Jay R. Parikh, MD

With exciting advances in technology, the indications for breast ultrasound have progressively increased over the past two decades.1,2 Initially, breast ultrasound was utilized clinically for differentiating cystic versus solid breast masses. Current indications for breast ultrasound by the 2000-2001 ACR Practice Standards include the evaluation and characterization of palpable and mammographic abnormalities, matrix characterization of masses, evaluation of implants, guidance of interventional procedures, and the initial evaluation of masses in women who are pregnant, lactating, and less than age 30.3,4 With these rapidly expanding applications, breast ultrasound has evolved into one of the five fundamental components of a comprehensive breast imaging center.5

Breast imaging centers are currently facing a financial crisis, resulting in the closure of some centers.6 The low reimbursements of both screening and diagnostic mammography have caused breast imaging to be labeled as an economic “loss leader” in many facilities. Breast ultrasound, however, is relatively well reimbursed compared to mammography, and can help a center  achieve financial profitability. In light of higher labor costs, managed care, and capitation contracts, it becomes increasingly important for facilities to be fiscally responsible. The challenge therefore is for radiologists and other health professionals to convince a facility’s financial managementadministrators, other radiologists, investorsof the economic value of purchasing a state-of-the-art breast ultrasound device.

The purpose of this article is to help stakeholders learn how to systematically develop an effective budget proposal for the purchase of breast ultrasound equipment. A step-by-step process is described with a template for submission for capital financing. The template is applied to a specific breast center, and a payback analysis is generated, showing recovery of capital investment within 2 years.


The budget proposal described below was submitted for the Women’s Diagnostic Imaging Center (WDIC), one of four dedicated breast centers under the umbrella of the Swedish Cancer Institute. The WDIC is a freestanding facility offering the full complement of components of a comprehensive breast imaging centerscreening mammography, diagnostic mammography, breast ultrasound, interventional breast ultrasound, and quality assurance. The WDIC is staffed by two general radiologists and one fellowship-trained radiologist in breast imaging.  Breast ultrasound previously was done with an outdated 1994 breast ultrasound machine. The challenge was to economically justify the purchase of a state-of-the-art machine.

TABLE 1. Historical ultrasound volume as a percentage of total Women’s Diagnostic Imaging Center examinations provides basis for projected revenue increase.

Volume Analysis. A volume analysis is fundamental to any capital investment consideration. The critical role of quality assurance and data entry is inherently underscored in this process. Current breast centers should have a mechanism in place, preferably computerized, for efficient data entry, accrual, and analysis. Data relevant to purchasing of ultrasound equipment include the number of annual patient visits, annual ultrasound volume, and growth/decline over time.

Table 1 demonstrates relevant volume analysis for the WDIC from 1995 to 2002.  Note how breast ultrasound volumes increased over the time period twice as quickly as did growth in overall patient visits. This is common in all four of our breast centers, reflecting the increasing indications and utilization of breast ultrasound in clinical practice. The increases in patient and breast ultrasound scans can be extrapolated to project volumes over the next 5 years. From this projected growth, projected revenue can be estimated. This revenue can then be balanced against cost of equipment to determine a break-even point of the investment.


The quality of submission for an ultrasound machine must be reflected in the quality of the application process for capital acquisition. Typically, most facilities will have a standard application form for capital equipment purchases. Recruiting the assistance of other administrators who have previously submitted budget proposals at the same facility and review of previous capital budget proposals will expedite the process and minimize errors and resubmissions. Sloppiness is inexcusable and tarnishes the credibility of the submitting administrative team. The proposal should be frequently and meticulously scrutinized by all members of the administrative team before final submission. The WDIC capital equipment request form requires a Statement of Need and an assessment of Alternative Implications.

Statement of Need. This statement succinctly answers the question, “Why do we need to buy this ultrasound equipment?” The response should be direct and to the point. The most significant reason in this breast center was improved patient care.  The improved resolution of state-of-the-art breast ultrasound enables more accurate evaluation of clinical and mammographic abnormalities, elevating the quality of patient care. Patient throughput is increased with current equipment because of faster and more confident breast ultrasound evaluations, increasing capacity of performing breast ultrasound and ultrasound-guided procedures. Staff productivity and efficiency are increased. The expanding indications of breast ultrasound, as evidenced by volume analysis, help justify acquisition of the machine. Lastly, the older 1994 ultrasound machine had fully depreciated, confirming no capital losses with the purchase of new ultrasound equipment.

Alternative Implications. The essence of this statement is the answer to the question, “What happens to the current practice if we don’t buy the new equipment?” Conceptually, it is very similar to the null hypothesis applied to statistical analysis. One has to envision the quality of practice maintaining the status quo. Honesty is the best policy. Painting an unrealistic situation of gloom and doom without the ultrasound machine risks loss of credibility with the reviewers of the budget proposal.

Implications of not having a state-of-the-art ultrasound machine include not being able to offer patients the highest level of clinical care, decreased capacity to offer breast ultrasound, decreased efficiency and staff productivity, and decreased capacity to offer ultrasound-guided procedures including biopsy, cyst aspirations, and localizations.

TABLE 2. Calculation of estimated total investment includes all costs associated with the acquisition.


In conducting a cost analysis (see Table 2), the subtotal base cost must first be established. This is the price paid by the facility to purchase the capital equipment from the manufacturer.

This is not the vendor’s asking price for the breast ultrasound equipment. It is the final negotiated price agreed to by both parties for the purchase of the ultrasound machine, software package (eg, spatial compounding, panoramic scanning, postprocessing algorithms), and hardware package (eg, color Doppler capability, transducers, accessory storage devices). The input of the breast imaging radiologists is critical before negotiation to determine the features required for each facility. Our radiologists requested the complete package to offer the highest quality of patient care. Often freight costs are extra, and need to be anticipated. In this case, this was negotiated as part of the purchase package.  Lastly, sales tax must be accounted for, which is currently 8.6% in Washington State.

Cost Estimates: State-of-the-art breast ultrasound unit, software, L12-50 mm transducer, BW printer
List: $134,250
Discount Applied: 15%

Often with large pieces of capital equipment purchase there are delivery and installation costs, either from the manufacturer or from a regional engineering installation firm. In our case, the breast ultrasound machine could be readily rolled on its wheels into the suite and directly plugged in. Renovation and remodeling costs also may be incurred, such as modifications to existing lighting or ventilation systems.

The total asset base cost is the cost of actually buying the ultrasound equipment and getting it running and functional in the facility. The total asset cost of purchasing the breast ultrasound capital equipment is calculated by summing the subtotal base cost and the subtotal delivery and installation costs.

The miscellaneous one-time costs are the costs that occasionally come up to establish and maintain consistent and optimum operation. Typically, they are related to consulting, design of room space or layout, and training of personnel to use the machine. Accessories such as dry laser printers may be placed in this category or may be justified separately, depending on the institution’s preference and the total dollar amount.

The total cost of investment can now be calculated by adding the total asset cost and subtotal miscellaneous costs. As this is the cost from which time to payback is calculated (see below), it is critical that the total accurately represents all cost, either direct or indirect, related to installation.

TABLE 3. Calculation of estimated time to payback provides administrators with a timeline for the return on investment.


In order to provide administrators with the key information regarding the time it will take for the capital investment to provide returns, an analysis of the estimation of time to payback must be performed, by calculating a series of benchmarks (see Table 3).

Estimated Increased Annual Revenue. This is the estimated increase in gross fiscal revenue over the next year. Based on the target growth volumes and historical data, additional volumes are first extrapolated for the upcoming year. The expected charge per unit of service is based on a standard pricing structure and philosophy generated by the institution.

Assuming that the rates of reimbursement essentially stay constant over the next year, the projected increase in gross annual revenue can be estimated from the product of the estimated increase in ultrasound volume and the expected charge per unit of ultrasound service. However, net revenue is not gross billed revenue. With insurance contracts, disallows, and adjustments, the net revenue in most facilities is significantly less than gross billed revenue. At our facility, we prefer to conservatively underestimate the projected annual net revenue. The projected increased net revenue is estimated to be 46% of the gross billed revenue.

Volume: Eight examinations per day for 250 working days

Revenue: Facility bills technical component of service only. If global fee is appropriate, additional labor costs would need to be added. 2002 Medicare Resource-Based Relative Value Scale allocates 1.05 relative value units and technical reimbursement is $36.61.

Estimated Increased Annual Operating Expenses. With increased volumes, there are often increased operational expenses.  These expenses vary for each facility based on the model and local labor salaries. Typical expenses include those related to increased cost of labor (technologist, support staff, radiologist), annual maintenance contracts, and annual supplies. Additional costs may be incurred at individual facilities. The sum total of these individual operating expenses is the increased total annual operating expenses necessary for accommodating the increased ultrasound service volume. As with the actual asset cost, it is critical to include all expenses to accurately reflect daily operation.

Expenses: 0.5 FTE Patient Care Aide at $15 per hour
$1 supply cost per procedure (film, linen, gel)

Net Average Increased Annual Income. The net average increased annual income is calculated by deducting the increased total annual operating expenses from the estimated increased net revenue.

Estimated Time to Payback. The estimated time to payback is the time it will take the facility to recover its financial investment of capital purchase. It is the time it takes a facility to break even on buying the ultrasound machine. It can be estimated by dividing the previously estimated total cost of investment by the net average annual income in years. Our conservative estimated time to recovery was 2 years. The calculation is very sensitive to volume. Incremental volume growth or a higher pricing structure will reduce the payback figure further.


In the face of the fiscal crisis facing many breast imaging centers, the economic justification of a state-of-the-art breast ultrasound machine must be systematically presented to facility management. We have shown a template that has been used to achieve this goal at the Women’s Diagnostic Imaging Center in the Swedish Cancer Institute, Seattle. It is the intention of the authors that other centers will find the blueprint useful in bringing state-of-the-art breast ultrasound to their own facilities.

Jay R. Parikh, MD, is medical director, Interventional Breast Imaging, Women’s Diagnostic Imaging Center, Swedish Cancer Institute, Seattle

Karen McInerney, RTRM, is manager, Women’s Diagnostic Imaging Center and Swedish Breast Care Center, Swedish Cancer Institute.


  1. Parikh JR, Porter B. Understanding breast ultrasound. Decisions in Axis Imaging News. 2002;15(3):16-32.
  2. Parikh JR, Cardenosa G, Coll D, et al: Breast ultrasound. Taveras JM, Ferruci JT, eds. Radiology. Philadelphia: JB Lippincott; 1999:92.
  3. ACR Standard for the Performance of Breast Ultrasound Examination. American College of Radiology. ACR standards 2000-2001. Reston, Va: American College of Radiology; 2000:389-392.
  4. ACR Standard for the Performance of Ultrasound-Guided Percutaneous Breast Interventional Procedures. American College of Radiology. ACR standards 2000-2001. Reston, Va: American College of Radiology; 2000:171-175.
  5. Parikh JR. Breast center model puts emphasis on patients. Diagnostic Imaging. Women’s Health Special Supplement. 2002; 24(4):15-19.
  6. Destouet JM, Sheman ML. The impact of mammography regulations on breast imaging practice costs. Seminars in Breast Disease. 2001;4(1):10-14.