Coral Bay Hospital Case Summary
This report is for the Board of Directors of Coral Bay Hospital, to evaluate a project to build an Ambulatory Surgical Center(ASC)
This report utilizes the base case analysis, worse case analysis and best case analysis feeling these analyses are sufficient, while many analyses may be of interest, they could confuse the recommendations and strategic value of the project. In preparation the board would be told that calculating multiple NPVs for multiple inflationary rates for labor cost and supply cost would further confuse the issue. The information presented the NPV, IRR, MIRR and payback times would be calculated and discussed. Additionally, a break even point would be calculated. The break even point calculation included in fixed cost would …show more content…
The analysis other than the worst scenario reveals a benefit to the hospital. Even the worst scenario shows a payback period of 6.5 yrs, so despite the negative NPV, IRR and MIRR , the money expended to start the project can be recovered. However, this is more of a strategic decision by the board. There are no other centers in the area and being the first ASC and particularly in a hospital with a good reputation will help build volume. Also, the concept should be growth and not stagnation even with scenario of 10 cases a day there is eventual payback, but the management should focus on growth of the cases in the ASC. Another possibility will be if the ASC is a joint venture. Coral Bay Hospital will through contractual alignment with the surgeons help build the volume and also prohibit the surgeon from joining another local ASC. Therefore, if the board rejected the project and the surgeons were to be approached by another ASC/hospital , Coral Bay may lose a large part of its book of
This report utilizes the base case analysis, worse case analysis and best case analysis feeling these analyses are sufficient, while many analyses may be of interest, they could confuse the recommendations and strategic value of the project. In preparation the board would be told that calculating multiple NPVs for multiple inflationary rates for labor cost and supply cost would further confuse the issue. The information presented the NPV, IRR, MIRR and payback times would be calculated and discussed. Additionally, a break even point would be calculated. The break even point calculation included in fixed cost would …show more content…
The analysis other than the worst scenario reveals a benefit to the hospital. Even the worst scenario shows a payback period of 6.5 yrs, so despite the negative NPV, IRR and MIRR , the money expended to start the project can be recovered. However, this is more of a strategic decision by the board. There are no other centers in the area and being the first ASC and particularly in a hospital with a good reputation will help build volume. Also, the concept should be growth and not stagnation even with scenario of 10 cases a day there is eventual payback, but the management should focus on growth of the cases in the ASC. Another possibility will be if the ASC is a joint venture. Coral Bay Hospital will through contractual alignment with the surgeons help build the volume and also prohibit the surgeon from joining another local ASC. Therefore, if the board rejected the project and the surgeons were to be approached by another ASC/hospital , Coral Bay may lose a large part of its book of