NR 711 Week 2 Three-Year Cost Analysis Example

Three-Year Cost of a Video Patient Monitoring Program on a 32-Bed Medical-Surgical Unit, FY2028 to FY2030

Student Name

College of Nursing, Chamberlain University

NR 711: Fiscal Analysis and Project Management

Instructor Name

Month Day, Year

Three-Year Cost of a Video Patient Monitoring Program on a 32-Bed Medical-Surgical Unit, FY2028 to FY2030

Purpose

This analysis prices one change: replacing part of the unit's one-to-one sitter coverage with remote video monitoring on 4 West, the hospital's 32-bed adult medical-surgical floor. It produces one figure, the cost the hospital commits to by approving the change, so that the request can be placed beside the other asks waiting for the same patient safety capital pool. It does not estimate savings. Sitter hours avoided, falls prevented and staff relief belong to the business case, which uses this sheet as its cost side. Keeping the two apart means the committee can check the cost without first accepting a forecast about benefits, and a cost sheet that already nets out projected savings is impossible to audit (Drummond et al., 2015).

Rules Fixed Before Any Number

Five rules govern every figure below, and they are stated first so that a reviewer can apply them to any other request in the queue and get a comparable total.

First, the horizon is three fiscal years, FY2028 to FY2030, starting at go-live on 1 July 2027. Three years matches the vendor's license term and the period over which the finance office depreciates portable clinical electronics, so a longer horizon would count years with no contract behind them.

Second, figures are nominal dollars, with two escalators and no others: the license rises 4% a year under the draft contract, and wages rise 3% a year under the finance office's planning assumption. No discounting is applied over three years, because the capital committee compares requests in nominal dollars, and discounting one request but not its rivals would make this one look cheaper for a reason unrelated to the cameras themselves.

Third, a cost is inside the change if the hospital would pay it only because the cameras exist. The wireless network on 4 West already carries telemetry and has spare capacity, so it is outside. The two network drops needed for the central station are inside. Furniture, the room used for the station and the electricity are outside, because the room is already furnished and the load is trivial.

Fourth, one-time costs are paid in year one and are never spread across the horizon. Recurring costs are shown at their full annual value in every year they run, including those that begin partway through the term.

Fifth, every figure carries its source in its own row, so a reviewer who doubts a number knows who to ask.

The Costing Table

Table 1

Cost of Video Patient Monitoring on 4 West by Fiscal Year, Nominal Dollars

Note. Note. Rows and columns both sum to $495,617. Wages escalate 3% and the license 4% a year; nothing else is escalated.

How the One-Time Block Was Built

The purchase lines come from a single written quote dated March 2027 and total $96,000, the same figure that went to the committee last cycle. Requests of this kind most often forget the training line, and it is not small. Fifty-eight registered nurses need two hours each, which at the FY2027 loaded rate of $61 an hour comes to $7,076. Twenty-two nursing assistants need the same two hours at $25.50, which is $1,122. Five monitor technicians need 24 hours of vendor training at $24, which is $2,880. Together that is $11,078, and every hour of it is backfilled, because the unit cannot take a nurse off the floor for two hours without paying someone else to cover the assignment.

The parallel-running line covers the two weeks after go-live when sitters stay on while the cameras prove themselves. During those 14 days the unit pays its half of a monitor technician for 336 hours, $4,032, with no sitter hours saved yet. A request that leaves out the period when both arrangements run understates year one by exactly that amount (Finkler et al., 2013).

How the Recurring Block Was Built

The monitor technician is the largest single cost in the request, and it is shared. One technician can watch up to 16 patients at a time across two adjacent units, and the finance office prices the position at $24 an hour, loaded, around the clock: 8,760 hours, or $210,240 a year. The unit's half is $105,120 in FY2028, rising with wages to $108,274 and then $111,522. If the neighboring unit withdrew from the arrangement, this line would double, a dependency the business case has to name.

The license starts at $14,400 and rises 4% each year under the draft contract, giving $14,976 and then $15,575 after rounding to the dollar.

The Second and Third Invoices

Two costs do not appear in year one at all, and both are easy to miss when a request is read in the spring it is submitted. The hardware warranty covers the first twelve months only. From FY2029 the vendor's service contract costs $6,240 a year, roughly 10% of the camera hardware price, and it is fixed for the remaining two years of the term. The camera batteries are rated for 18 months of continuous use, so a full set of twelve, at $180 each, is due in month 18, which falls in FY2029: $2,160. A sheet that showed only the year-one recurring figure of $119,520 would understate FY2029 by $12,130.

Recurring cost therefore grows each year, from $119,520 to $131,650 to $133,337. Annualized over the horizon it averages $128,169 a year. That is the figure the committee should hold in mind as the cost of keeping the program running once the purchase is behind it, and it is larger than the purchase price every year. Studies of video monitoring have tended to report the purchase and the sitter savings while saying less about what it takes to keep watching (Sand-Jecklin et al., 2016), so this sheet puts the watching first.

What Is Not in the Sheet

Four items were considered and left out, each for a stated reason. A third screen for the station was suggested by the technicians; it is not in the quote and would add about $550. Integration with the nurse call system was offered as an option at $18,500 and is outside the request. Recording of video is not part of the program, so no storage cost appears. And the cost of a fall that the cameras might prevent is a benefit, not a cost, so it belongs to the business case.

The Price

Approving video monitoring on 4 West commits the hospital to $495,617 over three fiscal years, FY2028 to FY2030, in nominal dollars: $111,110 one-time in the first year and $384,507 recurring across the three, of which $96,000 is capital and $399,617 is operating.

Check on the Arithmetic

Every subtotal was cross-footed: the one-time rows sum to $111,110 across the first column and down the total column, the recurring rows sum to $384,507 the same way, and the year columns, $230,630, $131,650 and $133,337, add to $495,617. Rounding happens once, at the dollar, on each escalated figure, and not again on the totals.

References

Drummond, M. F., Sculpher, M. J., Claxton, K., Stoddart, G. L., & Torrance, G. W. (2015). Methods for the economic evaluation of health care programmes (4th ed.). Oxford University Press.

Finkler, S. A., Jones, C. B., & Kovner, C. T. (2013). Financial management for nurse managers and executives (4th ed.). Elsevier Saunders.

Sand-Jecklin, K., Johnson, J. R., & Tylka, S. (2016). Protecting patient safety: Can video monitoring prevent falls in high-risk patient populations? Journal of Nursing Care Quality, 31(2), 131-138. https://doi.org/10.1097/NCQ.0000000000000163