Capital Project II, III, & IV Section II: Establishing AcceptabilityWrite a 1,050- to 1,200-word paper in which you include the following: Complete and discuss the results of the acceptability of the item for key stakeholders. Respond based on research to the purchase and use of the items at other organizations. Determine organizational risk and compliance issues related to the purchase and use of the capital item. Recommend risk avoidance strategies. Explain management roles and risks in accordance to compliance. Format paper consistent with APA guidelines. Section III: Economic Feasibility Create a budget that demonstrates the effect of the capital purchase on the service line, including the productivity of the service line. Complete a financial analysis of the capital expenditure. Provide responses in a Microsoft Excel spreadsheet. Create a pro forma summary sheet showing the net revenue and +cost impact of purchasing this item.Section IV: Final Project Summary Write a 1,200-word executive summary for the justification and include it at the beginning of the paper. Attach the financial statement. Format paper consistent with APA guidelinesThis is a three assignment group together but to be laid out seperately

Running head: CAPITAL PURCHASE 1 Capital Purchase Cheryle Pasqualone HSC/751 October 3, 2015 Debra Vaughn CAPITAL PURCHASE 2 Capital Purchase Capital expenses or expenditures are payments by a business for fixed assets, like buildings, and equipment. Another way to consider capital expenses it is applied to buy assets that will have a useful life over several years. When health care organizations (HCO) need to purchase equipment that will be used for a long period exceeding a year, this is considered a capital expense. Purchased items last longer than a year, that are purchased are considered fixed asset, and the purchase is considered a capital expense. Capital expenditures are typically depreciated for tax purposes, and under certain circumstances some capital expenditures are considered current operating expenses. Health Care Organizations (HCO) acquiring capital expenditures often require a certificate of need (CON). This is state- based and according to the National Conference of State Legislatures, "The first Certificate of Need law in the nation issued in New York in 1964, when the State Legislature required the government to determine there was a need for a new hospital or nursing home before construction could begin" (pg. 1). The American Hospital Association soon supported the concept, and began a push to establish CON Boards in other states. In the Health Planning Resources Development Act of 19742, Congress required agencies in each state to centrally plan expansion in the health care industry, and authorized just over $1 billion in grants for states to set up CON requirements over three years. In the state of New Jersey health care equipment that involves new technology is not subject to obtain a certificate of need requirements, but is required to the following requirements stated by National Conference of State Legislatures include: CAPITAL PURCHASE 1. The new technology shall be directly related to an already licensed health care service for which the provider has obtained a certificate of need, if applicable, and is already licensed; 2. The provider shall provide the Commissioner with written notice of the intent to initiate the new technology at least 60 days prior to the date the provider will begin use of the technology; 3. The new technology shall have pre-market approval from the Federal Food and Drug Administration and meet all other applicable State and Federal legal and regulatory requirements, if any; 4. The provider shall use the new technology in accordance with guidelines approved by the Joint Commission on Accreditation of Health Care Organizations until such time as the Department may adopt licensing standards for the new technology. The provider shall comply with the Department's licensing standards for the new technology upon adoption of applicable standards; and 5. The provider shall agree to submit to the Department patient information and other data concerning use of new technology. The provider shall submit data, as specified by the Department until such time as the Department determines that further reporting is not required. Upon a finding by the Commissioner that the provider's use of new technology is not in compliance with the provisions set forth in 1 through 5 above, the Commissioner may suspend the use of same. These guidelines were reviewed by JFK Health Care Organization prior to consideration to purchase a CT machine. JFK Health Care Organization has received certification to be a Comprehensive Stroke Care Facility. A stroke ensues when there is a decrease of blood supply to part of your brain interrupting perfusion, causing the brain tissue to be deprived of oxygen and nutrients. Within 3 CAPITAL PURCHASE 4 minutes, brain cells begin to die. This deprivation is considered a medical emergency. Prompt treatment is crucial, so early action is required to minimize brain damage and potential complications. To treat an ischemic stroke, doctors must restore blood flow very quickly to your brain. Emergency treatment with medication is performed by the administration of TPA (clot-busting drugs) that must start within 3 hours if given intravenously or sooner. Quick treatment improves your chances of survival and will reduce complications. Aspirin can be given for immediate treatment in the emergency room to reduce the likelihood of having another stroke. Aspirin provides protection from blood clots forming by decreased platelet aggregation. The alternative modality of treatment is an intravenous injection of tissue plasminogen activator (TPA). This potent clot-busting drug is to be given within 4.5 hours after stroke symptoms begin through intravenous administration. TPA helps to restore blood flow by dissolving the blood clot causing your stroke, and it provides help to people who have had strokes aiding in the recovery more fully. In addition, emergency intervention may require TPA delivered to the area of the clot directly in the brain or mechanical clot removal. The window of time for this treatment is somewhat longer than for intravenous TPA but is still limited. All of these options are life-saving care, but cannot be performed until a CT scan of the brain has been completed to differentiate the type of stroke that is occurring. At this time, the present CT scanner is several years old and does not have the capacity to provide imagery specific to meet the needs of the stroke program. The consideration for the purchase or lease is the need to expedite fast diagnosis and implementation of intervention within a four- hour window to achieve the best outcome for the patients receiving care at JFK Health Care Organization. The increased volume of patients that will require CT scanning is significant CAPITAL PURCHASE 5 with the new certification as a Comprehensive Stroke Facility meeting the guidelines for treating this population of patients. In order to maintain certification, an additional CT scan machine that provides the benefit of the newest technology in the diagnosis of stroke is required and would benefit patients. The capitol decision - making considerations for this purchase or lease included access to services, quality of care, and revenue. According to Cleverly, \"Capitol decisionmaking process in the health care industry is complexed. Provisions of care to the community access to services as well as quality standards are critical objectives for health care as well as profit. The number of participants involved in the process directly or indirectly is greater in the health care industry than any other industry\" (pg.421). The purchase or lease of the CT scanner machine does not require a certificate of need approval based on the laws in the state of New Jersey but must comply with the requirements stated by National Conference of State Legislatures. JFK Health Care Organization can provide easy access to obtain CT scanning upon the point of entry on admission. With a diagnosis of stroke, symptoms are assessed and a diagnosis of stroke is determined an immediate CT scan can be completed. This rapid access to evaluate the patient's level of injury facilitates an algorithm of care and intervention process based on the CT imagery results. The board of trustees and Chief Financial Operator (CFO) recognize the benefit of this purchase or lease and the necessity to comply with the certification of a Comprehensive Stroke Care facility. Plans for additional funds will be required for maintaining and updating this equipment to be considered as a capital expenditure. The revenue generated by this purchase will provide required services, enhanced output, and positive results for the community. CAPITAL PURCHASE 6 The cost of a new CT machine varies based on the resolution required and splicing for improved imagery. The price ranges according to GE, \"CT Scanner Cost Price Info - Block imaging can be $250,000-$450,000 for the newest technology that includes a 64 Slice Series.\" There are various contracts that can be negotiated for warranty coverage and updates which will be an additional charge. The algorithm for stroke requires a CT scan to determine the course of therapy immediately once NIH score determines a possible stroke diagnosis. Also, a CTP and CTA are performed to provide further information to determine what surgical procedure would be most beneficial. The various testing through the CT studies establishes if TPA (IV anticoagulant) therapy is an option for an ischemic stroke or if surgical intervention is required. TPA is to be administered within the first hour of onset or as soon as possible to provide optimum results mitigating neurological deficits. If surgical intervention is required the neurosurgical staff is contacted to expedite intervention as time is of the essence. The decision for JFK Health care Organization to purchase or lease a new CT scanner is based on the ability to service the increased volume of patients that will require rapid results to improve their outcome post stroke. This equipment will enable faster testing, results, and improved imagery preventing delays in care and supporting rapid interventions for proactive care. Purchase or leasing of this new equipment while expensive and can be justified due to JFK Comprehensive Stroke Program that will increase the number of patients that will now be treated through this HCO. Patients presenting with possible stroke symptoms are assessed immediately to identify the nature of the stroke - hemorrhagic or ischemic. According to Stroke Treatment, (n.d.), "Utilizing diagnostics including CTA/CT perfusion imaging, surgeons perform intra-arterial or mechanical thrombolysis with advanced catheter-based clot retrieval devices, including a new system that uses suction to remove the bolus instead of extracting it CAPITAL PURCHASE 7 mechanically. These procedures have proven effective when applied within eight hours of stroke onset. In ischemic stroke, CT perfusion outlines the territory of the penumbra and identifies brain tissue with reversible ischemia, which may allow treatment of patients as long as 24 hours after first symptoms occur.\" One way to evaluate the care of patients diagnosed with stroke is to look at the percentage of patients receiving the timely and effective care measures that are appropriate. The goal is 100 percent to provide the best outcome. According to "Time To Treatment And Outcomes In Ischemic Stroke" (n.d.), " Those treated within the first 90 min had significantly lower in-hospital mortality [odds ratio (OR), 0.74; 95% confidence interval (CI), 0.64-0.86], decreased rates of symptomatic intracranial hemorrhage (OR, 0.72; 95% CI, 0.60-0.87), increased frequency of independent ambulation at discharge (OR, 1.51; 95% CI, 1.35- 1.69), and higher likelihood to be discharged to home (OR, 1.33; 95% CI, 1.20-1.46). For every 1000 patients treated, every 15-min reduction in time to treatment was associated with 18 more patients with improved ambulation at discharge, 13 additional patients discharged to a more independent environment, and 4 fewer in-hospital deaths. This remarkable study proves what many clinicians caring for acute stroke patients have always believedthe faster we can give TPA, the better the outcomes\" (). The purchase of a new CT scanner requires approval from the trustees, CFO, and management justifying this capitol expense with attention to key aspects that include the amount, attainment, and financial analysis prior to purchase. Within these aspects there are subsets to consider such as hospital goal, economic feasibility, and acceptability. The purchase or lease of a new CT scanner far exceeds what would be considered a small purchase and as a capital expense funds to maintain this equipment are factored into the cost. The initial outlay of funds is only a CAPITAL PURCHASE 8 portion of the cost and consideration as additional staff will be needed to operate the equipment and is an added expense. The goal of KHS is to achieve and maintain Comprehensive Stroke Care certification and cannot be achieved without obtaining a new CT scanner. A quick method to evaluate KHS economic feasibility to purchase this item can be achieved through calculating the equipment's value, profitability index, and annual cost by discounted cash-flow (Cleverly, pg. 429). The CT scan equipment value is expensive and might be considered to be an item that would benefit the HCO if leased; however consideration of the certification justifies possible purchase. Presently, the one CT scanner available for stroke evaluation is out dated and cannot be updated to provide the imagery requirements to obtain a definitive diagnosis for stroke. The expected increased volume of patients requiring CT testing in a timely manner in combination with improved diagnostic imagery validates the consideration for a new CT scanner purchase verses leasing. Present CT technicians are capable of operating a new CT scanner with minimal instruction, and the sales agreement includes instruction and training included in the cost. Support services from the equipment company can be negotiated in the contract to help train new personnel. The decision to purchase verses leasing a CT scanner involves many considerations. Due to the requirements to maintain Comprehensive Stroke Care privileges JFK Health Care Organization has minimal options. According to GE health care organizations that want to upgrade their CT scanner and save money over the cost of brand new equipment. However, even at refurbished CT prices, late-model scanners like the GE VCT 64-slice can represent a hefty sum to pay all at once. The listed leasing choices provided by GE are broken down for comparison to determine the best option below: CAPITAL PURCHASE 9 Multi-Year Lease Financing Options for GE VCT 64 Aside from offering the obvious benefit of reduced starting costs, all three of these plans include the cost of the first year of a service agreement as part of the total and spread it across the lease term. This allows for a year of lower payments before needing to kick in your regular equipment service budget. 5-Year Lease with First 3 Months at $99 This plan offers the lowest starting costs. As the name implies, the first 3 months of the lease would cost only $99 each. The typical payment for the rest of the lease term would be $7,505. 5-Year Lease This plan offers the lowest ongoing monthly costs at a flat rate across the lease term. Typical monthly payments under this plan are $7,075. 4-Year Lease The 4-year lease is the "happy medium". It provides a reduction in up-front cost, but also pays the equipment off faster. Equipment purchased under this plan typically costs $8,590 per month. Aside from offering the obvious benefit of reduced starting costs, all three of these plans include the cost of the first year of a service agreement as part of the total and spread it across the lease term. This allows for a year of lower payments before needing to kick in your regular equipment service budget. CAPITAL PURCHASE 10 The JFK Management has evaluated that in the past the ED department had to transfer on average sixty-five or more patients per week to other facilities that provided comprehensive treatment for stroke. The new certification to treat and manage this population can provide data to determine what is the best decision for JFK to purchase or lease a new CT scanner? According to GE, the mean purchase price of a new CT scan would be in the range of $350,000.00 excluding any maintenance agreement and additional coverage. The five-year lease would cost $63,972 for the first-year, and $84,900 annually for the next three-years. The total amount for leasing a CT scanner would cost JFK Health Care Organization $318,672 over a four year time frame. Leasing a CT machine would provide greater savings and according to GE expedite the receipt of equipment quickly. Determination for leasing can be evaluated verses purchase based on the data obtained from past populations that required transfers to stroke care facilities. Data regarding future patients that will be using this service from HCO in the area that also had to transfer their stroke population require consideration for the decision of purchasing or leasing a new CT scanner. Rapid changes in technology for CT scanner (5 years) requires consideration in a decision for this purchase versus leasing. The increased revenue captured from the population that had to be transferred to other facilities will provide information regarding future funds that can validate this capital venture. JFK Organization must expedite a decision as the Comprehensive Stroke Program begins to accept stroke patients seeking current options to minimize damage after a stroke. Neurosurgeons and operating staff are prepared to provide the high- tech interventions described. These options require pre-operative CT scanning and JFK present scanner is limited in the CAPITAL PURCHASE 11 information it provides. Cost analysis for CT scanner for lease or purchase provides options for consideration to acquire this necessary equipment. No requirement is needed through the NJ Legislature to obtain a certificate of need for this capital expense adhering to the regulations as stated above. The decision for purchase or lease of a CT scan provides an opportunity for JFK Health Care Organization to be a leading provider in the care of stroke victims in South Jersey. Prior to this time patients required transfer to facilities in the Philadelphia area to deliver life- saving measures. Transferring patients to outside facilities is time-consuming, costly, and creates anxiety for families. Time is of the essence in preventing damage to the brain after a stroke and coordinating transfer requires multiple resources and time. Additional costs are incurred by HCO that have to transfer patients to receive services that they cannot provide. During a stroke event, families are stressed, and the added burden of transferring their family member to an unfamiliar facility increases their anxiety. It is in the best interest of JFK Health Care Organization to make a decision to lease a CT scanner based on the financial information provided by GE. Leasing a new CT scanner will improve outcomes for stroke patients, increase patient admissions, and foster the communities trust in the service they provide. JFK will establish additional benefits by providing savings in rehabilitation and long term care for this population with early intervention. Early identification of stroke signs and symptoms, provides immediate early intervention, decreases loss of function, and improves quality of life. CAPITAL PURCHASE 12 References Certificate of Need: Application and Review Process. (Dec 21, 2007). Retrieved from http://www.nj.gov/health/healthfacilities/documents/ac/reg8_33.pdf Cleverly, W.O., Song, P.H., & Cleverly, J.O. (2011). Essentials of health care finance. (7th Ed.). Sudbury, MA: Jones and Bartlett GE CT Scanner Cost Price Info - Block Imaging. (n.d.). Retrieved from http://info.blockimaging.com/bid/93368/GE-CT-Scanner-Cost-Price-Info Health Care Planning and Resources Development Act of 1974, Public Law 93-641, http://65.61.14.11/ALPHTN/assets/history_law.pdf National Conference of State Legislatures, http://www.ncsl.org/issuesresearch/health/con-certificate-of-need-state-laws.aspx Stroke Treatment. (n.d.). Retrieved from http://hospitals.jefferson.edu/ Time to Treatment and Outcomes in Ischemic Stroke. (n.d.). Retrieved from http://www.medscape.com/viewarticle/807586