MHA5006_Banta_Lucresha_Assessment 3-1
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Capella University *
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5006
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Health Science
Date
Dec 6, 2023
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docx
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Uploaded by ChancellorCapybara3440
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Cost-Benefit Analysis
Capella University
Lucresha Banta, RN, BSN
November 2023
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Cost-Benefit Analysis
A cost-benefit analysis looks at data related to purchasing a large piece of equipment, the implementation of new policies, and the costs associated with making this decision. This analysis
will examine the monetary and non-monetary benefits of purchasing an MRI for an extensive physician practice. The study takes into consideration the financial impact of buying an MRI machine, as well as the opportunity costs, which include non-monetary benefits of owning an MRI machine. Opportunity Costs
Opportunity costs are those costs that could have a potential benefit over the next best alternative available (Turner et al., 2023). Opportunity costs are not just financial costs but include factors such as an individual’s time, patient satisfaction, value for the money, and ease of
access to the resource or intervention. Opportunity costs also consider the opportunities that may become available when deciding or, in this case, purchasing an MRI machine. The opportunity costs look at the future benefits of a decision; in other words, even if the decision initially loses money, will it be beneficial in the long run (Fernando, J. 2023)?
As this practice continues to grow, purchasing an MRI machine to enhance the services provided to patients will be an essential step. The initial cost of buying the machine is $350,000. A straight-out purchase of the machine will allow for increased profits in the following years. Along with the price of the MRI, the practice must set up an appropriate room for the machine to
be housed in, train for the use of the device, and look at the staff needed to provide the services, including a radiology technologist and a radiologist. Since this is an already established practice, the billing will already be taken care of by current staff. This also pertains to other ancillary staff,
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including the janitorial and marketing team. To keep the machine maintained, it will be essential to have a service contract, which is $100,000 per year. Another significant cost associated with bringing in an MRI will be personnel to operate. According to www.salary.com, the salary for a radiologist is $454,000/year. According to The Mayo Clinic, the salary for a radiology technologist is $61,000/year. These will be recurring costs from year to year. Benefits of having the MRI will include reimbursement income, reduced turn-around times for results, increased patient satisfaction, increased patient numbers, and no longer needing
to outsource the services. Providing the MRI service in-house increases productivity. Less time will be used to make phone calls to schedule appointments, including wait times for follow-up calls, reduced time to schedule appointments, and reduced time in reading and receiving the reports of the scans. These processes alone will increase patient satisfaction and possibly the number of patients coming to the clinic. Plan of action
Based on the cost-benefit analysis, it is recommended that the clinic purchase the MRI machine. Though there will be a significant expense upfront for buying, planning, building renovations, training, and hiring the correct personnel to perform needed functions, this will be a cost that will be reduced over the years of use. Purchasing the service contract will help cover maintenance costs through the years. The practice already being established will help reduce other costs such as building costs, janitorial services, billing department costs, marketing costs, and other ancillary employee services. The practice will need to incorporate training on the MRI and implementation of new charting guidelines that will allow integration of the MRI services.
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Income generated from the MRI includes reimbursement in insurance payments, co-pays,
deductibles, and cash income from uninsured patients. This income will increase year-over-year.
Conclusion
After the initial upfront costs, the cost-benefit analysis indicates the medical practice will begin making a profit after the first year. This profit will continue to increase yearly as patient numbers and reimbursement rates grow. In my opinion, it would be beneficial for the practice to purchase an MRI machine. Since growth is a focus of this medical practice, the benefit of moving forward with the purchase and implementation of the MRI machine is a logical next step.
As an established practice with many processes and personnel already in place, the income benefit will outweigh the initial startup costs of obtaining the MRI.
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References
Average Salary by State In (2023) – Forbes Advisor
http://www.brighthubpm.com/project-planning/58181-writing-a-cost-benefit-analysis/
Careers A-Z - Explore Healthcare Careers - Mayo Clinic College of Medicine & Science
Fernando, Jason (2023). Opportunity Cost: Definition, Calculation Formula and Examples. Opportunity Cost: Definition, Calculation Formula, and Examples (investopedia.com)
Quigley, Patrick (2022). Harnessing the self-pay opportunity. Modern Healthcare. Harnessing the
self-pay opportunity | Modern Healthcare
www.salary.com
Turner, H. C., Sandmann, F. G., Downey, L. E., Orangi, S., Teerawattananon, Y., Vassall, A., & Jit, M. (2023). What are economic costs and when should they be used in health economic studies?
Cost Effectiveness and Resource Allocation,
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, 1-11. https://doi.org/10.1186/s12962-023-00436-w
How Much Does It Take To Start A Radiology Imaging Center? - RadsResident