Grand Canyon University/ Cost Justification

The MRI machine and the time it takes perform a scan is the bottleneck of the process. Each scan can have different times associated with it depending on the type of scan that will be performed. This will limit the capacity of the overall process. For example, a scan without contrast will usually take 30 minutes. A scan that requires contrast will double that time to 60 minutes.

This charge is also another revenue stream for the hospital and contributes to the ROI of the equipment. GE, which is the manufacturer of the equipment, indicates that the equipment has a viable life span of up to 15 years, but the warranty only covers the first 6 years of use (Price, 2011). The above figures are a clear indication that the MRI equipment can provide the hospital with an adequate return on investment. These figures, the machine’s lifespan, and the growing demand for MRI scans serve to justify the purchase of the equipment. Other factors that enhance the returns from the equipment include:

Finally, if any end-user customers were to adopt the activity-based pricing (ABP) system proposed by O&M, O&M could help hospitals better understand their costs and analyze their processes. This would improve efficiency and reduce waste due to loss, theft and expiration of sensitive medical supplies. O&M would reduce its costs by delivering only what is needed, and the hospitals would be buying fewer unutilized supplies.

When considering requests such as a new piece of equipment, staff training, and supplies for the unit, a manager must consider the overall budget, constraints, and variances. If equipment has a useful life of more than one year and exceeds the minimum cost level of the facility, the manager may request the cost originates from the capital budget of the facility (Yoder-Wise, 2012). Large equipment such as a patient lift, which costs $3000 per lift, would be beneficial to the staff and

Keep using the old machine incurs higher cost(higher EAA) than replacing it with the new one. Therefore assuming sales are equal for both cases, when sales is smaller than 328338.07 and greater than 434036.67, Fonderia di Torino S.p.A should definitely replace the old machine with the new automated machine.

When making a purchase to improve on many areas of operations there are always factors to take into consideration. There will be a great amount of capital expenditure for this equipment; however the potential for higher return on investment is remarkable. The initial cost of purchasing the MAGNETOM is approximately $ 1 million. There will be an additional cost of $500,000 to operate and maintain the machine. These costs will be reimbursed within the first eight months of extensive utilization if the all marketing for the machine is on point. Since we are currently paying a technician to operate our out of date machinery, there is no reason why this prediction cannot become reality. There will also be an offset of income inherited by the lack of errors made by the technicians after they have trained for the new machine . ("Magnetom espree -," 2013)

The next factor to consider is competitive position and healthcare firms can substantially ensure higher quality of care when pricing there products and services at an increased level. Aside from pricing, cost is another major aspect since it can drastically affect a company’s competitive position. A hard investment would involve a MRI device that insurance companies or healthcare organizations could reimburse the office at a higher rate for providing the patients of improved cost-efficient results. As a result, such benefits accrue primarily from savings in drug expenditures, improved utilization of radiology tests, better capture of charges, and decreased billing errors, (Wang et al., 2003). Physician providers are always in competition with the latest and greatest technology, EMR system, and most effective medication for patients.

hospital’s leadership and physicians total asset control. Customization of the facility and control of the facility is a definite advantage. Appeal While renovating existing facilities should be more cost effective, it is still a short-term solution. A newly designed facility is a long-term initiative. New facilities bring in future concepts and all kinds of opportunities for new services. One of the other primary advantages to a new facility is that it has appeal to physicians, future recruits, current employees, and potential hospital donors. New facilities appeal to community investors as well. Financial According to one commercial real estate acquisitions and marketing manager, the assumption that leasing real estate costs less than building or buying real estate assets is completely fallacious. Because hospitals use different

Due to the technological advances in the medical industry, the clinic has decided on advanced medical equipment to provide quality care to the patients. The equipment that will be purchased is a High- Speed CT Scanner, X-Ray Machine, and an Ultrasound Machine. This equipment will allow more quick and efficient test and treatment. The options that can be made include: buying new or refurbished equipment with an option of a loan, acquiring on capital or operating lease. During this phase, I chose the most cost effective option to acquire the equipment. To acquire the equipment, I chose the operating lease. Since there are always potential advances in technology, buying the equipment may not be a good idea. In the long term, the equipment that was purchased will likely be replaced by newer technology in a few years. Due to the decisions of acquiring new equipment, the clinic is now doing well and the profits are growing which allowed growth for the clinic.

To acquire the equipment, I chose the operating lease. Since there are always potential advances in technology, buying the equipment may not be a good idea. In the long term, the equipment that was purchased will likely be replaced by newer technology in a few years. Due to the decisions of acquiring new equipment, the clinic is now doing well and the profits are growing which allowed growth for the clinic.

The current machine is more than adequate for what we do. I know at some point maintenance will price us into a new machine and Peter has already sent us an estimate.

Also, x-ray machines last for a long time, the average life-span 15 years. However, it would have been better for EHC to purchase under an operating lease an ultrasound machine instead of a capital lease. An operating lease has lower upfront payment and lower monthly installments. Having more upgrade options with an operating lease, that will help take care of technological obsolescence.

Everything will be scanned onto the computer such as the patient’s personal information, medical history, medicines that were prescribed to the patient or any medications that the patient is currently taken, and any diagnosis the doctor has concluded to including any referrals to any specialists. The system itself does cost money to attain plus to install the software onto all of the computers will also cost money since an IT technician would have to be called in order to get everything running correctly. Also training staff on how to use the system will take time.

The first expense I will start with is the expense that is considered the overhead costs. There are no overhead costs because your company has a vacant building that will be perfect for housing the MRI machine. The next expense will be the purchase price of the MRI machine which is two million five hundred thousand dollars. The next expense to take into account is the annual maintenance costs of one hundred and twenty five thousand dollars. The annual maintenance costs needs to be multiplied by five years, which means the cost for the maintenance comes out to six hundred and twenty five thousand dollars. The next expense associated with the MRI machine is the site preparation, site and installation cost of five hundred thousand dollars. The next expense associated with having an MRI in your network is the labor costs. The annual labor cost including benefits for the one and half employees is seventy thousand dollars. The annual costs of the staff have to be multiplied by five years and that equals out to be three hundred and fifty thousand dollars. The final expense to include is the supply costs for five years of running an MRI machine. The supply cost per scan is forty dollars. The MRI machine will be running for fifty weeks annually with twenty seven scans being done every week. When configuring the amount of supplies used annually you need to multiple twenty seven

In the medical sales industry, most of the competitive advantage comes from the doctor preference. Because of the high cost and amount of time that it takes to learn how to use a different company’s medical equipment, most doctors use one company’s products for life. Stryker has always recognized the existence of brand loyalty and has made it a top priority to develop excellent relationships with its customers. Hospitals that use Stryker’s equipment are more likely to continue to buy from Stryker because of their diverse product offerings. The key factors that differentiate Stryker from its competitors are innovation, reliability, service and reputation. As of December 31, 2010, Stryker owned approximately 1,125 United