Question

Can someone please answer the questions of this sample case study? Thank you

270 SECTION ILI: FINANCIAL MANAGEMENT Case Study Cost/Benefit Analysis You are the laboratory manager. The hospital administration wants to pene- trate the market and expand the business by performing Parathyroid Surgeries (reimbursement $15,000). They have enticed a prominent surgeon to join the staff He plans on scheduling four surgeries per week - two on Tuesday and two on Thursdays. Every case will need an intact Parathyroid Hormone (PTH) performed STAT during surgery. You currently send this test to your reference laboratory with a minimum 24-hour TAT. None of the analyzers currently in your lab are capable ofrunning this test. The best pricing you obtain is from Siemens Diagnostics for an Immulite 1000. The price of the analyzer is $75,000. The price of the test kit is $800 for 100 tests. The test requires three levels of controls run per 24 hours. The stability of the test kit once opened is eight weeks. Reimbursement for the test is $20. You realize that you will only be able to run on average 32 tests (patient reportable results) before discarding the reagent ($25 per test for reagent alone). Issues and Questions to Consider: 1. Would you bring the test in-house as per the physician's request? 2. What other departments need to be involved in developing this service 3. What assumptions should be made modifying the Chemistry operating budget? 4. What financial tools would be useful in justifying the addition of this test 5. Would further explanation be needed in justifying the addition of this tes t as addition does not appear to be warranted on its own merits?

Answer 1

1. It will not be beneficial to bring in the Siemens Diagnostics for an Immulite 1000. Hospital has ability to manage 32 tests in 8 weeks (4 tests per week * 8 weeks) The reimbursement gained on those tests would be $ 640 (32 Test * $ 20 Per test reimbursement) there will be cost of $ 800 to purchase a test kit, which once opened, will last only for 8 weeks and an additional cost of $25 per 32 tests hence the total cost would be $ 825. Straightaway there is loss of $ 185 in every 8 weeks using this proposition

2. You will need engineering department to set up the machinery, admin and purchase department to arrange the procurement and installation. Additionally you will need an engineer looking out on this machinery regularly in case there is any situation of breakdown. You will need to hire an analyzer as none of the analyzer currently is able to run the test

3. Need more explanation to solve the answer 3 (We can discuss this in the comment section)

4. Financial Tools: a. Opportunity costs b. NPV and IRR c. Payback Period

5. There are no further explanations required