CAPITAL INVESTMENT ANALYSIS - TWIN FALLS HOSPITAL - Article Example

College THE PROPOSED OUTPATIENT SURGERY CENTRE IN TWIN FALLS COMMUNITY HOSPITAL Inpatient surgeries have lost market due to the marketability of outpatient surgeries and the fact that the charges for outpatient surgeries are lower. Therefore, patients have preferred the outpatient surgeries as patients spend less time in hospitals and thus less money. Outpatient surgeries are also convenient and the techniques used have made it safe to conduct the surgeries. Twin Falls Community Hospital did not have an outpatient surgery but due to existence of the inpatient centre, they needed to strategize as the amount of revenues incurred was lower as the years passed.

Reduction in the sales would require a strategy to increase their revenues - setting up an outpatient centre so as to increase the revenues earned. If the hospital opened a centre for outpatient surgeries, they would help increase the revenues. This would create a balance as the inpatient surgeries earned the community hospital less revenue and the outpatient surgeries would bring in more revenue. (Muth, 2002). To avoid competition, it was advisable to market their outpatient centre and ensure that all their patients realized that they now conducted outpatient surgeries so that all people in the area could visit the community hospital more than other hospitals in the area.

This would lead to an increase in total net income for the hospital a they marketed their new centre.Below is a scenario analysis table to show the expected net value, the best they would get roughly, and the worst.Scenario analysisYearsAmount InvestedExpectedBestWorst1st2,100,000.002,114,000.002,163,000.002,037,000.002nd2,100,000.002,177,420.002,227,890.001,975,890.003rd2,100,000.002,242,743.002,294,726.701,916,613.304th2,100,000.002,310,039.442,363,568.501,859,114.905th2,100,000.002,379,355.

192,434,475.561,803,341.45Total$10,500,000.00$11,223,557.62$11,483,660.76$9,591,959.65If the community hospital invested in the total amount put in, as shown above, due to fluctuations in the prices of equipment each year, they would expect $11,223,557.62 if they increased the amount at rate of 3% per year due to irregularities. The best they could get from the invested amount per year if the rate increased the same way would be $11,483,660.76. The worst case if the rate of income due to irregularities became lower at the same rate per year would be $9,591,959.65.The worst scenario in the analysis above would help the community hospital to gauge whether or not they were willing to bear the risks from the invested amount.

The worst case would happen if there were other hospitals in the area that offered more quality services for their outpatient surgeries thus posing great competition for Twin Falls. Another loss would occur if the prices of equipment increased at a very high rate in a year thus leading to more charges for everything they require to purchase. Also, if the market of outpatient surgeries decreased over the years, which was very unlikely, they would have the worst case scenario. The worst case scenario analysis would enable the hospital to plan ahead on how to ensure that there was minimal competition in the area so as to ensure that other invariable issues such as prices of equipment would not lead to huge losses.

To avoid any high risks, the invariable rate of increasing revenues for the hospital was 3%. Thus, calculated per year with a 3% increase, that would lead to an amount as shown in the best case scenario above.In conclusion, it would be possible to go ahead and set up an outpatient surgery centre because of the strategies set to handle great risks and huge losses. It would eventually lead to substantial profits for the hospital as the outpatient surgeries had outdated the inpatient surgeries due to reasons stated earlier.

ReferencesMuth, A., & Bellenir, K. (2002). Surgery sourcebook: Basic consumer health information about inpatient and outpatient surgeries. Detroit, Mich: Omnigraphics.