An equipment acquisition proposal was being considered by a large health care 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 schedule will be $10,000/year. The expected volume for tests is one of each of the five autoimmunity tests 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. The CEO of XYZ Health Care has hired your team as consultants to answer the following questions: 1. How many autoimmunity tests per year will have to be performed on the array machine to break even? 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? Please create a professional written document including an executive summary that addresses the questions above. Also provide one paragraph to recommend or not recommend the purchase. If using a written Word Document: -An executive summary is a great way to communicate in an efficient and concise manner what you’ve found out. Keep in mind, most people reading your work will be in a time crunch and will need a quick, one-page document to review. -8-10 pages including charts. -Use headings through-out -The response should provide a rationale and discussion regarding each step you take. Charts should be fully explained in the text. If using PowerPoint: If you prefer, you may create a narrated PowerPoint presentation (be sure to include a transcript of the narrated portion – or you may include the transcript of the narrative on the notes page of the slide). Be sure to let me know where the transcript is located if you decide to create a narrated presentation. Outside references- This is for both formats: Make sure to include references that support your decision to purchase the machine or to continue using the outside laboratory. *Longest, B.B., Rakich, J.S., & Darr, K. (2000). Managing health services organizations and system. Baltimore: Health Professions Press.—You don’t need this book to do the project. This is where the original idea was conceived.
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