Hospital Cost Benefit Analysis - Essay Example

"Hospital Cost-Benefit Analysis" is a wonderful example of a paper on the health system.
The competition in the healthcare industry has increased immensely. Hospitals, in particular, have started to embrace the growing demand of patients. One of the barometers for success in the industry is hospitals’ capacity to expand and improve their facilities. Hospitals consider their annual budgeting cycles as critical in improving competitiveness. Health facilities need to identify certain areas that have to be improved. Enhancements in equipment and medical practices are proposed in annual budget meetings along with future gains from investing in this expensive venture.  Although hospitals have varying priorities, the importance of identifying the pressing needs should be stressed.

There are several reasons why hospitals chose to upgrade their equipment. In most cases, such investments are pushed because better equipment translates to improved long term revenue flow. Enhanced equipment allows hospitals to charge more fees and justify price movements when patients would inquire. Hospitals also improve their equipment to boost patient retention. Most patients come back because of effective medical equipment and top-notch customer service. Moreover, changes in equipment would expand the expertise of hospital staff. Better equipment helps in increasing productivity and maximizes the overall effectiveness of hospitals in delivering patient care.

In the case of CCU, there is a proposal to acquire two defibrillators. The proposed items are considered as the most portable available in the market. The product is considered as user friendly and reflects accurate data. The defibrillators are flexible and can be customized according to the needs of the hospital. There is also available storage for information gather and data can be easily transmitted to destinations. Aside from these benefits, the purchase is expected to improve the processes within the service line.

Each defibrillator costs USD 3,299 which includes batteries and other peripherals. Defibrillators usually have a life span of 3-5 years depending on the maintenance and how effectively the product is used. Although the cost of the product is paid on a one-time basis, the actual cost is reflected through depreciation. In a three-year period, the annual cost for each defibrillator is USD 1,099.67 and each product costs USD 659.8 is a five-year depreciation scheme. Based on the product features, training is not needed since there are user-friendly manuals available. Maintenance and operating costs can also be factored in especially the purchase of parts and product enhancements.

 The hospital needs to target at least a 25% return from the investments made. For the total cost of USD 6,598, the return in the next 3 years should be at USD 4,123.73. This means that every year, earnings from the use of defibrillators have to reach 1,374.58. Assuming that the defibrillator is used 1,400 times annually, the rate needs to be increased by USD .98. In years 2 and 3, the increase can be lessened because the use of the equipment is expected to increase. If the hospital plans to use the defibrillators for five years, then the revenue flow also changes. In Year 1, the cost of using the defibrillators has to at USD .59. There is a decrease in rate during Years 2 and 3 but an increase is expected in Years 4 and 5 because the usage of the equipment will be reduced due to depreciation (see Excel sheet for complete table).

There are also non-monetary gains expected from the purchase of the defibrillators. The old equipment is heavy and causes back pain according to some hospital staff. Since the new product is portable, the back incidence will be lessened. Processes within the area where the defibrillators are used will also be improved. Client service is another aspect that will be boosted and further maintains the hospital’s high retention rate.