Life cycle costing as a decision making tool for technology acquisition in radio-diagnosis

Life cycle costing analysis is an emerging conceptual tool to validate capital investment in healthcare.

A preliminary study was done to analyze the long-term cost impact of acquiring a new 3 T MRI system when compared to technological upgradation of the existing 1.5 T MRI system with a view to evolve a decision matrix for correct investment planning and technology management. Operating costing method was utilized to estimate cost per unit MRI scan, costing inputs were considered for the existing 1.5 T and the proposed 3 T machine. Cost for each expected year in the life span of both 1.5 T and 3 T MRI scan options were then discounted to its Net Present Value. Net Present Value thus calculated for both the alternative options of 1.5 T and 3 T MRI machine was charted along with various intangible but critical Figures of Merit (FOM) to create a decision matrix for capital investment planning.

Considering all fixed and variable costs contributing towards assumed operation, unit cost per MRI procedure was found to be Rs. 4244.58 for the 1.5 T upgrade and Rs. 6059.37 for the new 3 T MRI machine. Life Cycle Cost Analysis of the proposed 1.5 T upgrade and new 3 T machine showed a Net Present Value of Rs. 42,148,587.80 and Rs. 27,587,842.38 respectively.

The utility of life cycle costing as a strategic decision making tool towards evaluating alternative options for capital investment planning in health care environment is reiterated.