The purpose of this assignment is to critically think about the implications of capital planning and the aspects of operations management that need to be considered when making financial decisions.
Assume that the radiology unit at Northwestern Memorial Hospital needs a new magnetic resonance imaging (MRI) machine, and you have been tasked with requesting bids. Two vendors submitted quotes based off the specs in your proposal. You anticipate the service life of this machine to be 10 years and that it should generate $600,000 per year at 50% capacity. To remove any potential for bias, your compliance department has provided the bids to you and removed the name of each company.
Bid: Company A
Supply and install a 3T (3 Tesla) MRI scanner. Once bid is accepted, work will be completed in 90 days. Each day after 90 days incurs a $5,000 (a day) penalty. Warranty is for 2 years. Software upgrades for 1 year.
- Total cost: $3,650,000
- Additional warranty: $150,000 (per year to year 5)
- Software upgrades: $50,000 (per year up to year 5)
Bid: Company B
Supply and install a 3T (3 Tesla) MRI scanner. Once bid is accepted, work will be completed in 90 days. Each day after 90 days incurs a $5,000 (a day) penalty. Warranty is for 4 years. Software upgrades for 5 years.
- Total cost: $4,400,000
- Additional warranty: $75,000 (per year to year 10)
- Software upgrades: $25,000 (per year up to year 10)
After comparing both vendors and reviewing the “Consolidated Financial Report,” choose the bid that will enable the hospital to make the most financially sound decision. Create a PowerPoint presentation for the capital purchase to present to your vice president, explaining your choice. Address the following questions in a PowerPoint presentation of 10-12 slides (not including your title and reference slides):
- Why would the bid you chose be a good investment for the hospital?
- How will this purchase factor into the hospital’s plan for allocation of its resources?
- What operating costs did you take into consideration when making this decision? Explain.
- What facility considerations will the hospital need to make to accommodate the new MRI scanner? (Consider the location of the unit, materials, licensing requirements, etc.)
- What is a reasonable ROI that the hospital could expect? What are the minimum quality standards?
- What kind of training will need to occur?
Cite a minimum of three references to support your rationale. Comprehensive speakers’ notes are required.
Refer to the resource, “Creating Effective PowerPoint Presentations,” located in the Student Success Center, for additional guidance on completing this assignment in the appropriate style.
While APA style is not required for the body of this assignment, solid academic writing is expected, and documentation of sources should be presented using APA formatting guidelines, which can be found in the APA Style Guide, located in the Student Success Center.
Essentials of Health Care Finance
Cleverley, W. O., & Cleverley, J. O. (2018). Essentials of health care finance (8th ed.). Burlington, MA: Jones & Bartlett Learning. ISBN-13: 9781284094633
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