Introduction
For healthcare organizations, capital budgeting is an essential discipline because it helps them to make educated choices about significant expenditures that will improve the standard of care and patient safety (Zhang & Wang, 2021). Additionally, they will perform better overall, enabling the facility to take on more patients. I want to suggest a medicine dispensing system.
This innovation has been tried in other countries and has proved to be successful and very effective—a good example of a country where it has tried and become successful is China. For a very long time, they have not complained about medical delays in China, which can be evidenced by the growing population and low mortality rate (Luan, Shao, & Dou, 2020). A healthy nation grows as labour capital is available, making production cheap and effective. This, in turn, leads to growth in a country’s GDP, which attracts more investors. This technology, therefore, will be of great help to this country.
Item Description
The new medication dispensing system is an automated, computerized method for measuring and giving patients their medicines (Chapuis et al., 2019). It generally includes a pharmaceutical cabinet, barcode scanning equipment, and software that tracks and documents medicine distribution. The technique aims to improve patient safety by reducing the possibility of a medical negligence case, such as the prescription of incorrect medicine or dosage (Chapuis et al., 2019).
One of the major complaints that have been reported in hospitals is medical negligence. This has been a problem as many citizens have lost their lives. Some doctors are also affected negatively as they lose their jobs and cannot get a job elsewhere. In dealing with the situation, action needs to be taken as soon as possible (Boyd & Chaffee, 2019).
This will help boost the patient’s confidence in going to a hospital and feeling better. As it has been mentioned in the paragraph above, the invention will help in dealing with errors in dosage and medication (Zhang & Wang, 2021). This will also help in providing the labour needed to grow the economy. Imagine a situation of losing a specialist in a certain field. It may affect the production process and the company at large.
The Rationale for Its selection
- Addressing Patient safety
- Reduction of pharmaceutical errors
- Increasing efficiency and efficacy of the procedures used in dispensing medicine.
This capital item was chosen since it addresses a key patient safety issue in healthcare institutions. By automating the medicine delivery procedure, this technology can help reduce the likelihood of pharmaceutical errors, which are a primary source of injury in hospitals (Keerthi, Ramapriya, Kashyap, Gupta, & Rekha, 2021). In addition, the system can increase the efficacy of the medicine dispensing procedure, thereby saving time and resources for healthcare personnel. Fatigue has been mentioned as one of the major reasons why these mistakes occur. This machine may be used as an alternative benefiting the patient and the doctors.
Cost- Benefit- Analysis
The capital equipment cost for this system is $500,000.
The personnel cost for training and support is estimated at $50,000.
The supply cost is estimated at $20,000.
In evaluating the benefits that come with deploying this equipment, it is crucial to do a cost-benefit analysis. In doing this and ensuring that it becomes successful, it is important to look at the capital requirement, the cost of training the people, and the supply costs involved.
The capital equipment will depend on the quality of the equipment being bought. They are of different quality, which will also depend on the amount the organization requires.
The personnel cost will depend on the health organization’s size and the average number of patients. From a critical point of view, more nurses may be employed, but this cost can be saved by reducing the number of patients who are readmitted to the hospital or even those who stay.
The supply costs needed for the effective operation of the equipment may include aspects such as disposable sensors, batteries, and electrodes. This will greatly depend on the equipment used and its frequency.
The Positive Financial Impact
The new method is projected to save $100,000 annually in costs connected with drug errors, such as longer hospital stays and additional treatments.
Capital equipment cost: $500,000
Personnel cost: $50,000
Supply cost: $20,000
Total cost: $570,000
From the above figures, this is good equipment. The money saved can be used to develop other sectors, especially the emergency response department. A healthy nation is a wealthy nation. A large sum of money is lost when drug errors occur, which causes some patients to stay for a long in hospitals and leads to additional treatments (Bhandari, 2022). Once this is improved, people will be free and confident in their nation-building activities.
Review of the Financial Ratios
Return on Investment (ROI); The Return on investment can be calculated by dividing the net benefit of the projected investment by the cost of investment (Luan, Shao, & Dou, 2020). For example, in this case, if the cost of the equipment is $570,000, and the net benefit is $100,000 from the calculation that has been done above, the ROI will be 17.5%, which is a good figure.
= (Net benefit / Total cost) x 100 ROI = ($100,000 / $570,000) x 100 = 17.5%.
Net Present Value (NPV); This can be calculated by subtracting the cost used in investment from the present value of potential benefits to be experienced in the future (Luan, Shao, & Dou, 2020). From this description, it has been substituted effectively, the NPV
= (Net benefit / (1 + Discount rate) ^n) NPV = ($100,000 / (1 + 0.1) ^5) = $41,814.
Cash Payback period; This can be described as the period needed to recover the cost used in investment. It can be calculated by dividing the cost of the investment by the annual benefit (Luan, Shao, & Dou, 2020). In this case, if the cost is $570,000 and the annual net benefit is $100,000, the cash period will be 5.7 years, as shown in the calculation above.
Cash payback period = Total cost / Net benefit Cash payback period = $570,000 / $100,000 = 5.7 years
Recommendations
The healthcare organization should fund the purchase of this system as it is within favourable financial parameters.
From the financial data provided, the projected capital investment is likely financially sustainable. The return on investment is 17.5%, which exceeds a minimum rate of 15%. It should also be noted that the NPV is positive, indicating that the investment will generate more value than costs. The cash payback period is 5.7 years which is within an acceptable range.
Conclusion
Patient risk has been described as one of the major health concerns. The new medicine dispensing machine is a worthy capital investment as it will address this problem. It would help both doctors and patients. Fatigue has been a major cause of medical negligence; hence this machine would be influential. Apart from minimizing cases of medical negligence, it will also increase the efficiency and efficacy of drug dispensing.
The NPV, ROI, and cash payback period are all positive, and thus the financial aspects of the cost-benefit are good. I recommend that the health organization fund this project or machine.
References
Bhandari, L. (2022). Assessing the market and financial potential of self-made pill dispenser: a start-up aiming to eradicate medication non-adherence in Portugal (Doctoral dissertation).
Chapuis, C., Bedouch, P., Detavernier, M., Durand, M., Francony, G., Lavagne, P., … & Payen, J. F. (2019). Automated drug dispensing systems in the intensive care unit: a financial analysis. Critical Care, 19, 1-5.
Keerthi, A. M., Ramapriya, S., Kashyap, S. B., Gupta, P. K., & Rekha, B. S. (2021). Pharmaceutical Management Information Systems: A Sustainable Computing Paradigm in the Pharmaceutical Industry and Public Health Management. Sustainable and Energy Efficient Computing Paradigms for Society, pp. 33–51.
Luan, M., Shao, X., & Dou, F. (2020). Financial conditions, health care provision, and patient outcomes: Evidence from Chinese public hospitals. Economics Letters, 186, 108876
Boyd, A., & W. Chaffee, B. (2019). Critical evaluation of pharmacy automation and robotic systems: a call to action. Hospital Pharmacy, 54(1), 4-11
Zhang, X., & Wang, Y. (2021). Research on intelligent medical big data systems based on Hadoop and blockchain. EURASIP Journal on Wireless Communications and Networking, 2021(1), 1–21.
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