Palm Hospital Notes

Palms in trueheartedary (Traditional Project Analysis) Palms Hospital * 250 strike out capacity investor owned Islamorada, Florida * Founded in 1946 by Rob Wins abject, went back in 1967 later on the war * High economic growth, cosmos expansion Acknowledged to be hotshot of the conking health precaution providers in the field of force * Currently evaluating a proposed ambulatory (outpatient) procedure b whizz marrow * More than 80% o all outpatient process is performed by specialists * peasant procedures take come up-nigh one time of day or less, major procedures take cardinal or more hours * About 60 portion of the procedures are performed under normal anesthesia, 30 percent under local anesthesia, 10 percent under regional or spinal anesthesia * ope cast rooms built in pairs for homework and mathematical process efficiency * Outpatient surgery commercialise has experienced significant growth since the premiere ambulatory con midriff opened in 1970 1990 2. mil lion surgeries, 2009 more than 20 million surgeries * Growth was fueled by terce factors rapid advancements in technology do it possible for inpatient surgeries to be performed as outpatient surgeries, Medicare has been aggressive in approving refreshful minimally invasive surgery techniques, mean deed of Medicare patients who drug abuse outpatient surgery serve has grown substantially patients prefer outpatient surgeries for convenience, and third gear party payers prefer them for less personify * Inpatient surgery numbers corroborate been flat due to these factors over the refinement 20 socio-economic classs outpatient procedures grow at 10% one-yearly * No separate outpatient surgery centre exists in Palms Hospitals immediate environment, provided rumors about physician owned facilities are come up * Palms Hospital owns a land bordering to the facility that would be a improve location for the new ambulatory surgery centre the land was bought for $150,000, spent $25,000 to conduct the land (also expensed for rank purposes) to put can and utility lines. If sold today, the land leave behind ring in $200,000. * The supposed structure al execrable house four operate suites that leave alone cost $5,000,000 plus a nonher(prenominal) $5,000,000 for equipment costs for a total of $10,000,000. * acknowledge the mental synthesis and the equipment fall into the modified speed up cost recovery system (MACRS) five- year secernate for tax depreciation purposes in reality, the building has to be depreciated over a semipermanent period than the quipment * Although the vomit may declare a longer life, the infirmary assumes a five-year life in its hood budgeting analyses and thus approximates the judge of the cash flows beyond year 5 by including a final/spare encourage in the compend to estimate this value, the hospital uses the market value of the building and equipment after five years, which in this human face is $5M before taxes, excluding land value. * blood line taxes must be paid on the difference between an additions allay value and tax rule account book value at termination for example, if an asset that cost $10,000 is depreciated to $5,000 and then sold for $7,000, the firm owes taxes on the $2,000 excess in salvage value over tax book value * Expected volume for this centre is 20 procedures a day, with an average budge of $1,500 but charity care, bad debts, managed care plan discounts and other allowances lower the clear revenue enhancement amount to $1,000 the centre will be open 5 age a week, 50 weeks a year, 250 days out of the year.Labor costs are anticipate to provide at $918,000 a year excluding fringe benefits utility costs run at $50,000 a year * If the centre is built, hospitals cash bash will increase by $36,000 annually, chiefly for housekeeping, building and grounds maintenance centre will be allocated $25,000 of the hospitals current $2. 8M administrative overhead costs. On a verage, each procedure will bear $200 in expendable aesculapian supplies, including anesthetics. The hospitals inventories and receivables, as well as accruals and payables will increase. Overall kind in meshwork working capital is expected to be small, therefore not imperative to the analysis. The hospitals tax rate is 40%. * Inflation one of the most difficult factors to deal with in project analysis. Input costs and charges corroborate been rising at twice the rate of overall inflation. Inflationary pressures are exceedingly variable.Analysis is started by assuming that both revenues and costs, save for depreciation, will increase at a constant rate which they project will be at 3%. * poster members tie ins wants to make sure that a eff put on the line analysis including sensitivity and scenario analysis is performed before the proposal is presented (board was forced to tightfitting a daycare that appeared to be gainful but turned out to be a big money unsuccessf ul person 2 years ago) * Another concern would be the impact of the centre on the current volume of inpatient surgeries. mathematical process department head projected that the outpatient surgery centre could siphon off up to $1,000,000 in cash revenues annually, hat could lead to a $500,000 reduction in annual cash expenses * The data developed for risk analysis were as follows third scuttlebutt variables are highly uncertain number of procedures per day, average revenue per procedure, building/equipment salvage value. If another centre was built to deal with theirs, number of procedures could be as low as 10 a day, but if acceptance to their centre is strong, they could be doing 25 procedures a day. * Net average revenue (cost of procedure) is $1000. But if surgery awkwardness is high, net average revenue could be $1,200. If severity is low, it could be $800. If real estate and medical exam equipment values stay strong, salvage value could be as high as $6M, but if it weak ens, itll be as low as $4M considering that the average salvage value is $5M. Another board member apparent motion why the scenario analysis only had three scenarios and suggested 5 or 7. * Based on historical scenario analysis data that use best case, worst case, and most likely, the hospitals average project has a coefficient of variation of NPV (net present value) in the hold of 1. 0-2. 0 and the hospital typically adds or subtracts 4 percentage points to its 10 percent corporate cost of capital to counterbalance for differential project risk. * Note the case asks us to conduct complete project analysis and present findings. It suggests the application of three-card monte Carlo disguise (but that is bullshit because thats the simulation you need a computer parcel for).