Question

The Health Information Service of Longueville Private Hospital in Australia have been collecting their medico-legal transactions using Microsoft Excel. A profile of the hospital’s medico-legal activity is detailed:

Medico-legal Activity per month

Subpoenas processed: 50

ROIs: 30

Chapter 16As: 40

Coroner’s requests: 20

Adoption requests: 1

Solicitor’s requests: 25

However, they have found that this tool is limited in its data reporting and analytics functionality pertaining to monitoring medico-legal activity, tracking outstanding arrears and workforce and workload activity. The Health Information Service decide as a team to submit a proposal to purchase a new product specifically designed to capture, process and report on medico-legal activity as well as interfacing with the hospital’s information systems. "Chart Release" is discussed as a potential product to meet the business needs.

How to do the cost benefit and payback analysis in this case? I know the formula equation for this is total cost/total revenue (benefit)=length of time (payback period)

Answer 1

To perform a cost benefit and payback analysis for the purchase of a new product, follow the steps of determining total cost, identifying potential benefits, assigning a monetary value to benefits, calculating total revenue, and determining the payback period.

Step-by-step explanation:

To perform a cost benefit and payback analysis for the purchase of a new product, the Health Information Service of Longueville Private Hospital can follow these steps:

1. Determine the total cost of purchasing and implementing the new product, including any installation or training costs.
2. Identify the potential benefits of the new product, such as improved data reporting and analytics functionality, better monitoring of medico-legal activity, and increased efficiency in tracking outstanding arrears and workforce activity.
3. Assign a monetary value to each benefit, considering the potential cost savings or revenue generation that can be achieved.
4. Calculate the total revenue or monetary benefit from the new product.
5. Divide the total cost by the total revenue to determine the payback period, which represents the length of time required to recoup the initial investment.

By following this analysis, the Health Information Service can make an informed decision about whether the purchase of the new product is financially viable.