Cost Analysis: The Purchase of Health Care Equipment

An equipment acquisition proposal is being considered by a large healthcare organization, XYZ Health Care. 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 $50,000, with a useful life of 5 years. The depreciation schedule will be $10,000/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 hospital’s average charge to patients is $20/test.  The cost of reagents for each testaverage $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 through 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 department’s current equipment gives.