An Equipment Acquisition Proposal
An equipment acquisition proposal was being considered by a large health care organization. The
equipment, an array machine, will enable the hospital to perform five specific autoimmunity tests
in-house rather than sending them to a reference laboratory. Test turnaround time is expected to
decrease by 2 days. The array machine costs $50,000, with a useful life of 5 years. The
depreciation schedule will be $10,000/year.
The expected volume for the five tests is one of each test per day. Having the tests done by the
reference laboratory costs the hospital an average of $10/test. The hospital's average charge to
patients is $20/test. If the array machine is acquired and the tests done in-house, the costs of
reagents would average $2/test.
The array machine can run a maximum of 40 patient samples and perform 20 different tests on
each sample every 2 hours. Except in extraordinary circumstances, tests would be run Monday
thorough Saturday.
The machine requires approximately 1 hour of technician time (valued at $15/hour) each day to
calibrate it, to conduct a test run for control purposes and to perform general maintenance. This
is a fixed cost because it does not vary by volume. Technician setup time to run tests is
negligible. Beyond the five autoimmunity tests the laboratory wants to perform in-house, the
machine can also perform apolipoprotein cardiac profiles that are currently done on equipment in
the clinical chemistry department. The array machine can provide a quantitative measure and not
just the positive or negative indicator that the clinical chemistry department's current equipment
gives.
1. How many autoimmunity tests per year will have to be performed on the array machine to
breakeven?
2. Given the present volume of tests, would there be an annual net contribution and, if so, how
much?
3. If half of the patients have Medicare coverage (DRG reimbursement includes all tests), would
the laboratory break even on the equipment? If not, should the equipment be acquired anyway?
For each of the above questions, your response should provide a rationale and discussion regarding each step you take.
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An Equipment Acquisition Proposal An equipment acquisition proposal was being considered by a large health care...
Cost Analysis: The Purchase of Health Care Equipment Team Project An equipment acquisition proposal is being considered by a large healthcare organization, XYZ Health Care. The array machine will enable the hospital to perform autoimmunity tests (for immunoglobulins G, M, and A and complements C3 and C4) in-house rather than sending them to a reference laboratory. Test turnaround time is expected to decrease by 2 days. The array machine costs $50,000, with a useful life of 5 years. The depreciation...
Can someone please answer the questions of this sample case
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