specific to a particular decision maker’s population”, and recommends a simple cost calculator because it is easy for budget holders to use[6]. In practice, that means the number of eligible patients, what the hospital pays for the product you replace, and its own staff costs.

Show the budget impact by year, not a single return ratio. A budget impact case answers the question finance actually has: what will this cost or save in this year’s budget, and the next two, at this hospital’s volume? A ratio or a net present value hides the year-one cost, which is the one a department head has to find.

Use costs, not charges. A hospital’s list charges are far above what care costs it; even Medicare converts charges to costs with cost-to-charge ratios when it decides whether a case qualifies for an add-on payment[2]. If your champion gives you a charge figure, ask finance for the cost, or leave it out.

Example Co., step 3 Fictional

The unit’s nurse manager shares three numbers: 5,000 sitter hours a year, 2,000 of them from an agency at $52 an hour, and 3,000 from in-house aides at $27 an hour. Supply chain confirms no current product is being replaced. The case uses only those figures and Example Co.’s price.

Do this

List every number your case uses and mark each as “from the hospital”, “from our price list” or “assumption”, then replace as many assumptions as you can with the hospital’s own figures.

Which costs and savings should I count?

Count every cost of using the device, not just its price. That means the price or subscription, installation, consumables, service, training time, the hospital’s IT work to connect it, and anything that has to be stored, cleaned or replaced. A committee that finds a cost you left out stops trusting the savings.

Then split the savings into hard and soft. Hard savings are cash that stops leaving the hospital: fewer purchased supplies, fewer agency or overtime hours, a contract that can be cancelled. Soft savings are time or capacity freed, and most of a hospital’s costs do not fall when time is freed.

In a cost analysis of a large urban public teaching hospital, 84% of the 1993 budget ($360.3 million of $429.2 million) was fixed and 16% ($68.8 million) variable, with the authors concluding that most costs, including buildings, equipment, salaried labor and overhead, are fixed over the short term[1]. One hospital in one year is not a benchmark, but in my view it is why a day of stay saved, or an hour of salaried nurse time freed, rarely shows up as cash.

Count a soft saving as cash only when it changes a bill: an agency shift not booked, overtime not paid, a bed filled by a patient who would otherwise have waited. Otherwise show it as capacity, in hours or bed-days, and let the hospital decide what it is worth.

Example Co., step 4 Fictional

Year-one costs are the subscription, 32 beds × $1,000 = $32,000; installation, $4,000; training, 40 nurses × 1 hour × $60 = $2,400; and the hospital’s IT work, 20 hours × $90 = $1,800. That is $40,200 in year one and $32,000 a year after, or $104,200 over three years. The evaluation showed sitter hours down 30%, or 1,500 hours a year (0.30 × 5,000). The full case assumes the hospital cancels agency shifts first: 1,500 × $52 = $78,000 a year, all hard. The conservative case assumes only half the reduction cancels agency shifts, 750 × $52 = $39,000, and shows the other 750 in-house hours ($20,250 at $27) as capacity, not counted.

Do this

Make two lists for your device, every cost of use and every saving, and mark each saving hard or soft before you add anything up.

Figure 3 Every cost of use goes in, not just the subscription

Year one

$32,000 subscription, 32 beds × $1,000 + $4,000 installation, one time + $2,400 training, 40 nurses × 1 hour × $60 + $1,800 the hospital’s IT work, 20 hours × $90 = $40,200 in year one

Three years

$40,200 year one + $32,000 year two, subscription only + $32,000 year three, subscription only = $104,200 over three years Show the numbers as a table
Cost Amount
Subscription, year one, 32 beds × $1,000 $32,000
Installation, year one $4,000
Training, year one, 40 nurses × 1 hour × $60 $2,400
The hospital’s IT work, year one, 20 hours × $90 $1,800
Total, year one $40,200
Year two, subscription only $32,000
Year three, subscription only $32,000
Total over three years $104,200

Example Co. (fictional), computed in Python. 32 × $1,000 = $32,000; 40 × 1 × $60 = $2,400; 20 × $90 = $1,800; $32,000 + $4,000 + $2,400 + $1,800 = $40,200; $40,200 + $32,000 + $32,000 = $104,200.

How do I present the case so it survives the committee?

Lead with the conservative case. In my view, a case that still pays when the soft savings are removed is the one finance approves, and the full case then reads as upside rather than as a sales claim. Show both side by side, by year, with the assumption that separates them written in one line.

Show what has to be true. Name the one or two assumptions the result depends on, such as the share of freed hours that cancels agency shifts, and show the result if they are worse. A committee that can see the break-even point can decide for itself, which is faster than arguing about your estimate.

Keep it to one page your champion can forward unchanged: the clinical column with its evidence, the financial column with the hospital’s numbers, the conservative and full cases by year, and the payback month. The MedTech Marketing Playbook covers the rest of the value analysis pack, and AAJ’s report on how medical device companies charge covers how the pricing model changes what the hospital pays upfront.

Example Co., step 5 Fictional

In the conservative case, $39,000 a year of hard savings against $40,200 of year-one cost leaves −$1,200 in year one, then +$7,000 in each of years two and three ($39,000 − $32,000), or +$12,800 over three years; with the subscription billed monthly and the one-off costs counted in month one, it pays back in month 15. The full case nets +$37,800 in year one and +$46,000 in each later year, +$129,800 over three years, and pays back in month 3. The page states the one assumption that separates them: how many of the 1,500 freed hours cancel agency shifts. The break-even is about 668 hours a year ($104,200 ÷ 3 years ÷ $52 an hour); at 750, the conservative case, the system pays for itself within the three years in cash.

Do this

Put your conservative and full cases side by side by year, write the one assumption that separates them, and show the break-even value of that assumption.

Figure 4 The conservative case pays back in month 15; the full case in month 3

Conservative case Half the 1,500 freed hours cancel agency shifts

  • Hard savings $39,000 a year (750 × $52)
  • Net, year one −$1,200 ($39,000 − $40,200)
  • Net, years two and three +$7,000 each ($39,000 − $32,000)
  • Net over three years +$12,800
  • Payback Month 15
  • Not counted 750 in-house hours, worth $20,250 a year at $27, shown as capacity

Full case All 1,500 freed hours cancel agency shifts

  • Hard savings $78,000 a year (1,500 × $52)
  • Net, year one +$37,800 ($78,000 − $40,200)
  • Net, years two and three +$46,000 each ($78,000 − $32,000)
  • Net over three years +$129,800
  • Payback Month 3

The one assumption: agency hours cancelled a year

  • Below break-even
  • Pays for itself within three years
  • 668: break-even
  • 750: conservative
  • 1,500: full

Below break-even Pays for itself within three years

Show the numbers as a table
Conservative case Full case
Agency hours cancelled a year (break-even about 668) 750 1,500
Hard savings a year $39,000 $78,000
Net, year one −$1,200 +$37,800
Net, year two +$7,000 +$46,000
Net, year three +$7,000 +$46,000
Net over three years +$12,800 +$129,800
Payback Month 15 Month 3
In-house hours shown as capacity, not counted 750, worth $20,250 a year None

Example Co. (fictional), computed in Python. One-off costs of $4,000 + $2,400 + $1,800 = $8,200 fall in month one; the subscription is $32,000 ÷ 12 = $2,666.67 a month. Conservative: $39,000 ÷ 12 − $2,666.67 = $583.33 a month, and $8,200 ÷ $583.33 = 14.1, so month 15. Full: $78,000 ÷ 12 − $2,666.67 = $3,833.33 a month, and $8,200 ÷ $3,833.33 = 2.1, so month 3. Three years: −$1,200 + $7,000 + $7,000 = +$12,800; $37,800 + $46,000 + $46,000 = +$129,800; 750 × $27 = $20,250. Break-even: $104,200 ÷ 3 ÷ $52 = 667.9, about 668 agency hours a year, on a scale of 0 to 1,500 hours.

What changes by stage?

  • Pre-seed — Learn how your first target hospital is paid for the patients your device touches, and which current product or cost it would replace. Do not build a return model before you have one hospital’s real numbers.
  • Seed — Build the case for one unit at one hospital from its own numbers, with a clinical column and a financial column, and lead with the conservative case.
  • Series A–B — Turn the first hospital’s measured results into a budget impact calculator each new hospital can fill in with its own volumes and costs, and keep a record of which assumptions held.

Free tool

Check that your price works for you too

The free Unit Economics Calculator helps you check your own side of the deal, your margin and payback per site, so that the price you put in the hospital’s case is one your company can sustain.

Open the calculator

The illustrative engagement How a device startup wins its first hospital shows the value analysis pack and evaluation in context, and AAJ’s report on how US hospitals buy medical devices covers the contract route and what committees weigh. If an evaluation comes first, the free Pilot-to-Contract Planner works its criteria and decision date back from the committee’s meeting.

Two companion posts cover the steps around the business case: How do I turn a paid pilot into a contract? sets the evaluation terms before it starts, and What can a medical device startup say before and after FDA clearance? covers what the deck and the website may claim.

If you want me to look at your own funnel, positioning and channels, my Growth Audit ends with three prioritized fixes and a 30-day action plan.

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References

The superscript numbers in the article match this list.

Every source was opened on November 1, 2026, through a web-page reading tool, so check short quotations against the live documents.

  1. Roberts RR, Frutos PW, Ciavarella GG, et al. (1999). Distribution of Variable vs Fixed Costs of Hospital Care. JAMA 281(7): 644–649. Cost analysis of one large urban public teaching hospital, 1993 budget of $429.2 million; fixed and variable defined over the short term. jamanetwork.com
  2. Code of Federal Regulations. 42 CFR 412.88, Additional payment for new medical services and technologies: general provisions (65% limit for discharges from 1 October 2019; costs determined with operating cost-to-charge ratios). eCFR (text checked via Cornell Legal Information Institute, 1 November 2026). ecfr.gov
  3. Code of Federal Regulations. 42 CFR 412.172, Payment adjustments under the Hospital-Acquired Condition Reduction Program (payment at 99% for hospitals in the top quartile of total HAC scores, fiscal 2015 onward). eCFR (text checked via Cornell Legal Information Institute, 1 November 2026). ecfr.gov
  4. Code of Federal Regulations. 42 CFR 412.2, Basis of payment (inpatient prospective payment per discharge). eCFR (text checked via Cornell Legal Information Institute, 1 November 2026). ecfr.gov
  5. Code of Federal Regulations. 42 CFR 412.154, Payment adjustments under the Hospital Readmissions Reduction Program (floor adjustment factor 0.97 for fiscal 2015 and later). eCFR (text checked via Cornell Legal Information Institute, 1 November 2026). ecfr.gov
  6. Sullivan SD, Mauskopf JA, Augustovski F, et al. (2014). Principles of Good Practice for Budget Impact Analysis II: Report of the ISPOR Task Force on Good Research Practices, Budget Impact Analysis. Value in Health 17(1): 5–14. Task force report (methods guidance, not a survey). ispor.org

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