EXECUTIVE SUMMARY
The Nightlife Hospital, a leading health facility in the United States seeks a capital expenditure justification for the purchase of an MRI machine. This design of the machine will utilize the current technology so as to ensure best services to the customers. The machine will solve the current problems caused by referring patients to other hospitals and waiting for test results in before treating them. The machine should meet the demand by patients for better and more comfortable scanning operations. It should also be cheap, sustainable, and safe for the patients and the clinicians. The best MRI machine the hospital would purchase is a Discovery MR750W 3.0T from the General Electric Company (GE). Discovery MR750W 3.0T is relatively cheap, and its design utilizes wide-bore technology. On installing the scanner, the hospital will earn huge revenues from patients seeking treatment in the facility and those referred by other physicians. However, the hospital will spend a little cost of the revenue on the operation and maintenance of the machine.
Justification of Capital Expenditure
Introduction
The beginning of the 21st century has seen the Americans endured challenges that have not be witnessed since the end of the Great Depression of the 1930s. The recent banking and financial crisis hitting most parts of the world has made it increasingly more expensive and challenging for hospitals to finance their expansion projects. Hospitals are now shifting their capital funds towards sustainable infrastructure while at the same time reducing the overall capital spending. The crisis has seen many medical practitioners and other sectors of the economy increase their interests and lease rates and lessen the amount of debts being lent to customers so as to reduce risks. The way the company spends its capital is essential for its expansion and provision of quality services to its clients. Money is a scarce resource in all sectors of the economy, no matter the size of the company. Every company needs therefore to have a stringent level of justification of their capital expenditures on various infrastructures it wants to put in place. Hospitals invest in capital projects so as to boost profitability and keep their business growing. Such projects include purchasing of new medical equipment, purchasing new facilities and renovating the existing hospitals. These projects ensure that the hospital remains competitive regarding patient satisfaction, quality of care, hospital prices and profits and patient satisfaction (Margaret, 2014).
Concurrent to the present economic recession, the technological revolution is arguably at the peak in the United States. Technology has transformed healthcare industry from the laboratory testing, awareness, and diagnosis of infections and to the management of patients in the hospital. Many clinicians are now using smartphones to educate their consumers on the management of the chronic illnesses. Installation of Magnetic Resonance Imaging (MRI) machine can further improve the quality of services in medical facilities. An MRI is an important machine that every major health facility needs to own. Clinicians use the equipment frequently to scan the inside of patients’ bodies in search of abnormalities in internal organs, spinal cord, heart, bones, and breasts (Schuhmann, 2009).The scanner can detect warning signs and symptoms of the disease, helping the clinicians to get early diagnoses. But, however, why are many large health organizations in America do not own the machine despite its importance? This question has a rather simple answer: the MRI machine is costly and requires justification for the expenditure.
Currently, Nightline Hospital does not own an MRI scanner, and this has affected institution’s operations in many ways. First, the hospital is sending its patients to other health facilities for scanning. This has caused delays as doctors have to wait for test results from these hospitals so as to continue with the patient’s medication. Also, it has cut down the profits since the hospital is contributing a lot of revenues to the other institutions from the patients it sends there for scanning. Moreover, the lack of the scanner is damaging the image of the hospital to its customers and the public, which causes them to lose trust in the hospital’s medical capability.
The machine to be purchased by the Nightlife Hospital should be able to gather for clinicians’ and patients’ needs. The equipment should be affordable to the institution. It should be located in the United States so as to reduce the costs of transporting it. Its replacements parts should be easily available in order to reduce the costs of maintaining the equipment. The scanner should also be environment-friendly, and it should meet the American College of Radiology’s four-zone plan for MRI facilities. The plan provides a safe environment for staff and patients for any MRI machine, with appropriate placement of waiting and changing rooms. The MRI scanner should have a warranty of more than five years and after expiration-warranty services to ensure that the machine lasts longer. The services should be stated and signed during the purchase of the machine and should have less fee.
The company where the scanner is to purchased should provide technical support and system updates of the equipment which should last for more than ten years of the use of the equipment. Technical assistance should be readily accessible via a toll-free number, and system updates should be provided for free since their goal is to enhance the performance of the equipment and to eliminate a manufacturer malfunction. Furthermore, the size of the equipment should be moderate so as to fit into the new constructed Nightlife Scanning Lab. This will ensure that the equipment does not temper with other activities in the facility.
Discovery MR750W 3.0T
The best MRI machine the hospital would purchase is a Discovery MR750W 3.0T from the General Electric Company (GE). The MR750W meets all the facility’s considerations, and it is one of the latest GE healthcare’s innovations that utilize wide-bore technology. GE Company is located in New York; hence this will save on the facility’s costs of transporting the equipment. The wide bore Tesla system is designed to meet the needs of the clinicians and patients. It has an Optical RF, a 50 cm usable FOV, MultiDrive RF Transmit, and high-performance gradient, which meets the patient demand for a better and more comfortable scanning experience. Discovery MR750W 3.0T costs $51, 615 according to the GE company. Nightlife Hospital will have to source most of the funds to meet this amount from the financial institutions such as banks. A bank loan will be appropriate to aid the procurement. The hospital should consider purchasing the equipment to be an investment. The hospital will derive revenue from the patients seeking treatments and those been referred to the institution by other clinicians.
Benefits of Discovery MR750W 3.0T
Discovery MR750W 3.0T will be essential for the generation of revenue from a large number of customers requesting the MRI scanner services. The patients undergoing scanning will be charged a minimum of $600 and a maximum of $4,000. On average, the facility receives between four hundred and five hundred patients a day, with fifteen percent of them having an MRI scanning. Therefore, the physicians can perform between thirty and forty scans a day. This figure shows that Nightlife Hospital will be making as much as $40,000 a day using the MRI scanner.
The cost of operating the MRI machine will be incurred mostly through maintenance and electricity bills. The equipment needs to be serviced at least twice a month to enhance its functionality, which consumes a significant amount of revenue that it brings in. Additionally, frequent use of the scanner will mean the hospital utility bills will keep on increasing, consuming even more of the profit. However, considering the hospital’s the huge urge to have the equipment, purchasing an MRI machine is absolutely the best option for the management.
References
Margaret, P. (2014). US Hospital Industry Spending. Market Realist: Nov 6, 2014. Pg. 2-
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Schuhmann, T. (2009). Hospital Capital Spending. Healthcare Financial Management:
November 2009. Pg. 1-10.
