Capital Justification Purchase Essay

Custom Student Mr. Teacher ENG 1001-04 29 March 2016

Capital Justification Purchase

This assignment requires justification to the vice president for approval to purchase a major piece of equipment for use in the radiology department of the hospital. My main objective is to provide valuable information to justify the cost as well as provide critical data that substantiates the ROI. Additionally, the report will have detailed information outlining the benefits that will assist in the decision making process and address all concerns and questions relating to the purchase. Lastly, the report will include how beneficial and profitable the technology will be for the hospital. The radiology department is in need of a MRI machine to better provide safer and reliable results for detecting breast cancer. I have done extensive research on the several different types of technological devices and believe that I have come up with the best model. In considering the Siemens’s MAGNETOM Espree-Pink the following six major categories to follow were taken into account to help substantiate the purchase:” 1) available alternative; available resources; cost data; benefit data; prior performance, and risk projection.” (Cleverely, et al, 2011, pg. 426).

Based upon the research conducted, I believe that this model will improve the quality of patient care, help streamline breast exams and detect the disease with greater confidence. Research shows that MRI’s can be helpful in breast care, especially in high-risk women. The MAGNETOM Espree –Pink offers a unique design and has demonstrated that no other system comes close to offering patient comfort. This state of the art equipment will take us into the future with the latest technological advances. MAGNETOM Espree-Pink combines an open-bore design with the Sentinelle breast coil for Siemens which offers exceptional breast imagining and biopsy capabilities. And, the future is built in, for instance should our needs change over time, we have the option to upgrade the system to a MAGNETOM Espree whole-body scanner –with all the latest advanced applications and renowned technology. This will allow us the capabilities of having the ability to detect cancer in other areas of the body. MAGNETOM Espree-Pink offers the following: Pink Comfort, Pink Workflow and Pink Applications.

Pink Comfort can greatly reduce errors due to patient movement, resulting in better image quality. “The open-bore design offers an exclusive 70 cm inner diameter, providing exceptional comfort. It enables patients to feel more at ease, particularly claustrophobic or obese patients. Pink Workflow provides a dedicated multimodality Workplace that offers standard MRI evaluation, it enhances breast reading and reporting, and it is coupled with syngo BreVis, a computer-aided tool for real-time breast analysis. It is easy-to-use, fast, and reliable. Pink Applications allows for faster imaging, excellent clinical detail, shorter exams – all part of the dedicated solution for breast care. With its optimized applications, MAGNETOM Espree-Pink enables you to see more, by improving accuracy and showing more details. These applications enable truly comprehensive breast care, helping to improve diagnostic confidence as well as patient care.” (www.siemens.com/espree-pink)

Financial Considerations

In the acquiring of the MAGNETOM Espree-Pink there are some financial aspects to be considered. The manufacture’s price of the equipment is listed at $1.5 million and listed are a couple of options that could provide for this capital expenditure. We would like to look at available alternatives to acquiring this equipment: purchasing or leasing. The cost benefits of leasing include the ability to lease for a short period of time with less expense and the ability to upgrade the equipment as technology changes. For example, with a five-year lease of $150,000 per year, we will pay $750,000 over the life of lease. The immediate rate of return may be greater which may reduce the expense of the equipment. For example: The assumption is that the charge per usage is $2000 and numbers are based on number of patients seen per year.# of Patients

Cost of Equipment Lease per year
Operations Cost Per Incidence
Total Expense
Profit
750
$150,000
$500
$525,000
$975,000
1000
$150,000
$500
$650,000
$1.35 million
1250
$150,000
$500
$775,000
$1.725 million

The cost benefit of purchasing the equipment is that it would be owned outright by the hospital. The ROI may be seen within the first three years. This can be done by purchasing directly or by financing the purchase. We now have to consider the fixed cost of the purchase price per year and its depreciation and interest. Our operation cost per incidence will now remain the same as leasing the equipment. Our number of patients is assumed to be the same as our option for leasing along with our procedure charge of $2000. # of Patients

Cost of Equipment Purchase
Operations Cost Per Incidence
Total Expense
Profit
750
$315,000
$500
$690,000
$810,000
1000
$315,000
$500
$815,000
$1.185 million
1250
$315,000
$500
$940,000
$1.560 million

In conclusion, the technological advances of MAGNETOM Espree-Pink can provide numerous benefit to the radiology department by enhancing the speed and accuracy of diagnoses, facilitating earlier and more accurate treatment predicating breast cancer and generating additional revenue. The initial cost of purchasing or leasing will be a great expense to the hospital, but the ROI will outweigh the initial cost over a five year period. I believe that the MAGNETOM Espree-Pink will meet the critical needs of the hospital and our community in which we serve.

References
Cleverley, William, O., Cleverley, James, O., & Song, Paula, H. (2011). Essentials of health care
finance – 7th ed.
MAGNETOM Espree-Pink (http://usa.healthcare.siemens.com/magnetic-resonance-imaging/0- 35-to-1-5tmri-scanner/magnetom-espree-pink)

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