Assessing Capital Expenditure With Mammogram Essays Example
ASSESSING CAPITAL EXPENDITURE WITH MAMMOGRAM
Section II: Establishing AcceptabilityAcceptability of the Device for Stakeholders
(Broek, Boselie and Paauwe, 2013) argued that healthcare projects not only hold a list of business benefits including cost effectiveness, increased profitability etc. for an organization but also address variety of values including life quality, health benefits etc. that are demanded by variety of stakeholders of the system. They further explained that management may be focused on achieving the efficiency while direct patient care employees may be more interested in improvement of quality of life of the patients. (Paul, Ezz, and Kuljis, 2012) stated that even same stakeholders demand different values according to the influential factors including behavioral, environmental social and economic factors. They discussed the fact that values like life quality are demonstrated by personal perceptions about the phenomena and cannot be expressed numerically via applying technical formulas.
In consideration of the theories discussed above, the section is crafted to explain the acceptability of the project by the stakeholders of the addressed health care benefit. The stakeholders important to the project viability and value measurement are management, patient care providers, diagnostic staff, physicians and most importantly patients themselves. However, lack of understanding of patients about complex diagnostic procedures and devices mostly limit their ability to judge the efficiency of any procedure in terms of ease and comfort.
Considering the management’s perspective, the device will be adding value to the NMC as a competitive advantage. If the project’s financial benefits are viable, the project is viable as 3D-imaging based advanced devices are the need of modern clinical setups. Direct interactive staff including doctors, diagnostic staff and patient care nurses mainly shows interest in comparing the features of old system that aid in enhancing the quality of life of the patients that is in term of ease of usage, more accurate and detailed results, time efficiency of devices, data recording capability and other features and give the verdict accordingly. Finally, patients are more interested in ease of procedures, accurate results and decreasing the need for repetitive diagnostic exercises. The proposed device Selenia Dimension Mammography System will optimistically be proven beneficial from all stakeholders’ perspective. It will provide significant help in achieving management’s goal of the NMC to gain competitive advantage of advanced care device, as well as, improve diagnostic procedures via reducing number of post biopsies, image slicing for detailed analysis, and ease of usability.
Research Evidence for the Acceptability of the Device from other Organizations
Considering the stakeholders’ concerns, research about the technology, as well as, device is conducted for assessing the viability of the project. Moreover, it is found that 3D-imaging technology is proven to be the break-through innovation in the field mammography for breast cancer diagnostic. Susan B. Allen Memorial Hospital provide the said service with the Selenia dimension devices and reported that researchers suggest that 3D-imaging detect the breast cancers around 40% earlier than a 2D device further x-ray exposure is also minimal thus enhance quality of life for the patient with same bothering procedure as for 2D-imaging (Schulz-Wendtland et al., 2009). Capital region medical center is one of the introducer of the digital mammography technology and states that mammography is an effective measure to detect the breast cancer far earlier before appearing symptoms and 3D mammography selenium dimensions device allow radiologists to generate and review detailed breast structures thus provides more narrowed outcomes. The upgrading facility of the device’s features is another beneficial and positive point from budgetary aspects as upgrading costs will be definitely lower than considering a wholly new device.
Organizational Risks and Compliance Associated with the Device Purchase and Use
The primary risk associated with any capital purchase is financial loss that is inherited in the term risk. For NMC’s capital purchase decision, it is also applicable that if the organization fails to install efficiently and manage the device with capable staffs the cost of the purchase can be turn into wastage of resources. Further, one major issue in the medical setup is the safety concerns of patients that are quality of life. Many of the stakeholders including patients are highly concerns with the matter. For instance, the exposure of X-rays is found to be dangerous for the patients. Further, many of the civil societies are now pointed out the harms to the health of the patient due to unnecessary exposure to radiology devices. In addition, (Chiasson and Davidson, 2004) stated that health now becomes a complex amalgam of multiple organizations and highly subjective to many structures and regulatory matters. In alignment with that statement, FDA regulates many of the obligations and if the rules are not correctly addressed can raise the issues of legalities (Johnson, 2012).
Some of the beneficial points associated with the device purchase decision for NMC is the upgraded system, facility enhancement, alignment with the new technology, aid in building and maintaining standardization of data management, better quality of life for the patient, and the approval of FDA for the addressed manufacturing company. However, to develop compliance and turn the decision favorable to the organization, NMC need to focus specifically on the strategies that aid the company in avoidance of adversity for the matter.
Recommended Risk Avoidance Strategies
(Kraus, 2000) suggested that risk avoidance process of avoiding the probability of any adverse happening that if successfully done aid health organizations in achieving their desired goals. Some of the risk avoidance strategies are recommended for NMC regarding the purchase and operations of the proposed device.
Make viable financial decision about generating, investing and leasing for the purchase of the machine via critical cost-benefit analysis for the device.
Fulfill FDA requirements and regulations and start functionality of the device according to legislation.
Form legal contracts with the manufacturing company Hologic for professional assistance and quality assurance.
Before starting actual functions, provide full training to the diagnostic staff.
Keep extra concerns for careful procedures that aid in reducing harms to the quality of life of the patients.
Timely educate all stakeholders about the benefits and harm of the technology rationally to keep out of any adverse situation.
Management Roles and Risks
Keeping in concern the uncertainty of future, it should be taken into account that any accident can occur as dealing with the human body is always subjective. Considering the fact management should develop the strategic plan to cope with any occurring adverse situation. For instance, as discussed in part one, leadership is an important aspect of the matter, the management should own any adverse matter as the responsibility of the organization and move forwards accordingly. Further, there must be the implementation of risk control strategies to respond timely and prevent the organization from any critical situation.
Section III: Economic Feasibility
Effect of Capital Purchase on the Service Line and the Productivity of the Business
The decision of National Medical Center related to the installation of a Selenia Dimensions Mammography System a digital mammography device introduced by Hologic will produce a considerable impact on the overall productivity of the business. The initial investment of the $140,000 will have followed long-term productivity implications. Some of the major implications are listed below:
As compared to the 2D mammography, the installation will improve extensive capability enhancement by 41% in the detection of cancers that are insidious.
The recall rate of the cancers among the patients will be reduced by 40%.
The ability to detect the cancers will also improve by approximately 30%.
Improvement in the visualization capability with respect to the cancer detection, masses, and the asymmetric densities among patients (Feng & Sechopoulos, 2012).
The pro forma of the capital expenditure and the impact on the net impact on the revenue is depicted on the basis of the certain assumption. The impact of the addition of the device to the hospital revenue is as follows:
The net present value of the investment is $43,226.85, and the positive NPV implies that investment is considerably advantageous for the NMC. The Net Present Value is the financial tool for the assessment of the viability of the investment considering the factor of the time value of money. It implies the generation of positive inflows over and above the initial investment across the period of assessment.
Owing to the risk associated with the investment in the technology, NMC has also reviewed the cost at which the investment in the mammogram device will run into non-feasible domain. Applying the capital expenditure assessment tool of internal rate of return, it has been found that investment will remain feasible to the point the cost associated will rise over 15%. The internal rate of return is the rate at which outflows and inflows related to the investment become zero.
It is important to mention that the above results are only related to the revenue and cost associated with the capital expenditure in questions. Following are the assumption made of the assessment:
Assumptions based assessment of Revenue and Cost Saving with the under question capital expenditure:
The capital resource for the underlying investment can be generated from various sources. However, it is assumed that investment amount is generated from the debt at the rate of 3% per annum. The debt will be repaid in the period of three years making a yearly installment equal to $30,831.97. In addition to these, following assumptions are made:
The additional revenue will increase by 25% over two years (Pinder, 2013).
The cost saving will increase by 10% in the second year and 25% in the third year.
Other fixed expenditures will increase by one percent. These expenditures are assumed to include the expenses that will be added to the total expenditure of the employees such as related utility bills, etc.
The investment is done by acquiring debt that is assumed to be available at 3%. The rate of the loan is derived from average lending rate available from the World Bank data.
Section IV: Project Summary
National medical center is a hospital and in the phase of improving its functionality. For the purpose, hospital is in the phase of making capital purchase decision about new improved technology devices. The report presented below is a research-based proposal for purchasing and installing a digital mammography device namely Selenia Dimensions Mammography System by Hologic. Capital expenditure proposal formulated is on the grounds of need of hospital for the upgraded system as well as to cater the increasing demand for the technological 3D-imaging facility that is embedded in the said device. The cost of equipment is $140,000 which will be the main part of estimated cost of undertaking the project of installation. Within the proposal, the capital expenditure is justified from many aspects including the intended goals of management, economic, environmental issues, stakeholders’ perspective, and estimated financial cost-benefit analysis of the purchase decision. Further, presenting the research-based evidences final recommendation is also added to support the expenditure decision.
One of the major goals of management is to retain their patients with the providence of the service, as reported in the document; previously patients opt to visit other centers to avail the said facility. Further, management is considering the device with the vision of providing high technology based service to their patients with compassion. Selenia Dimensions Mammography is designed to lower the radioactive dose exposure to the patient and is approved by FDA for the purpose. Further, its 3D-technology allows diagnostic staff to refine the images by machine and thus reduce the extra effort of the patient that fulfills the goal requirement mentioned above. It is a high-tech efficient system that will aid in reducing overall procedural costs for the hospital in many aspects including time-saving, the lesser requirement of staff, standardization of data, and digital information recording and flow. In addition, increased demand for the technology for the mammography purpose will be catered by the installation of the device that will aid hospital gaining the competitive advantage of having that equipment.
Taking specific goals into account, increasing productivity is an ongoing goal of NMC. This goal will be funded by the installation of the device, as number of the daily mammography visits will be increased, as well as diagnostic staff including consulting physicians. These consulting physicians will be able to see more patients due reduced procedure time. Further, the efficiency of the hospital would be increased via detecting more accurate results earlier than other setups and lesser extra costs of printing, sending and receiving. Cost effectiveness via reducing waiting time, long queues, and extra assistance from staff will also aid increasing efficiency of the hospital. Revenue generation is considered as the key goal when a purchase decision has to be made. The National medical center will attain the goal of increase in revenue through installation of this device, as there is evident increasing popularity of the device. This increasing popularity has created the demand for examination from that device from the physicians and generating referrals for the setup where the technology is present. Increasing concern for the breast cancer, increased number of patients, and physicians’ referrals will add value to the hospital that will in turn increase the revenue and profitability of the setup. The embedded technology in the device allows physicians to judge the condition of the patient via employing C-View imaging system, 2d and 3D views and a thin layer sliced images. These judgments increase the probability of accurate diagnosis, and also enhance the quality of produced results, as well as physicians’ recommendation.
Further, Hologic is innovator manufacturer of the device and assures quality of the device that is a positive point in favor of the device purchase decision. The installation of the device is also justifiable from the economic environment and organizational goal perspective. The age of digitization is impacting positively in almost all fields of life and cost cutting is becoming goal of each organization in the world. The installation of the device provide significant help to NMC in reducing extra costs reporting and more time-consuming procedures and thus aiding organizational goal of efficient working with sustainable economic environment. Further, being socially responsible NMC keeps community service obligations of providing best possible less bothering treatment procedures in order to improve the quality of life of the patients. The machine, as reported, will decrease the required level of patients’ effort and thus reduce the pain associated with the said procedures. Further, from the perspective of stakeholders including direct care staff, patients, and physicians, the purchase is acceptable as it significantly addressing the concerning issues of stakeholders. Although, some of the risks associated with the purchase of device that are inherited with any capital expenditure decision including financial loss, questionable device performance, any adverse situation, etc. But, overall the benefits of the purchase are far more than associated treats.
Further, the risk associated can be control and managed efficiently to make the project a success. The investment is also financially viable, as it will enable the NMC to facilitate additional 120 patients generating total revenue of $1,736,397 across three years with the initial investment of $ 140, 000 and annual total expense of $502,186.97, $506,900.52 and $511,661.21 for three years respectively. Across three years, the NPV of the debt-based investment at an annual cost of 3% is $43,226.85 with an internal rate of return of 15 percent. Considering the positive and negative aspects, the organizational and managerial goals, beneficial perspective of stakeholders, researched performance and need evidences, and financial analysis via forecasted viability of the underlying project, it is recommended that Selenia Dimensions Mammography System must be installed. The recommendation of purchase is backed with the suggestions of collaborative purchase processing with Hologic, risk control and management, following regulatory measures, providing sufficient training to the staff, as well as educating the staff, community and audiences about benefits of decision.
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