Calculate ROI, NPV, IRR. Explain why or why not we should go or should not go with this plan? I need a detailed and specific analysis.

The location of the department will take place in existing hospital space and will require approximately $150,000 for renovations and updated signage for the area. There are two contributions of funds for the project, one being a gift of $50,000 from the Network’s foundation office which is ultimately from the community. The remaining $100,000 is from capital funds.

Per billing guidelines, any services performed preoperatively in the hospital setting will roll up to the inpatient claim and be billed as a part of the DRG for the inpatient service. However, outpatient services will be billed on a separate claim and documented via CPT code for services provided and will thus be reimbursed separately according to payer fee schedules.

Because this service is able to be provided in existing hospital space and a modest budget for renovations, the upfront cost to implement the operation are extremely low in comparison to other projects. Costs such as medical equipment, a refurbished x-ray machine, laptops, printers, fax machines and telephones are depreciated over an average life of 5 years for a total expense of $100,000.  In essence we are reallocating existing revenue and staff to provide services in an alternate location so current revenue per unit of $1,145 was utilized with a 10% increase in previous fiscal year volumes for year one. All supplies were also increased by 10% from previous fiscal year to account for projected volume increases. With a 2-2-2 staffing model, AHWR for RN’s is $21.25, $10.00 for front desk staff and $14.25 for technicians with a 21% expense applied for employee benefits. Current reimbursement rates of 20% were utilized which are diluted compared to other service lines due to the combination of inpatient and outpatient volumes.

Table 1-A: Financial Pro Forma