Business of Radiology 101
Capital Expenditures
Costly medium to long-term purchases that do not fall under operating expenses are budgeted separately as a capital budget. In contrast to an operating budget, which often accounts for relatively fixed yearly expenses and contracts, the Capital Budget includes major purchases such as new or replacement machinery, products, or devices.
Typical radiology capital purchases include large equipment such as: MRI and CT scanners, and the facilities to house them. There are a number of situations that lead to equipment purchases: equipment end of life, excessive downtime, regulatory mandates, safety concerns, outdated features, systems interoperability, changes in capacity or demand, planned expansion, and competition. Imaging hardware purchases and their contracts are complex, affecting both capital and operating budgets with an array of immediate and long-term expenses:
- Initial Equipment Expenses
- Financing: interest from leasing, loans etc
- Construction: renovation, HVAC, electrical, shielding, new building etc
- Labor: more/less staff needed to run device
- Supplies: supplies per study
- Overhead: scheduling, billing if exam volume changes
- Service Contract: first year usually under warranty
- Shipping & Installation
- Inspection & State/Federal Inspection
- PACS Integration
When a department or group anticipates an expense, early budgeting can ensure funds are available when needed. A radiologist or committee will begin the purchase by writing a ‘Request for Proposal’ (RFP), defining the desired specifications of the equipment. RFP's can vary widely in detail. Once an RFP has been submitted, a vendor reviews the desired specifications with their product lines and submits a bid with a device that will fulfill or exceed the RFP.