Chapter 1, Problem 3EAGP1

I. Hospital Administration

Southwest Hospital has an operating room used only for laser eye surgery. The annual cost of rent, heat and electricity for the operating room and its equipment is $1.08 million, and the annual salaries of the people who staff this room total $1.6 million.

The cost for each surgery is $2395, which includes all medical supplies and drugs and a complimentary bouquet of flowers for each patient. In addition, one-quarter of the patients require dark glasses that the hospital provides at no additional charge but cost $20 per pair. The hospital receives a payment of 56000 for each eye operation performed.

Southwest Hospital currently averages 70 laser eye operations per month. One of the nurses has just learned about a machine that would reduce by 5100 per patient the amount of medical supplies needed. It can be leased for 5100.000 annually. Keeping in mind the financial cost and benefits, advise the hospital on whether it should lease this machine.