Response

Review: classmates posts below. five well-developed sentences, minimum 100 for each response.

WRITE– 

Discuss a cost consideration they did not include. 

Explain your rationale for stating that it is an important factor to be considered in the capital expenditure proposal. 

Anthony- There are different types of capital expenditures like land, buildings, and equipment.  A specific type of capital expenditure for a radiology department would be replacing the MRI magnet/machine with a new one.  The capital expenditure budget would be an important piece in determining if this is a good purchase.  The budget usually consists of two things: costs associated with already existing capital assets and budgeted costs for planned capital expenditures.  Since not everyone has an endless amount of money to spend on capital assets, the budget determines the amount that is available.  Once the budget is set, companies must prioritize their investments based on necessity, cost, and opportunity cost.  One way that organizations can help prioritize is based on cash flow reports like the net present value or internal rate of return (Baker, Baker, & Dworkin, 2017). Another way to vector projects is through the multicriteria Preference Ranking Organization METHods for Enrichment Evaluations, also known as the PROMETHEE method.  This method quantifies opportunity cost of alternatives. It determines the best net flow and helps in the decision-making process (Castro, 2002).

Aside from the actual cost of a piece equipment, like the replacement MRI magnet, there are other costs to consider as well.  Maintenance on a magnet can be costly.  For example, if the magnet must be quenched in an emergency scenario (rapid releasing helium so that the magnetic field lowers), it costs roughly $90K to fix the damaged parts and refill the helium.  As a result, it is imperative to pay for a maintenance contract with the vendor so that all maintenance and parts are covered under warranty.  Another cost to consider when purchasing a replacement magnet is the cost of lost revenue during the deinstallation and installation phases.  It is a big muscle move to do these processes.  It requires the magnetic field to be ramped down, a panel in the wall removed, jacks to put the magnet on rollers, and a crane.  Once the new magnet is installed, the magnetic field must bring up to operating strength and tested by a physicist.  It can be several weeks to months before the new magnet is brought online.  If the company doesnt have another magnet to accommodate the patients, the renting of a mobile unit would be a consideration, otherwise a lot of revenue would be lost. 

Regina– Capital expenditure budgets are necessary and important in any business or organization because they are intended and utilized for the planning, controling and monitoring of longterm financial decisions and outcomes.  Another name utilized to better understand the use of capital expenditure budgets is “capital spending plan” which consists of existing asset spending or new capital asset spending (Baker, Baker & Dworkin 2017).  One captial expenditure that is important in a physicians office would be upgrading old outdated Billing Software with Practicesuite Billing Software.  This software is one of the best billing softwares and offers an extensive amount of products that would streamline the office functions from the front office to the clinical side so that only one software would be needed to complete every function of the office.  It is cloud based so therefore there will be monthly premiums that will be associated according to what type of additional services that would need to be included in the software and taking into account the computers that would need to be updated in order to hold the capacity of the software being that it would replace all of the different software programs that are now in place. 

Estimating the payback period and cost flow is important when making any type of capital expenditure plan and budget.  When analyzing the specific needs of this billing software, the identification of the greatest potential for the future delivery of high-quality patient care is the biggest factor and obtaining a longer planning process to understand the true market needs is a must (Shultz, 1991).   When writing the proposal for this billing software, all of the advantages of obtaining it over the current software is needed which consists of faster payment initiatives with the use of online payment access from Insurance Carriers, the inclusion of EMR software, Coding Software with Correct Coding Initiatives installed, Clean claim processing software included, Appointment software included, Dashboards, and so on.  The software will pay for itself in no time because of the faster rate of payments being received and the use of one system for all other programs that are currently being paid for.  

Due 1/20/20 @9am eastern time with plag report

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