Capital Investments: New X-Ray Machine

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Table of Contents

Introduction
Machine description
Management goals
Economic analysis of the investment
Organisational Goals met by the investment
How the expenditure would relate to the needs of the organization
How it would be beneficial to the organization
Justification of the expense
Conclusion
References

Introduction

Capital investments are long term decisions, made to acquire a long term asset in a hospital. Fixed assets are used to assist in offering services in the hospital. The decision to buy a new asset varies among hospitals but reasons include, automation, better services from the new machine or efficiency in hospital operations. Buying an asset is a costly investment which needs to be thought and well interpolated. Cost benefit analysis of the investment should be done to ensure that an asset acquired results to a gain to the hospital. Both financial and social cost should be considered (Raciborska, Hernández & Glassman, 2008).

Central Carolina Hospital offers medical services to residents of Lee County and its environs. The mission of the hospital is to provide efficient and affordable services to its patients. In the efforts of offering quality services to its customers, the company aims to buy a new x-ray machine (Central Carolina Hospital Official website, 2010). The cost of the machine together with installation cost amount to $6 million. This paper analysis the decision made by the management.

Machine description

The machine to be adopted is called Novel X-ray machine, the efficiency and the level of technological development adopted by the machine will assist in detecting variations of up to 100 nanometres across. The precision of the machine is narrower than the size of a human hair. It uses complex computer algorithms which are combined by powerful light sources for better results. The machine is a whole body X-ray machine which approximately four times faster than ordinary machines. The cost of operating is slightly higher than the ordinary machine at the hospital; however the machine is more reliable than the current machine.

The machine will require two operators like the current one and the most appropriate method of having qualified staff to handle it is training the operators of the current one on the differences that the new one has brought and how to operate and interpolate results from it (Park, 2010).

Management goals

The decision is supported by top Central Carolina Hospital management team; there are different goals that the machine is expected to fulfil. In line with the hospitals vision and mission statement, a new X-ray machine is likely to have an increased service delivery to patients of the hospital. Technology is on the rise and thus there have been new X-ray machines which offer a better service to patients in the market. The main goal for the investment is to improve service delivery. When services have been improved, then the hospital will attain its main goal of offering quality services to the people of Lee County and its environs.

The move will involve an expenditure; this include both purchasing the machine and installation costs. The total cost is expected to be $6 million. After the machine has been installed, there will be gains in terms of X-rays fees and on the other hand there will be operation cost in terms of operator’s salaries and maintenance costs. However the revenue from the investment will be higher than the costs of the investments. Before investing in the X-ray machine, a net product value (NPV) analysis was will be conducted and net value of the project estimated. The net effect will be financial gain to the company.

The quality of X-ray services from the machines will higher than those of the current machine. Its precision is up to 100 nanometres across. X-ray machines pass X-ray pulses which are passing through soft tissues then absorbed by hard tissues; when doing this they are then reflected on a radiographic film. To get a clear image for interpolation, the power of the rays are accelerated a move faster however this is dangerous to human body. The move has resulted to cancer at some instances. When the new machine will be adopted, it will be in a position to offer precise images that can easily be interpolated without having to increase the power of the X-rays.

The end results are an increased efficiency and precision. The services of the hospital will be increased accordingly. The machine will use a different approach; it will not be focused on absorption of X-rays rays by hard tissues but will be interested with any diversion or refraction as the rays pass through different services. The approach is called phase contrast. It offers a clearer image (Central Carolina Hospital Official website, 2010).

The machine will offer quality services. The machine is faster that the current machines and thus a patient do not have to wait for long for results. The images are clearer and thus interpolating the images is facilitated. Medical practitioners using the images will have an easy time in making decisions about the condition of a patient a move that will assist them in offering better services.

Employees working directly with the machine will have a better working condition which they will not be exposed to radioactive components. This will make them more precise when undertaking their duties. Interpolators of images from the machine will have an easy time, they will be able to make precise decisions more appropriately. This will increase service delivery and they will feel motivated by the quality services they are offering.

The machine being of its kind in the locality of Lee County will attract patients to come for consultancy in the hospital. There will also be referral case from other hospitals whose machines do not give a desired image. This is an extra income to the hospital as it offers quality services to its patients (Cooke-Davies, Crawford & Lechler, 2009).

Economic analysis of the investment

To buy the product, the hospital will incur a huge financial outflow; this is in both purchasing and installation cost. The old machine room will b the same one to be used with the machine however there is need to undertake some modifications of its structure.

Costs incurred will be as follows

The above are the initial costs for the machine. There will be others costs of salaries and maintenance which are estimated to be as follows;

Costs incurred will be as follows

The machine is expected to have a good working condition for the next five years. It will have no scrap value. The numbers of patients that will be requiring services of the machine in a day on average are estimated to be 10 people. This estimate is based on the current need for the service although it is expected that the demand will rise as the efficiency of the machine is known (Seninger & Smith, 2004).

The average cost of X-rays services will be at $10 per patients. This makes the amount derived from the machine as $3660 in a year. The cost of capital in the country is at 10%. Let’s take an NPV analysis of the project;

*Years costs benefits net benefits discounted net benefit.*

From the above NPV analysis it is clear that the machine will have a net economical benefit to the hospital. This is over and above social benefits in terms of quality and improvement of services to the community which cannot be given a financial figure. In the five years that the machine will be in operation the scrap value have been estimated to be Zero however there will be scrap value. Although operational costs of the machine have increased, the demand and the cost that will be charged on using the machine will far outdo the increased operational costs.

Investing in the machine will leave the hospital at a better financial standing than the current states. From a different angle, the machine efficiency will increase the popularity of the hospital and gain from an increased reputation. More patients will be willing to come to the hospital for services. This will bring more profit to the hospital. On the other hand operators of the machine will have no exposure to radioactive elements from the machine and thus they will have an improved health condition (Aidemark, 2001).

Organisational Goals met by the investment

The mission of Central Carolina Hospital is to offer quality services to its clients. The hospital aims at providing technologically advanced services which satisfy customers and solve their health complications. There are different units which will be assisted by the machine they include;

Patient care

To take good care to a patient, the hospital must establish with precision the medical condition that the patient is suffering from. Using the new x-ray machine, the hospital will be able to diagnose the condition of the patient with more precision. They will be able to know the disease that the patient is suffering from and give medication to that effect. When patients are offered good affordable service the nation becomes a healthy nation which is one of the objectives that Central Carolina Hospital want to attain.

Medical and allied health education

The level of precision that the machine will offer will assist in determining of medical conditions which might have been ignored by previous levels of technology. The hospital will be able to analyse a disease from its micro stage of development. When this is done it will assist in developing medicine. The hospital trains nurses and offers internship programs to students. They will get a chance of getting a clearer image of how processes are done and facilitate their learning (Ika, 2009).

Community service

The hospital has corporate social responsibilities programs which include community enlighten and free clinics time to time. With the machine, the practitioner will have more information about the health condition of the people. The information will be shared with the community and it will be assisted in maintaining their health.

Cost containment

In term of fees, the machine will be charging higher than the old machine with $1 per patient. However the cost cannot be compared with the services. The machine can undertake a whole body scan rather than undertaking scans for different parts at different costs. In the end the cost of the machine will be low.

Leadership role and clinical research

The machine will give information on areas that the current level of research have not done. On the other hand when a research that requires an X-ray is to be conducted, the machine will give a better interpolation of result. The researcher can use images from the machine to give better results (Pons, 2008).

How the expenditure would relate to the needs of the organization

The hospital has over 100 staffs with a sole aim of providing quality services to its clients. Services offered by the hospital are both inpatient and outpatient. When the machine has been adopted, then these services will be enhanced further. In conducting its health care businesses, there is need for X-ray services to various patients with different conditions. Such conditions include fractures, Cancers and other conditions which are cured through exposure to radioactive rays. The organisation need better results if it is to interpolate and attend to their patients more appropriately.

The machine will assist the hospital physicians diagnose a patient with a high precision than they previously were able to give. This will facilitate better medical care.

How it would be beneficial to the organization

The benefit to the hospital is in two folds; efficiency aspects and economical gain. Efficiency gains relate to the increased quality of services that the machine will assist in giving. There will be much precision from clear images from the machine. This will facilitate provision of good medical care. This goes in line with the hospitals mission of providing customer focused services which are innovated regularly. When patients are treated better with the help of the machine, it leads to more business as the brand name of the hospital builds.

The machine is expected to last for the next five years with a good working condition. When the expenditure within the five years and the cost of acquisition are compared, the net effect is an economic gain to the hospital. Consequently, the increased quality of services leads to a strong brand name a move that will facilitate more business in the hospital. The end result is a gain to the hospital (Cleverly & Cameron, 2007).

Justification of the expense

The expense will benefit the hospital in many aspects. It will go a long way in assisting the hospital meet it objectives. X-ray service department is a support department that assist medical practitioners prescribing medication to patients make an informed decision. When the plant is implemented, the hospital will benefit from better precise decisions facilitated by the machine.

The companies mission statement is divided into four section; each section is likely to benefit from the machine in one way or another, the following are the segments and the way they are likely to benefit;

Patients

Patients will get better services which is the aim of the hospital. Those people who require the service will get it under a single roof and at a price which is relatively lower than if they were using traditional X-ray systems. Images from the machine will be clearer and thus prescribing medical practitioners will prescribe with more precision. The end result will be satisfied customers.

Employees

The company aims at providing a good working environment to its staff. The machine is more efficient than the old machine; it emits minimal radioactive rays and thus it makes the working environment better than if the older one was used. The machine operates as a support service to the medical practitioner; for a motivated team, support system should be good. The machine thus facilitates motivation within the hospital.

Physicians

Medical experts operating in the hospital will be able to make a more precise decision regarding the condition of the patient. Images from the machine are clear and easy to analyse. In training medical practitioners will be trained better when the system is put in place. They will be able to understand underlying factors that course different diseases a move that can go far in development of proper medicines to various conditions established (Central Carolina Hospital Official website, 2010).

Community

The hospital aims at providing quality affordable service to the people. The machine is one of the efficient machines in X-rays development and thus the community will benefit a great deal from the expenditure. Patients will get better services from the hospital. Development and research will be facilitated as more human disease conditions are diagnosed. The benefits accrue to the finical service consumer. Other than patients of the hospital, the hospital will offer referral services to patients sent from neighbouring hospitals which do not have such a facility. This will boost medical care provision among the community members.

X-ray department will be able to offer timely results to other departments since the machine is fast and efficient. These results will be utilized in making decisions. Working condition of the department will be improved a move that will be felt in the entire hospital. If the X-ray department services are improved, all departments which depend on this section for delivery will also be improved (Finkler & Ward, 2006).

Conclusion

Capital investment is a decision that involves an outflow of money from a hospital or the organisation involved. The decision should be evaluated to ensure that the end result is a gain to the organisation. Central Carolina Hospital is a hospital located in Lee County and serves the locality. It aims at providing quality affordable service to its patients. In this effort the company aims at buying a new modern X-ray machine. The cost of the machine is estimated to be $6million. The machine will give an economic benefit to the hospital through collection fees charged to patients scanned by the machine.

From an indirect angle, the machine will give the hospital a good reputation a move that will create customer loyalty and increase in customers. The hospital will cater for X-ray referral cases from other hospitals as well as research of new cases that the machine will facilitate in bringing up. X-ray department is a support department and thus when the machine is being used; service delivery from sections depending on the results of X-ray will be facilitated. This improves customer delivery and the aim of the hospital wants met.

References

Aidemark, L. (2001). Managed health care perspectives: a study of management accounting reforms on managing financial difficulties in a health care organization, European Accounting Review, 10(3), 545-560. Web.

Central Carolina Hospital Official website. (2010). Web.

Cleverly, W. O., & Cameron, A. E. (2007). Essentials of health care finance (6th ed.). Sudbury, MA: Jones and Bartlett.

Cooke-Davies, T., Crawford, L., & Lechler, T. (2009). Project management systems: Moving project management from an operational to a strategic discipline. Project Management Journal, 40(1), 110-123. Web.

Finkler, S. A., & Ward, D. M. (2006). Accounting fundamentals for health care management. Sudbury, MA: Jones and Bartlett.

Ika, L. (2009). Project success as a topic in project management journals. Project Management Journal, 40(4), 6-19. Web.

Park, A. (2010). X-Ray Vision. Time, 176(14), 61. Web.

Pons, D. (2008). Project management for new product development. Project Management Journal, 39(2), 82-97. Web.

Raciborska, D., Hernández, P., & Glassman, A. (2008). Accounting For Health Spending In Developing Countries. Health Affairs, 27(5), 1371-1380. Web.

Seninger, S., & Smith, D. (2004). Cost Accounting for End-of-Life Care: Recommendations to the Field by the Cost Accounting Workgroup. Journal of Health Care Finance, 30(4), 79-92. Web.

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