Introduction

The report presents the business case and budget along with the financial analysis for the X-ray service for Nepean Blue Mountains Local Health District. The Zero budget for the service is prepared and the break even analysis is performed. The risk management is also discussed. Considering the fact that Nepean Blue Mountains Local Health District is a not for profit organization and is dependent upon funding the contingent budget is also prepared which results in reduction of expenses up to 10 %.

Rationale for New Service

Nepean Blue Mountains Local Health District is known for providing the safe and high quality cares to the people in the area. The organization is driven by three aims: to improve health, enhance the experience of patient and living within the means (NBMLHD, 2020).  The health care however does not have X-ray facility in house. The patients are referred to other X-Ray centers in the locality and come back with the report for consultation and advice. Thus the strategic planning team of the organization has decided to present the case for an in- house X-Ray Facility.

An X- ray is an image that is generated when the small amount of radiations are passed into the body. The x-ray beam penetrates the body parts and produces pictures of organs, tissues and bones. The X-ray is needed for following activities (Health Direct, 2020):

• Evaluate the bone conditions  for fractions, dislocation in case of accidents and infections, arthritis in other cases
• Review the chest for identification of pneumonia or  heart failure, 
• To detect and evaluate cancer
• To study the blockages and problems in bowel 
• To detect the presence of any foreign object in the body

The NBM district health care does not have the in-house X-ray facility and hence it is not able to provide desired services and experience to the patients. Sometimes the serious patients are referred to the nearby by X-Ray center for the service and the patients are brought back afterwards.

The problems caused by the lack of facility:

• Delay in providing services  in urgent accidental or trauma cases
• Declining the patients whose only requirement is x-ray because of fall or some individual concerns
• Reducing the patient experience
• Use of ambulance to move the patients to get the X-rays from other centers, thereby risking the health of the patients as well as keeping the ambulance occupied.
• Less visit of patients for need of visit to the other center for X-ray

The above factors are affecting the performance of the organization because of delays in providing the service. This also affects the quality of health care as the consultant doctor might rely on personal judgment in absence of X-ray. The financial health of the organization is also affected as the number of patients visiting the center is declining due to the discomfort of going to other centers for X-rays.

In addition to this the addition of X-ray facility will not require an additional need to patient beds and space because the process of getting an X-ray done is non-invasive and painless activity. It does not need any recovery time (Better Health, 2020). 

In light of above issues and concerns, the management of NBM has decided to propose the in-house X-ray facility for the healthcare center.

Budget Buid-Up and Financial Activity

The budget for X-Ray facility includes the estimation of the capital cost and operating expenses. The Capital cost includes the electronic device which emits the rays and also produce digitally the two dimensional pictures.

The cost of the electronic machine known as radiographic equipment is estimated as $200,000

The machine will become obsolete and unfit for use after 5 years. Thus the machine is depreciated @ 20% per annum

The operating cost of the activity can be divided into four categories:

• Staffing cost
• Consumables Cost
• Utilities
• Administration cost

The budget for the above cost categories is estimated as follows:

1. Staffing cost:
2. Carrying out X-rays is a technical work and needs exerts for the job. The X- ray supervisor is the Radiologist. Thus the health care needs a radiologist/radiograph.  The expert need not be present for the whole day and can have the OPD for 2 hours in the morning and 2 hours in the evening.  He can be made available in emergency on call. The fee of the radiologist is $100 per hour (O’Suvilion, B., 2020)
3. The facility also needs two registered nurse. One full time $ 45 per hour for 8 hours 5 days a week and one part time  for 2 hours in the morning and 2 in the evening. 
4. A receptionist is needed to take appointments for the x-ray for the whole day. The cost will be $30 per hour for 5days and 8 hours a week.
5. We also need ward boy for the service to help in moving the patients on wheelchairs or stature @$30 per hour
6. One cleaner is needed to keep the area clean and hygienic @$30 per hour.

Total staffing cost is $496,340 per annum. The contingency of 15% is added for overheads expense. The total cost can be viewed in table 1of Appendix.

1. Cost of Consumables: the consumables needed by the service facility are hand gloves, X-Ray sheets and Masks.
2. The nurse, ward boy and supervisor need to use gloves for hygiene reasons. The pair of gloves cost $0.50. It is estimated that 20 pairs of gloves will be used every day in the facility. 
3. Based on the past experience it is estimated that there will be about 10 patients vising every day for X-rays. On an average every patient needs to get 3 x-rays to consider different angles. Cost of 1 X-ray sheet of standard size is $0.90
4. Masks are to be used only by the radiograph while carrying out the x-ray and will be used at the rate of 1 mask for every two patients. The masks are high quality filter masks and cost $1.20 per piece.

The total cost of consumable is $11,232 per annum. It can seen  in Table 2 of Appendix. 

1. Utilities Cost: Utilities are the commodities which are important for providing safe and hygienic health care services. The cost of utilities like the hand sanitizer, cleaning material for the place, water, electricity, stationary, telephone and electricity  expenses are estimated  for the year at $78,000 per annum. The break  can be seen in Table 3 in Appendix.
2. Administrative Expenses: Certain administrative expenses will also be incurred like the rent of the place, insurance of the building and equipment and general repair and maintenance and depreciation on equipment. The total administrative expenses are $107,640 and Depreciation of $40,000 per annum. The  details can be seen in Table 4 to Appendix.

The budget of the service for the year will come out to be $733,212.

Management of risk and service issues

Health care services are very critical services in terms of quality of service offered and the risks involved. It is very important to perform a risk analysis of the health care service and identify ways to manage it.

The risk involved in the X-ray service and the management plan are:

1. X-rays are the radiations which are passed through the body and are believed to cause damage to the body if not used properly. RMP: The new electronic device use the technology which do not require shielding from x-rays, thus no risk of damage to body parts (Applied Radiology, 2019).
2. An expert needs to take the x-rays so that the right image is taken in minimum attempts without causing much movement to the patient so that there is no collateral damage in case of injury. RMP:  The hospital has a radiologist to perform the x-rays and two registered nurses to support him.
3. Protection of patients and medical staff is of utmost importance in healthcare, they are at risk of infection. RMP: the health care services are risky due to exposure to various infections thus proper hygiene care like use of gloves, sanitizer and masks will be used (Radiol, W., 2015).
4. Risk of discrepancy in judgment, errors in decisions by the radiologists: like any other health care service X-ray and radiologists are subject to risk of errors, missing some facts or carrying out the procedure wrong. RMP: to reduce this risk, the NBM health care center has hired the qualified radiologist and registered nurse so that risk can be minimized. However, this risk cannot be eliminated completely.

Break Even Analysis

Break Even point is the operating level of the firm where the expenses are equal to the revenue and the firm has no profit or no loss. The total cost of the X-ray service of the healthcare center is estimated to be $733,212.

To break even the revenue should also be equal to $733,212

The X-ray service of the Health care center will reach the break even at 10 patients every day for on an average 3 x -rays from different angles for 5 days in 52 weeks in the year. The cost of one x-ray being estimated at $95. At this level the revenue will be as follows:

Thus this the optimal level of activity for the X-ray service to achieve break even.

Break Even Analysis:

Total Receipts $733,200

Total Cost$733,212

Profit /(Loss)(12.00)

The breakeven is achieved at 7800 x-rays per year @ $95 per x-ray. 

Contingency Budget

Considering that NBM is a district Healthcare which gets funds for operation, might not get sufficient funds for the operation. The center might need to reduce the cost without affecting the quality of its services. In case the service needs to reduce 10% of the budgeted cost, the following steps can be taken:

1. It has been assumed that there will be one fulltime registered nurse and one part time registered nurse. Instead of calling both the nurses at the OPD times, the nurses can be called alternatively and the 1hour overlapping each other for support.  The full time registered nurse can be made to serve the department for 6 hours. 3 in the morning and 3 evening. The rest time can be covered by the part time nurse. This will reduce the cost of 2 hours per day of registered nurse. Savings of $23,400 plus 15% overhead
2. Similarly the receptionist for the service can also be part time for the OPD hours only. Rest of the time the registered nurse and ward boy can make up, saving upto $31,200 plus 15% overhead
3. There can be saving in electricity expenses by upto $100 per week by using it judiciously (switching on only when is needed) and using power saver appliances (5 star). Total savings of $5200 per year.
4.  The facility can use smaller internet package can be taken with average speed. The common sitting area of the health care center will have the central broadband connection which can be used. $100 per week can be saved leading to annual savings of $5200.
5. The bills, prescriptions can be shared in soft copy to avoid waste of paper. Thus the use of stationery can be reduced by $50per week. Total savings of $2600 per annum

As the result of these cost reduction measures the excess of funds available to the health care center at the same level of revenue will be as follows:

Conclusion:

The above report shows the analysis of the X-ray service at the NBM district healthcare system and shows the level at which the break even can be achieved. 

However, cost saving/cutting should be achieved everywhere to provide the service at a cost efficient way without affecting the quality of services and hygiene is very important in the health care business