Why ROI Really Matters in Allocative Efficiency (and Why We Should All Care a Lot More Than We Do)

Let’s talk about something that might not set your heart racing at first glance: return on investment, or ROI. Not the private equity version where someone in a pinstripe suit calculates how many yachts they can buy. No, I’m talking about ROI in the NHS. Public money. Your money. Our money.

Why does it matter? Because when we talk about allocative efficiency (getting the most value from every pound we spend) we’re really talking about fairness, impact, and making tough choices with care and intelligence.

The new ROI guidance from the HFMA , supported by NHS England, and written by the amazing Emily Hopkinson is a quietly radical toolkit. It gives us the language and structure to ask a better set of questions when making decisions about where to invest, or where to step back. And in today’s climate of financial tightropes and rising need, that matters more than ever.

ROI: More Than Just a Spreadsheet

In the NHS, ROI isn’t just “how much money do we get back?” It’s about the full spectrum of return: better patient outcomes, improved staff wellbeing, reduced inequalities, environmental sustainability, and yes, financial savings too. In short, ROI in the NHS is about what matters.

The HFMA lays out four key approaches to ROI, like different lenses on the same telescope:

• Budget Impact Analysis: Can we afford this? Will it cost us more, or save us money, in the short term?
• Cost-Benefit Analysis: What’s the overall value to society? Are we creating more good than harm?
• Cost-Effectiveness Analysis: How much impact do we get for our spend on a specific clinical outcome?
• Cost-Utility Analysis: Are we improving quality of life and adding healthy years, especially when measured through QALYs?

Each one fits a different question. The trick is knowing which to pick. It’s a bit like gardening, you need the right tool for the job. You wouldn’t prune roses with a shovel.

What Makes This New ROI Guidance Important?

This isn’t just theory. It’s practical, clear and NHS-shaped. Written for real-world teams who are busy and under pressure.

It shows us how to:

• Avoid wasting time when ROI isn't the right tool. If a project can’t go ahead, or the evidence just isn’t there, don’t spend weeks trying to force it into a model.
• Work across the system, not just in organisational silos. ROI is about collective value, not just your team’s ledger.
• Build assumptions transparently. Because if the headline ratio is 4:1, but it all hinges on one shaky assumption, we need to know.

And crucially, it reminds us that not all benefits show up in budgets. Some are long-term. Some are qualitative. Some make people’s lives better without saving a single penny. But that doesn’t make them any less important.

Why This Matters for Allocative Efficiency

Allocative efficiency is about choosing the right mix of services. That means making trade-offs. It means stopping things that don’t work. And investing in things that do.

ROI is how we do that with rigour and fairness.

It helps us weigh things up. It helps us compare apples with oranges. It helps us decide whether this intervention, for this population, at this time, is the best use of our shared resources.

But let’s be clear. ROI is not just a number. It’s a conversation. A framework. A prompt to ask better questions.

What is the baseline if we do nothing?

Who benefits, and when?

What does success look like?

And how do we know we’re not missing something that matters?

Final Thought: Use With Care, But Do Use It

We need to move beyond the simple idea of savings. ROI, used properly, allows us to think about value. Not just to our own organisation, but to the system, to patients, to society.

If all we do is chase what balances the books this quarter, we will miss what transforms lives in the long run.

So next time you’re in a room and someone says “we just need to make a saving”, ask them: “Saving what? And for whom?”

Because every pound we spend is a choice. ROI helps us make it count.

And of course if you want to chat ROI or allocative efficiency give your lovely NHS colleagues at The Health Economics Unit a call!