Capital purchase justification for MRI machine acquisition in healthcare

¶ … capital purchase, costing $5,000, company benefit . Examples include a X-ray machine, MRI processor, software filing patient records, a research library, large item company . o Identify management goals expenditure support

Capital purchase

The health care field is becoming presented with more and more pressures in today's society. There are numerous changes in the social and economic environments, which become combined to generate new pressures for the health care providers. The life expectancy of the population increases, generating increased needs for medical care for several years. Then, the Baby Boomers are retiring, causing a demanding generation, used to financial resources and access to services, to turn to the medical care sector for more services. The policies regulating the field also change as do the demands and expectations of patients.

In such a context, the health care institutions find themselves in a position in which they have to be better managed and administered. In other words, by having to respond to numerous challenges from various environments, the health care providers must become more business oriented than ever before. The role of management in the administration of health care institutions is as such increasing.

In this setting, the current project assesses a capital purchase at a health care organization through administrative lenses. Emphasis is placed on the ability of the purchase to support the attainment of the managerial goals, to influence organizational economics, to support the organizational needs and goals, and also to provide a final, integrated justification for the capital purchase. The capital purchase considered is represented by a new MRI machine.

2. Support for managerial goals

The ultimate scope of any health care institution is that of providing quality medical services to the benefit of their patients. Still, in the context of the new challenges raised by the internal and external environments, there are also several managerial goals to be met by the medical institutions. These are listed below:

Operating based on a pre-established goal and operating in a manner in which the health care organization is self-sustainable. Additionally, it is hoped for the health care entity to become profitable; the profitability objective is quite uncommon within the medical field, yet, the institutions "must generate some level of profit to achieve their other goals. Whether for profit or not for profit, health care organizations need profits to invest in expansion of services so there is wider access to health care. They also need to earn profit on some patients in order to subsidize those patients who are unable to bear the costs of their services. Health care organizations need profits to acquire new technologies to improve the quality of health care. Further, health care organizations need to earn profit in order to money available should an emergency arise. Finally, profits are needed so that health care organizations can replace old buildings and equipment as they wear out" (Finkler, Ward and Calabrese, 2011).

Offering high quality services to patients, which in turn generate satisfaction and improve the reputation of the organization

Possessing a highly skilled and trained workforce, including all institutional personnel, not only the doctors

The integration of technologies within the medical and administrative processes, in order to support higher quality services and institutional competitiveness

Operating at high levels of efficiency, with the maximization of the results and the minimization of the costs

The purchase of the new MRI machine would support the health care institutions to provide better quality services for the patients, but also to better attain its managerial objectives. The means in which the capital purchase would support the managerial goals is revealed in the table below:

Goal

Means of attainment

Financial stability and profit maximization

The MRI machine would attracts more patients, which would in turn generate more revenues for the institution

Institutional reputation

The MRI machine would support a better diagnosis process, increasing the satisfaction of the patients and their unofficial promotion of the health care institution

Highly trained staffs

The purchase of the new MRI machine would materialize in the need for the medical staffs to become better technically trained in order to operate it

Technological integration

The new RMI machine represents a newer technology and improves the technological stance at the health care institution

Operational efficiency

The purchase and usage of the new MRI machine would result in diagnoses being set in a more efficient manner, with treatments being able to be offered sooner, and in support of the overall operational efficiency at the firm.

All in all, the purchase and integration of the new MRI machine is a positive action for the company since it helps it attain its multifaceted management goals.

4. Support for organizational goals

Organizational goals are generically defined as the scopes towards an entity would strive, referring to the results it hopes to obtain. In order to achieve these results, the organized group will develop and implement a wide array of strategies aimed at combining resources (inputs) in a means in which the desired outputs are created (Daft, 2009).

The organizational goals differ from one institution to the other and these are individually set by the institutions. In the case of economic agents for instance, the common goal is that of attaining higher levels of profitability. In the case of not for profit entities however, the goal might be one linked to a social cause, but it could also include profitability objectives (at least for reasons of sustainability, as it has been mentioned before in Finkler, Ward, and Calabrese, 2011).

In the case of the current hospital, its objectives are two sided in meaning that they include both financial desires, as well as social desires to provide a high quality medical act. In this sense, the organizational objectives are summarized as follows:

The provision of high quality medical care to the patients

The provision of support to the community by helping people stay healthier

The prevention of disease through programs of community education

The ability to operate in a financially sustainable manner.

These objectives are obvious at the level of the entire institution, and it is unlikely for the purchase of a new piece of equipment to generate the company's attainment of these objectives. Nevertheless, the purchase of the new MRI machine would represent a notable element in the overall system supporting the attainment of the objectives. Specifically, new machinery would allow the hospital to provider better care of their patients, which would in turn increase the number of patients treated (and the funds collected by the hospital), and also which would increase the general level of health within the community. In essence then, while not enough to attain the institutional objectives, the purchase of a new MRI machine would support the hospital in attaining its objectives.

5. Support for the organizational needs

In order to attain its objectives, the health care institution reveals numerous needs that would support it in attaining the pre-established goals. These needs are existent in terms of the attainment of all organizational goals, as well as managerial objectives. They are as such influenced by the medical values of the field in which the institution operates, but also by the business requirements linked to running an institution. In this order of ideas, the organizational needs are identified as follows:

The need to have a quick and easy access to all resources which facilitate the provision of the medical services to the patients

The need to possess sufficient financial resources to support the operations of the entity, coupled with the need to at least break even in the operations

The need for quick access to information as well as the need for technologic development and integration of the newest advancements in the field of medical technology

The need for adequate infrastructure to provide the medical services, including elements such as the buildings, the ambulances, the beds or the equipments.

The need for skilled and trained staff to provide the medical act, as well as to complete the non-medical tasks

As it can be observed, the needs of the health care provider are complex and multifaceted and it is impossible for the purchase of a MRI machine to address all these needs and serve them. Nevertheless, the new capital purchase does have the ability to -- directly or indirectly -- support the satisfaction of these needs. For instance, the MRI machine would allow the health care provider to access technologic support in diagnosis and treatment in a quicker and more efficient manner. The current MRI machine is old and outdated; it functions at low rates and it is unable to fully serve the needs of the hospital. The purchase of a new machine would solve this problem.

Then, the proposed capital expenditure would -- as already mentioned before -- attract more patients and as such more funds and revenues to the hospital. This subsequently translates into an increased ability to serve the need for financial resources. Also, the new MRI machine is an integrative part of the institution's infrastructure and it helps serve this need. Finally, the purchase and usage of the new MRI machine stimulates the development of the already existent staff and supports the attraction of new talented staffs.

All in all, the needs of the health care provider and complex and require a multitude of forces to become combined in order to serve them. The institution needs mostly money, people and infrastructure, which are difficult to attain and combine in perfect variations. While the purchase of a new MRI machine could not solve all these needs, it does begin to provide support for the development of the company at all of the three levels of institutional needs.

6. Justification

The previous sections of the project have focused on the individual assessment of the impact projected to be felt upon the hospital at the purchase of the new MRI machine. Based on the analysis conducted, it is concluded that the institution should engage in the actual purchase of the machine as this would generate a multitude of direct and indirect benefits for the firm. Still, at this stage, it is necessary to offer a more detailed and integrated justification for this recommendation.

Overall, the justification for the purchase of the new MRI machine has already been provided throughout the previous pages of the project. Yet, this rationale has been offered in a dispersed manner, through individual discussions of the role of the capital purchase at the levels of managerial goals, economic improvements, organizational goals and organizational needs. At this level, all these reasons would be centralized in order to provide an integrated view over the benefits of engaging in the purchase of the new MRI machine. The table below summarizes the benefits perceived at each of the four levels, and the lines following provide more information.

Managerial goals

Economic improvement

Organizational goals

Organizational needs

- Financial stability and profitability

- Institutional reputation

- Better trained staffs

- Technological integration

- Operational efficiency

- More patients

- Support for economic goals

- Interest from investors

- Better access to skilled staffs

- Superior patient care

- Community health

- Financial sustainability

- Patient attraction

- Infrastructure development

- Staff development

- Support for financial sustainability

The managerial goals of the health care institution are rather complex and they have a business nature. They for instance solicit for the institution to create a better reputation and to generate its own profits. These goals are usually uncommon within the medical community, where the primary focus falls on the provision of medical services, with little emphasis on efficiency. The purchase of the new MRI machine nevertheless mutually supports the attainment of both medical objectives, as well as the attainment of the managerial goals. The MRI machine would support technologic integration, the reputation of the company as well as its ability to generate financial sustainability and profitability.

At the strict economic level, the rationale for completing the capital purchase is represented by the ability of the new MRI machine to attract more patients, to raise the interest of investors, and to help gain access to more talented staff members; the hiring of better skilled and trained staffs is once again an economic advantage for the institution, which comes to spend fewer financial resources in the training of its staff members. All these features ultimately materialize in the institution's increased ability to attain its overall objectives.

Third, at the levels of the organizational goals, these are double sided in the meaning that they emphasize on both the medical dimension of the operations, as well as the business feature of the operations. The purchase of the new MRI machine would not generate any direct impacts on the hospital's goal of better educating the population to prevent disease, but it would however provide support in the attainment of its other three crucial objectives, namely the financial sustainability, the provision of better patient care and the support for a healthier community.

Finally, in terms of the organizational needs, these are extremely complex and they can generically be divided into three categories, namely the need for talented and skilled staff members, the need for financial resources and the need for infrastructure. The simultaneous satisfaction of these needs is an intricate and challenging endeavor, which requires years and countless efforts to be completed. The purchase of a new MRI machine does not have the capacity to solve these needs, but it does however represent a component in the equation. The new MRI machine for instance stimulates existent staffs to develop and also attracts new talented staffs from outside the firm. Then, the MRI machine also contributes to the infrastructure of the hospital and, through patient and investor attraction, it also stimulates financial stability and profitability.

All in all then, it is widely observable that the purchase and integration of a new MRI machine within the health care institution is a demanding decision, which would put additional strains on the already weakened financial state of the hospital. Nevertheless, it would also generate some notable benefits, which have been explained through the current paper. In addition to these, it has to be considered that the external environment is becoming more dynamic as the patients grow in number and demands, and the technology evolves rapidly. Competitive hospitals invest in the purchase of new technologies and other assets that help them better meet the emergent challenges, making it a necessity for the currently assessed hospital to also purchase a new MRI machine. In essence, the capital investment is a necessity and it is therefore strongly recommended.

References:

Brown, M., 1992, Health care information: strategy, structure and process, Jones & Bartlett Learning

Daft, R.L., 2009, Organizational theory and design, 10th edition, Cengage Learning

Finkler, S.A., Ward, D.M., Calabrese, T., 2011, Accounting fundamentals for health care management, 2nd edition, Jones & Bartlett Publishers

2012, Absolute Medical Equipment, http://www.absolutemed.com/Medical-Equipment/MRI-Machines last accessed on June 29, 2012