Reference no: EM132385180

In MS Excel, complete the exercises in part 1. In APA format, respond to the questions in part 2.

Part 1

1. Lutheran Regional Hospital uses a planning process to define a new radiology service line. The decision matrix gave it a high priority, and administrators want to evaluate its financial feasibility. Estimated fixed costs are $1 million, and the estimated net reimbursement level is $1,500 per procedure. Physician and other provider salaries on a direct basis are $340 per procedure, and total operating expenses will add another $160 per procedure. Calculate the breakeven point for this potential new service line.

2. If Lutheran Regional discovered a way to reduce the total initial investment to $600,000, causing the average pricing level to fall to $1,200 and the other assumptions to stay the same, how many procedures would be required to break even?

Part 2

1. What are some ways that hospitals can avoid qualitative and politically based decision making around technology investments?

2. What are the advantages to taking a portfolio approach to information technology?

3. What are the six recommendations for improving capital budgeting processes?

4. Should return on investment be analyzed at multiple points during a project's life cycle? Why?

5. How does a hospital calculate its cost of capital? Which data sources are necessary?

6. Does the time value of money really affect the long-term financial outcomes for a hospital?

7. What are the limitations to net present value, payback, and internal rate of return?