It always confused me. A hospital has an MRI or some other machine, and you hear they try to use it as little as possible to cut costs, because it costs them this or that amount per usage. But why would that be if they own it?
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Operational fees. Like, if you had an A/C you wouldn’t want to use it all the time even if the A/C belonged to you wouldn’t it? Because yes, it’s very much yours and having it on brings you comfort but would you like to deal with the electric bill that comes with having it on 24/7?
the machine only has so much “juice”. it can be used x amount of times before you need to do maintenance.
the “manpower” argument isnt a valid excuse. manpower is manpower, if manpower is the main reason, they should just say manpower and leave the machine out of it.
Advanced machines have service contracts that prescribe a certain number of uses. Hell, most offices have service contracts for their large printers and they pay per page in so much is they buy blocks of prints (i.e. your service contract covers 1-50,000 prints, after that you have to buy another block.).
Well kiddo remember how you only made it to age five because when you were four you spent two weeks in the hospital with an infection that wound up costing your family forty grand even though they have health insurance? It turns out the hospital has American insurance too.
The same reason a car has fixed and variable costs.
When you use a car, you pay for things that are proportional to the kilometers you travel (gas, tires) but you also need to compensate for costs that happen every year regardless of how much you travel (maintenance, cleaning) and even for the depreciation of the car. These fixed costs get divided by the number of kilometers that you expect to drive every year.
Same for a machine at the hospital. Someone needs to be billed for the cost of the machine. So the total cost of the machine and the other fixed costs are divided by the number of hours it is used every year.
You own your furnace in your home, but the great it produces consumes energy that you have to pay for a you use it. The hospital equipment requires energy to work , and MRI machines are not small. The magnetic field they produce takes some juice.
You own your car. Is it free to operate?
No, you have to buy gas, you have to change the oil and other fluids, it’ll need brakes from time to time, new tires, etc.
Expensive equipment is no different. And the mechanics you have to hire to fix problems are much much more expensive.
An MRI costs $1m. That cost then has to get spread among the patients who use it. Say it can do 10,000 scans in its lifetime. That’s $100 per patient. Plus electricity, repairs and maintenance. And the staff to run and read scans, on duty 24/7 for emergency purposes.
You want to use it more, the more you use it the less it costs per scan. That can add up to real $$$ over the life of a machine. In broad terms industrial and complex machinery (factories, planes, MRIs, buses, etc) should be used consistently. There are a couple of reasons for this, but the most obvious is that the more you use it the less it costs. Particularly with machines that have fixed maintenance cycles. If you have to drop the engine off a plane every year no matter what, then it is cheaper if you have flown it 365 days that year than if you flew it 100 days that year. Similarly, an MRI is going to need to be maintained at fixed intervals, so if you scan 1000 patients between those intervals it is better than only scanning 100 patients.
It seems counterintuitive because we aren’t used to thinking about things in terms of fixed and variable costs. Variable costs are things like electricity, those costs are going to go up and down depending, but you can smooth that over time. Fixed costs are things like installing the thing, regular maintenance intervals, etc. So, what you do is figure out how much each scan costs if you pay for the electricity and maintenance. What happens is the more you use it the less each scan costs because your maintenance doesn’t change, but the amount per scan that must go to maintenance drops.
It’s very much like your car.
Your car has fixed costs: pricetag, shipment, insurance, inspection, maintenance, cleaning. The opportunity cost of having an older model (vs a newer one).
Your car has variable costs: insurance (some policies are valid only over a certain range), repairs (parts break after miles not years), cleaning, and driving. Don‘t forget the opportunity costs as well (even when we’ll maintained and repaired, a car than run longer distance is worth much less).
The fixed cost you should indeed forget, those are sunken: the car is yours.
The variable costs is what should steer your decision if you want to drive.
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