MRI Machine Cost-Benefit Analysis

MRI Machine Cost-Benefit Analysis

Today, the world has witnessed a rise in the use of technology by healthcare practitioners. The practitioners use the technology to enhance efficiency and profitability and maximize health. Despite the shrinking and limited resources, hospitals are determined to achieve the goals listed above. Consequently, individuals in charge of the applicable departments or responsible for allocating resources need to weigh or prioritize between distinct competing options to obtain maximum profits from the limited budget (Plowman). The article below presents a cost-benefit analysis of embracing MRI technology in a clinic.

Cost-Benefit Analysis Template

Concept of Opportunity Cost

In the past, medical education has been omitting factors of health care services and other matters related to economics. However, currently, health care practitioners are embracing the importance of cost-effective decision-making as a strategy of cutting down on the cost of the operations without tampering with the quality of services offered to the patients.

Opportunity cost is defined as the value of the probable loss when making a choice between two or more options (Kennon, 2020). When an individual is offered two choices, one can identify that there are gains and losses for each decision and option selected, and it is vital to make a sound decision around each option (Plowman). In our case, the opportunity cost is the two options, whether to acquire or forego an MRI machine. The machine’s profits could include more customer satisfaction, more revenue earned for the clinic, and a chance for development for internal workers. On the other hand, there could be less need for MRI machines, therefore spending a lot of money buying the machine and making no or little returns and maintenance and management costs.

How the Cost-Benefit Analysis Aligns with Organizational Needs And Future Growth

One of the cost-saving strategies used by hospitals is outsourcing. The above entails transferring operations functions to another health care facility and monitoring sourcing via contract management and partnership. The main disadvantages of the above strategy include reduced or complete loss of authority and control over certain functions (Kocaman & Uslu, 2019). Thus, it is critical to note that such circumstances as named above may act as challenges for the managers due to the vendor’s linked sub-optimal performance. In addition, outsourcing could be costly as it involves annual contracts with the other facilities.

According to the cost-effectiveness analysis, purchasing an MRI scan machine is economical. During the first year, an institution may incur a high cost due to the purchase of the machine, installation, training, maintenance, and hiring of a radiologist. However, there is a relative decrease in the direct costs of owning and maintaining an MRI machine in the following years. The costs may include maintenance expenditure, training, accessories, updating software, and market increase of radiologists’ salaries.

On the other hand, is the benefits accrued from purchasing an MRI machine. By purchasing an MRI machine, a health care facility may cut down on the cost used to outsource the machine from other facilities. The cost can be added back into the facility’s revenue. Conversely, the facility can witness a rise in the revenue earned from their payer contracts that reimburse for the performed MRI procedures. Besides the monetary benefits of owning an MRI machine are the non-monetary benefits, which are referred to as benefits of purchase with no value associated with cost (Kennon, 2020). These include improved customer satisfaction since the patients will not have to make extra appointments or move outside facilities looking for MRI, increased productivity due to the removal of third-party involvement, and minimizing wait times on results by bringing a radiologist onboard.

Recommendations

Based on the cost-benefit analysis, I strongly believe that acquiring an MRI machine is the best decision. The initial costs may be a lot, but the return benefits of up to 1.8m can significantly impact the operational needs to enhance the clinic to serve it’s patient population best. While there are considerable risks, such as a potential for a reduction in the number of patients needing MRI scans, the facility could further start to gain new patients by offering contract services to other community institutions that do not have an MRI machine. In so doing, the clinic will gain more revenue from the contracted outsourcing. The increased productivity will enable the completion of services in a faster time, which impacts the revenue cycle and the reimbursement period in the particular facility. Furthermore, patients are assured of having all the procedures and care undertaken under one roof, and the staff can cross-train and earn excellent skills surrounding radiology procedures and workflows.

Conclusively, it is more cost-friendly for the clinic to purchase its own MRI scan machine than keep outsourcing. Based on the cost-benefit analysis, possessing its own machine is more profitable. Although the initial cost may be high, the benefits accrued are critical in the clinic’s growth. Other than the monetary benefits, the clinic can further gain other non-monetary benefits such as increased customer satisfaction, more skills for the staff, and increased productivity. Thus, the clinic buying its own MRI scan machine is a great idea.

References

Kennon, J. (2020, December 22). What Is Opportunity Cost? Retrieved December 9, 2021, from https://www.thebalance.com/what-is-opportunity-cost-357200

KOCAMAN, E., & USLU, Y. D. (2019). Analysis of Transaction Cost Theory of Magnetic Resonance Imaging (MRI) Services Provided by Outsourcing in Hospitals: A University Hospital Example. Journal of Health Systems and Policies, 1(1), 61-78.

Plowman, N. (n.d.). Writing a cost-benefit analysis. Retrieved from https://www.brighthubpm.com/project-planning/58181-writing-a-cost-benefit-analysis/

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Conduct a cost-benefit analysis using a template and explain the concept of opportunity cost and how a cost-benefit analysis aligns with organizational needs. Recommend a plan of action based on the cost-benefit analysis.

MRI Machine Cost-Benefit Analysis

Use the Cost-Benefit Analysis Template linked to complete Part 1 of this assessment. Use the following scenario that continues the scenario from Assessment 2 as the foundation for this assessment:

One of the physician’s groups in the clinic would like to purchase an MRI machine. Currently, clients who need an MRI must schedule an appointment at another facility, adding time and cost to any treatment they may need. The machine will be available for all the physicians in the clinic and will require additional staff to operate the equipment and the office area where it will be housed.

You must prepare a cost-benefit analysis to present to the physicians so they may decide whether to move forward with the purchase. Be sure to consider the non-monetary costs, such as productivity, as well as the non-monetary benefits, such as improved customer satisfaction. Although these may be difficult to quantify, they are important costs and benefits that must be considered.

Requirements
Prepare a two-part cost-benefit analysis.

Part 1
Complete the cost-benefit analysis template for the purchase of an MRI machine for the clinic with estimated costs and benefits values.
Part 2
Based on the cost-benefit analysis, write a 2–3-page summary:

Explain the concept of opportunity cost.
Explain how the cost-benefit analysis aligns with organizational needs and future growth.
Recommend a plan of action that is supported by the cost-benefit analysis. (Should the clinic purchase the MRI machine or not?) Reference specific areas of the analysis in your recommendation.