Given the present volume of tests would there be an annual net contribution and if so how much?
An equipment acquisition proposal was being considered by a large health care organization. The arra Show more An equipment acquisition proposal was being considered by a large health care organization. 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 $50000 with a useful life of 5 years. The depreciation schedule will be $10000/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 hospitals 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 departments current equipment gives. 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? The response should provide a rationale and discussion regarding each step you take Show less
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