I will post the two responses from the other classmates once i received them that has to be answered
Learning Resources
Required Readings
Penner, S. J. (2017). Economics and financial management for nurses and nurse leaders (3rd ed.). New York, NY: Springer Publishing.
- Chapter 5, “Reporting and Managing Budgets” (pp. 111–135)
- Chapter 6, “Budget Planning” (pp. 141–160)
- Chapter 7, “Special Purpose, Capital, and Other Budgets” (pp. 163–185)
Pink, G. H., & Song, P. H. (2018). Gapenski’s cases in healthcare finance (6th ed.). Chicago, IL: Health Administration Press.
- Case Study 20, “Coral Bay Hospital: Traditional Project Analysis”
- Case Study 22, “Northwest Suburban Health System: Outsourcing Decisions”
Danna, D. (2019). Learning and mastering the operating budget. Retrieved January 30, 2019, from http://www.strategiesfornursemanagers.com/ce_detail/213520.cfm#
Mukherjee, T., Al Rahahleh, N., & Lane, W. (2016). The capital budgeting process of healthcare organizations: A review of surveys. Journal of Healthcare Management, 61(1), 58–76.
Discussion: To Buy or Not to Buy: That is the Question
Your Women’s Health Services Center has determined that there is an opportunity to generate revenue by purchasing a digital mammogram machine. The cost of the machine is $250,000, with annual maintenance fees of $2,500 and is estimated to last 5 years. The radiology center will be open 5 days a week, 8 hours a day, and 50 weeks a year. The current volume of mammograms is 18 per day, and the reimbursement is $215 per mammogram. The radiologist is paid $50 to read each mammogram, and the salary for the full-time mammogram tech is $95,000 annually, including benefits. The cost of disposable supplies is $3.00 for each test. The potential volume for the new digital mammogram machine is 28 per day.
To Prepare:
- Review the Resources for this week and review the two case studies in Pink and Song (2018) to provide a framework for the Women’s Health Services Center digital mammogram machine purchase.
- Reflect on the scenario presented and consider whether you, as a healthcare leader, would recommend that the Women’s Health Services Center purchase the digital mammogram machine.
By Day 4
Post a comprehensive response that addresses the following:
- Explain how the operating budget, capital budget, and cash flow related to the scenario presented may help you as a healthcare leader in the decision-making process for a large purchase.
- Explain whether you would recommend to complete the large purchase for the healthcare organization and explain why. Be specific and provide examples.
By Day 6
Respond to at least two of your colleagues by explaining whether you agree with their decision to make the capital purchase or not. Suggest at least two barriers that may prevent success of capital purchase approval.
Expert Solution Preview
Introduction:
The scenario presented involves the Women’s Health Services Center considering the purchase of a digital mammogram machine. As a healthcare leader, it is essential to understand how the operating budget, capital budget, and cash flow relate to this decision-making process. In this response, I will explain the importance of these budgets and provide a recommendation for this purchase.
Answer to Question 1:
The operating budget, capital budget, and cash flow are critical in helping healthcare leaders make informed decisions for large purchases. The operating budget outlines the revenue and expenses required to run the healthcare organization’s day-to-day operations. On the other hand, the capital budget specifies the investments in long-term assets that will yield benefits beyond one fiscal year. These budgets provide valuable insights into the healthcare organization’s financial status, ensuring the alignment of the proposed purchase with the organization’s goals and objectives.
Cash flow, which represents the actual movement of cash in and out of the organization, is also an important consideration in decision-making for a large purchase. It ensures that the organization has sufficient funds to meet the required payments and obligations in time.
Answer to Question 2:
Based on the presented scenario, I would recommend that the Women’s Health Services Center purchase the digital mammogram machine. The volume of mammograms is expected to increase by ten, providing an opportunity to increase revenue. Additionally, the operating budget can accommodate the expenses associated with the purchase, including the annual maintenance fees, radiologist’s payment, and salary for the full-time mammogram tech.
The capital budget can also cover the expenses, and the expected five-year shelf life of the machine indicates that the purchase will yield long-term benefits for the healthcare organization. The cash flow can also accommodate the required payments, ensuring that the organization can meet its obligations. Overall, purchasing the digital mammogram machine aligns with the organization’s objectives of increasing revenue while providing quality healthcare services to its patients.
Answer to Question 3 (Response to colleagues):
I agree with both colleagues’ decisions to make the capital purchase. However, two barriers may prevent the success of capital purchase approval. The first is the cost-benefit analysis, where the organization may fail to recognize the long-term benefits of the machine, ultimately impacting its profitability and revenue. The second barrier is the availability of funds to make the purchase, where the organization may not have enough funds to meet the required payments. It is crucial to address these barriers to ensure that the purchase aligns with the organization’s goals and objectives.
