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Capital Purchase Justification

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Radiology equipment purchase is an asset management plan in the imaging of healthcare, and should, therefore, be viewed as a strategic plan that establishes the healthcare organizations direction, vision, and mission. It is also viewed in line with the marketing plan that operationalizes a portion of the strategic plan in order to maintain and obtain greater market share. The entire plan and its implementation assist to prioritize, apply, and operationalize the imaging equipment strategic plan through the acquirement, continuance, improvement, and fielding of capital assets needed to fulfill the healthcare mission and various strategic initiatives.

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Healthcare delivery has become intertwined with the technological tools used in the places, where million-dollar investments in radiology equipment and the facilities in order to support the hospital department have become expected. Achieving success with the new construction and renovated space requires design professionals with the expertise to help to make them work, careful identification of goals, great assistance of vendors, and involvement of the stakeholders (McClelland, 2004).

It is essential to keep radiology equipment up-to-date, since it is profitable, so that revenue continues. Three typical categories of equipment purchase are the current equipment in existing space, new equipment in the existing space, and new equipment in the newly constructed space.

Looking at the current healthcare, there is a number of reasons to justify the need to purchase a refurbished piece of radiology equipment. These include age of the current equipment, excessive downtime with the current equipment, regulatory issues with the current equipment, safety of current equipment, and important features on the new equipment not available on the current equipment (technological obsolescence). Others include compatibility with information systems and electronic imaging systems, greater volumes than the current equipment can handle, planned clinical research expansion, and finally, todays healthcare market competition (McClelland, 2004).

Currently, the healthcare is facing a dilemma, especially in the nuclear medicine department, wanting to replace the healthcare aging single-head gamma camera. Being a nonprofit community hospital, we are facing a serious budget constrains in terms of how much cash is needed in order to acquire the new technological unit. The solution is refurbished equipment, which, as far as I am concerned, is not only acceptable, but also a viable option in todays competitive healthcare market.

By purchasing a pre-owned system, the healthcare will upgrade with a dual head variable angle gamma camera at a significant discount, as compared to what a new unit might cost. The new equipment will enable the department to double its throughput, and our healthcare is currently looking at expanding its activities in molecular imaging by acquiring a PET/CT refurbished system scanner.

Despite the size of our healthcare, the facility and equipment and imaging center for radiology equipment remain a critical component in maintaining uptime, patient care, and revenue. If, for instance, a CT scanner or ultrasound device goes down, our patients will be inconvenienced. Healthcare will be delayed, and the facility will suffer from the loss of revenue and, worst of all, poor public image (Temple-Bird, Kaur, Lenel & Kawohl, 2005).

The bottom line of how much a facility can expect to allocate for equipment service is to apply the rule of thumb; that is, an annual service contract will cost between 10% and 15% of the equipments acquisition cost. However, together with the vendor we are planning to introduce a lower rate, which means that we will do pretty well.

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Expansive multiyear original equipment manufacturer (OEM) service contract expires, lower cost alternative service is considered. OEM offers various options, not only use of third party independent service contracts, time and materials services, but also equipment maintenance insurance that reduces expenses while enabling the transition to self insurance. For refurbished equipment, as its value depreciates significantly, its ability to generate profits remains high. Therefore, the need to reduce operational service expenses must be balanced against risk tolerance. EMI provides an excellent balanced vehicle, with the risk falling between the two while fixing costs at a low level (Temple-Bird, Kaur, Lenel & Kawohl, 2005).

Retrospectively performance of service expense management is usually unavailable, because of the lack of available data required for planning. A combination of perception, age, and usage-related factors should be considered, when making service risk decision management. The illustration below will be used in order to define which long-term service risk management tool is used:

Equipment status

Typical coverage

Suggested coverage


In warranty



Requires remote service

OEM contract


< 5 years old

OEM contract


Requires continuous software & hardware upgrades

OEM contract

OEM contract

Leased with service included

Lesser service

Lesser service

> 5 years old

Time & materials



Time & materials


Hardware & software

OEM contract

OEM software only EMI hardware only

As the medical director, you have the influence on the ways to justify the decisions; the healthcare business has less tolerance for unsound business practices. Hence, strategic healthcare business decisions must account for the unknown and protect healthcare interests from the inevitable change. The historical cost information, equipment reliability, and service vendor data have been put into consideration in order to assess the best way to manage service expenses (Awad, Abelson & Flood, 2009).

The illustration below is of a single imaging healthcare inventory and associated service costs, providing an actual example of the ways equipment maintenance insurance will be used to manage long-term expenses.


Historical costs

Future costs


Medical Equipment

Annual Service Contract Cost

Annual T&M Cost

Annual EMI Cost


Three-Year Savings









MRI, chiller, and A/C


































CT injector







MRI injector







Medical laser printer







Wet film processor







Medical equipment three-year savings: $168,060

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