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What kind of major changes could take place
Course:- Operation Management
Reference No.:- EM131350221




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Since opening day, Arnold Palmer Hospital has experienced an explosive growth in demand for its services. One of only six hospitals in the U.S. to specialize in health care for women and children, Arnold Palmer Hospital has cared for over 1,500,000 patients who came to the Orlando facility from all 50 states and more than 100 other countries. With patient satisfaction scores in the top 10% of U.S. hospitals surveyed (over 95% of patients would recommend the hospital to others), one of Arnold Palmer Hospital's main focuses is delivery of babies. Originally built with 281 beds and a capacity for 6,500 births per year, the hospital steadily approached and then passed 10,000 births. Looking at Table S7.4 , Executive Director Kathy Swanson knew an expansion was necessary. With continuing population growth in its market area serving 18 central Florida counties, Arnold Palmer Hospital was delivering the equivalent of a kindergarten class of babies every day and still not meeting demand. Supported with substantial additional demographic analysis, the hospital was ready to move ahead with a capacity expansion plan and a new 11-story hospital building across the street from the existing facility. Thirty-five planning teams were established to study such issues as (1) specific forecasts, (2) services that would transfer to the new facility, (3) services that would remain in the existing facility, (4) staffing needs, (5) capital equipment, (6) pro forma accounting data, and (7) regulatory requirements. Ultimately, Arnold Palmer Hospital was ready to move ahead with a budget of $100 million and a commitment to an additional 150 beds. But given the growth of the central Florida region, Swanson decided to expand the hospital in stages: the top two floors would be empty interiors ("shell") to be completed at a later date, and the fourth-floor operating room could be doubled in size when needed. "With the new facility in place, we are now able to handle up to 16,000 births per year," says Swanson.

Discussion Questions

1. Given the capacity planning discussion in the text, what approach is being taken by Arnold Palmer Hospital toward matching capacity to demand?

2. What kind of major changes could take place in Arnold Palmer Hospital's demand forecast that would leave the hospital with an underutilized facility (namely, what are the risks connected with this capacity decision)?

3. Use regression analysis to forecast the point at which Swanson needs to "build out" the top two floors of the new building, namely, when demand will exceed 16,000 births.

Table - Births at Arnold Palmer Hospital

YEAR

BIRTHS

1995

6,144

1996

6,230

1997

6,432

1998

6,950

1999

7,377

2000

8,655

2001

9,536

2002

9,825

2003

10,253

2004

10,555

2005

12316

2006

13,070

2007

14,028

2008

14,241

2009

13,050

2010

12,571

2011

12,978

2012

13,529

2013

13,576

2014

13,994




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