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

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