Case Study

Case Study

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Part I

Ranking

Expand the ENT, Plastic, Gynecology, and Orthopedics surgical programs

Develop a cost reduction program

Partner with a major supplier who will guarantee price, delivery, and product quality

Purchase the Henry Street School

Spend $3,000,000 to expand primary care physician membership in Corinth Health Systems, SHS’s PHO

Evaluation of the finance committee’s recommendation

I will vote for the first, second, and third projects in the list, and rest of the projects can be deferred. The expansion in the ENT, Plastic, Orthopedics, and Gynecology surgical programs only requires renovations, and in the pursuit of expanding these departments and surgical suites, all the cases will be referred back to the Superior Health System which is currently facing enormous difficulties due to relocation. The development of a cost reduction program will further minimize the negative cash flows; therefore, its highly favorable to adopt. Expanding the surgical programs will protect the health system against the currently incurred losses in the market share. Moreover, it will help the Superior Health System to gain more recognition in the health care industry due to its caring approach towards the complex cases.

Reasons for support of the proposals

Many studies have established the effects of a hospital’s physical environment and architectural design on the well-being of patients CITATION Rei08 \l 1033 (Reiling, 2008). Through the expansion of the surgical programs, there are chances of a visible increase in the positive impact on patients, and the nurses will also be satisfied in working in a conducive environment considering their nature of work. Partnering with a major supplier is also advantageous in its capacity as it will assist the Superior Health System in saving approximately $800,000 in materials and management salaries annually. Moreover, it will also aid in reducing the inventory carrying costs that can be utilized in the expenditure of many other important projects.

Reasons for rejection of the proposals

Purchase of the Henry Street School and the expansion of the primary care physician membership are the two proposals that are rejected in due course of capital budgeting. The primary reasons for rejecting these two proposals are their net present values, which are negative, statistically implying that these projects are not suitable and/or lucrative considering the budget of the superior health system. The purchase of Henry Street School depicts that there is an annual maintenance cost of $200,000, which is fixed, as mentioned in the details of the proposal. A fixed maintenance cost comes with a higher price, as Superior Health System will be certain of the future costs incurred by the maintenance of the school CITATION Zha11 \l 1033 (Zhang, 2011).

Expansion of the primary care physician membership is also not advocating because the estimates for any potential revenues are not determined, and its net present value is also negative. Initial investment costs and cash flows are too high, which does not present this proposal as feasible considering the unique community groups, time, risk, and liquidity. Furthermore, there is no guarantee that a lot of young doctors will be present in the shortage areas.

Recommendations for the expansion of the finance committee’s expenditures

For the expansion of the finance committee's expenditures, it is recommended that for a comprehensive supply management service, expenditures should be increased for partnering with a major supplier who will guarantee a better price and will increase the quality and quality of the product. Besides this, storage space will also be recovered, which is an added benefit. Although the case of purchasing Henry Street School is strengthened by the employee focus groups and other surveys, the fixed maintenance cost for the next three years is too high to contemplate over this choice.

Part II

As a trustee, I would want to go over the list of the important pragmatic decisions based on their review by the budget committees within the organization so that the proposals which are high in the ranking according to a trustee's perspective do not get deferred. It is the legal responsibility of a trustee to consider the beneficiaries of the health system; therefore, it is important for me to go over that list.

References

BIBLIOGRAPHY

Reiling, J. H. (2008). The impact of facility design on patient safety. Patient safety and quality: An evidence-based handbook for nurses.

Zhang, J. L. (2011). Supplier selection and purchase problem with fixed cost and constrained order quantities under stochastic demand. International Journal of Production Economics, 1-7.