complete Case 20 in the excel spreadsheet.
Additionally – please provide a traditional project analysis for this United States healthcare system on the bottom of page 137.
CORAL BAY f r HOSPITAL TRADITIONAL – -. ‘ jPROJECT ANALYSISC ORAL BAY HOSPITAL is a ZED-bed,
investor-owned hospital located
in Islamorada, Florida, which is known as the “The Sport Fishing Capi-
tal of the World.” The hospital was founded in 1946 by Rob Winslow, a
prominent Florida physician, on his return from service in World War
It. Winslow relinquished control of the hospital in 1967 while it was I
still small and in a relatively quiet setting. However, in recent years,
the Florida Keys have experienced a population explosion, which has
fostered high economic growth as well as a continuing need for more
healthcare services. Today, under a succession of excellent CEOs, the
hosPital is acknowledged to be one of the leading healthcare providers
in the area.
The hosPital’s management is currently evaluating a proposed
ambulatory (outpatient) surgery center. (For more information on
ambulatory surgery, see the Ambulatory Surgery Center Association
website at wwwascassociationorg.) More than 80 percent of all out-
patient surgery is performed by specialists in gastroenterology, gynecol»
ogy, ophthalmology, otolaryngology, orthopedics, plastic surgery, and
urology. Ambulatory surgery requires an average of about one-and~a~half
hours to complete: minor procedures take about one hour or less, and
major procedures typically take two or more hours. About 60 percent
of the procedures are performed under general anesthesia, 30 per-
cent under local anesthesia, and 10 percent under regional or spinal
anesthesia. In general, operating rooms are built in pairs so that a
patient can be prepped in one room while the surgeon is completing
a procedure in the other room.
HAP, 2014. Reproduction without permission is prohibited.
CASE 20 Student Version Copyright 2014 Health Administration Press
CORAL BAY HOSPITAL
Traditional Project Analysis
This case illustrates a complete capital budgeting analysis, including cash flow analysis
and profitability measures. Note the model extends to Column I.
The model consists of a complete base case analysis—no changes need to be made
to the existing MODEL-GENERATED DATA section. However, all values in the student
version INPUT DATA section have been replaced with zeros. Thus, students must determine
the appropriate input values and enter them into the model. These cells are colored red.
When this is done, any error cells will be corrected and the base case solution will appear.
Note that the student version does not contain any risk analyses, so students will have to
create their own if required by the case. Furthermore, students must create their own
graphics (charts) as needed to present their results.
INPUT DATA: KEY OUTPUT:
Land initial cost $0 NPV $0
Land opportunity cost (and salvage value) $0 IRR #NUM!
Building/equipment cost $0 MIRR #NUM!
Build/equipment salvage value $0 Payback 999.0
Procedures per day 0
Average net patient revenue per procedure $0
Labor costs $0
Utilities costs $0
Incremental overhead $0
Supply cost ($/procedure) $0
Inflation rate on net patient revenue 0.0%
Inflation rate on costs 0.0%
Tax rate 0.0%
Revenues lost from inpatient surgeries $0
Reduction in inpatient surgery costs $0
Cost of capital 0.0%
MACRS Deprec. End of Year
Year Factor Expense Book value
1 0.20 $0 $0
2 0.32 0 0
3 0.19 0 0
4 0.12 0 0
5 0.11 0 0
6 0.06 0 0
Net Cash Flows:
Project Cash Flows
0 1 2 3 4 5
Land opportunity cost $0
Building/equipment cost 0
Net patient revenue (including inpatient loss) $0 $0 $0 $0 $0
Less: Labor costs 0 0 0 0 0
Cost savings on inpatients 0 0 0 0 0
Utilities costs 0 0 0 0 0
Supplies 0 0 0 0 0
Incremental overhead 0 0 0 0 0
Depreciation 0 0 0 0 0
Income before taxes $0 $0 $0 $0 $0
Taxes 0 0 0 0 0
Project net income $0 $0 $0 $0 $0
Plus: Depreciation 0 0 0 0 0
Plus: Net land salvage value 0
Plus: Net building/equipment salvage value 0
Net cash flow $0 $0 $0 $0 $0 $0
Cumulative net cash flow $0 $0 $0 $0 $0 $0
(For payback calculation)
Profitability and Breakeven Measures:
Net present value (NPV) $0
Internal rate of return (IRR) #NUM!
Modified IRR (MIRR) #NUM!