Purchasing new equipment can provide an opportunity for increased profit margins and additional revenue. However, various components have to be considered in the process, including the prices for the installation, operating costs, salaries, and others that help determine whether the investment would provide an anticipated result. This paper aims to examine the cost and benefit analysis for a healthcare clinic and identify whether purchasing an MRI scanner would benefit the establishment.
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Opportunity Cost and Financial Strategy of the Organization
The notion in question defines the value of a particular choice that an organization makes when compared to opportunities that will not be considered. It is the primary component of the cost and benefit analysis because many intangible aspects affect the quality and outcomes of services. The purchase of an MRI machine influences the profit margin of a healthcare establishment because the clinic will be able to provide additional services, therefore increasing the overall revenue of the organization.
This will result in a larger volume of reimbursement payments and increased capital efficiency. Additionally, the portfolio of services that generate profit will expand. In this case, the analysis has shown that the clinic should purchase the MRI machine because the benefits significantly outweigh the costs of buying and setting up the device.
The MRI services provide necessary input into the diagnosing process. According to Westermann, Schick, Graves, Duchman, and Weinstein (2016), “more than 100 MRIs per 1000 inhabitants have performed in the United States annually, more than almost every other country” (p. 580). The purchase will align with the organization’s strategy to increase revenue by adding this service. Additionally, it will serve the community by ensuring that patients can have access to the necessary diagnostic tools. In regards to the industry care, the patient center approach implies a need to focus on ensuring that individuals receive quality care, which will be facilitated by providing in-house MRI that will allow the clinic to control the process and offer additional consultations to the patients.
Cost and Benefit Analysis and Action Plan
The primary aspect that should be considered with this purchase is customer satisfaction, as currently, patients have to visit other clinics to have an MRI scan. According to Faria et al. (2018), MRI is among the most cost-effective screening approaches that currently exist. The need to perform a procedure in one place and get a consultation in another is an inconvenience. Some clients may choose a different care provider that offers the service.
A non-monetary cost of customer satisfaction is considered in the analysis, which according to Plowman (n.d.) results in “increased sales, increased loyalty, and increased instances of recommending others” (para. 5). Based on the cost and benefit analysis, it can be concluded that the clinic can purchase and install an MRI scanner.
The price of an MRI machine for this project is the lowest price on the market and is estimated. This choice was made because the clinic should evaluate whether purchasing such equipment is justified; therefore, choosing the most affordable machine and identifying other costs. Therefore, the clinic should buy an MRI scanner for approximately $150,000 (Glover, 2014). It is anticipated that the clinic will have to increase its operating budget because new medical professionals will have to be hired. Installation costs include preparing office facilities, equipping an MRI suite, and setting up the machine and are estimated at $60,000.Yearly operation costs were added to ensure that the device can work, which involves factors such as electricity and maintenance.
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The personnel salary was estimated by using an average national wage for a radiologist and medical receptionist (“Medical receptionist salaries,” 2018; “Radiologist salaries in the United States,” 2018). Additional services that physicians will be able to provide due to a decrease in time for a procedure was included in the non-monetarily benefits. According to Bernstein (2014), an average physician can provide healthcare services to approximately 2,500 individuals per year, based on surveys from 2013. It can be concluded that a clinic will be able to perform at least 250 MRI related visits per one medical professional.
Non-monetary costs involve potential risks that the clinic can encounter. For instance, the MRI machine may break down or require repairs, which would result in the inability to use it. For these calculations, the cost of one procedure was multiplied by the average number of MRI scans that can be performed in a day. It will allow being prepared for such events and will help evaluate the purchase more explicitly. In total, the clinic will have to invest $992,396 in the first year to purchase and prepare the equipment for use.
The direct profit was calculated by examining the averaged time for the procedure, which is about an hour, the number of hours that a radiologist works for, and the price per one process. It should be noted that these calculations include both patients from the clinic and those who were received a recommendation to use its services, thus a non-financial aspect is considered. Additionally, the timeframe for services will decrease, benefiting both patients and physicians because radiologists will be able to interpret more scan results. According to Schock (2015), an important aspect to consider is the eligibility for Medicare, as not all MRI scanners are certified for use in the program.
Therefore, the operational costs for eligible equipment are part of the calculations. Penetration uncertainties and market saturation were not considered because the clinic has a sufficient number of clients that have to visit other diagnostics centers for these scans; therefore no such risks are present.
The clinic should use the information form the cost and benefit analysis, including the price for equipment and operating expenses information to create an action plan. Firstly, the contract for purchasing the MRI machine should be signed with a seller. The clinic should pay the expenses outright to avoid excessive spending. The contractor will install the device and ensure its maintenance should be located, to ensure that the equipment can operate. After that, the establishment should hire four staff members that will be working with the MRI machine and begin to provide the service to its customers.
Conclusion and Recommendation
Overall, the cost and benefit analysis of purchasing the MRI equipment has shown that the clinic and its physicians would be able to increase the establishment’s revenue significantly by providing MRI services. An essential factor in this decision-making process is that the clinic already has patients that require the scans; however, those are referred to the outsourcing facilities. Therefore, no additional expenses for marketing will be necessary to ensure that the purchase is profitable. The costs for the equipment, installation, operating expenses, and personnel salaries are less significant than the direct profit from the MRI services and intangible values.
Bernstein, L. (2014). How many patients should your doctor see each day? The Washington Post. Web.
Faria, R., Soares, M. O., Spackman, E., Ahmed, H. U., Brown, L. C., Kaplan, R., … Sculpher, M. J. (2018). Optimising the diagnosis of prostate cancer in the era of multiparametric magnetic resonance imaging: A cost-effectiveness analysis based on the Prostate MR Imaging Study (PROMIS). European Urology, 73(1), 23-30.
Glover, L. (2014). Why does an MRI cost so darn much? Time. Web.
Medical receptionist salaries. (2018). Web.
Plowman, N. (n.d.). Tools and template for cost-benefit analysis: Measuring increases in customer and employee satisfaction. Web.
Radiologist salaries in United States. (2018). Web.
Schock, R. (2015). Extremity MRI systems — Costs and other considerations. Web.
Westermann, R. W., Schick, C., Graves, C. M., Duchman, K. R., & Weinstein, S. L. (2016). What does a shoulder MRI cost the consumer? Clinical Orthopaedics and Related Research, 475(3), 580-584.