Phase 5 Capital Management

Capital Management Classification of capital expenditures Capital project decision making process

Classification of Capital Expenditures and Information Needed for Decision-Making Period during which the investment occurs Types of resources invested Dollar amounts of capital expenditures Types of benefits received

Capital project decision making process 1. Generation of project information 2. Evaluation of projects 3. Decisions about which projects to fund 4. Project implementation and reporting

Phase 5 IP Criteria Task Type: Individual Project Deliverable Length: 8-12 pages Points Possible: 250 Due Date: 3/24/2014 11:59:59 PM

Phase 5 IP Scenario Established in 1987, ABC Community Hospital not-for-profit is an acute care hospital located in an east coast Metropolitan area. With a staff of nearly 200 physicians and specialists, 800 employees and 100 volunteers, they offer a full range of healthcare services. They are accredited by the Joint Commission on Accreditation of Healthcare Organizations. The hospital has been profitable for the last 5 years with a profit margin of 3-4%. In March 2012, XYZ Healthcare System, a private, for-profit health care chain, took over management of the 400-bed ABC Community Hospital. In May 2013, officials began to discuss a proposal to build a new wing devoted to a Cancer Center and ancillary services devoted to the treatment of Cancer. The new wing would have 30 acute care beds, four surgical operating rooms, intensive care unit and extensive support services, including physical therapy and Hospice care. All patient rooms would be private. There is no Cancer Centers within a 200 mile radius of the hospital service area.

Phase 5 IP Scenario (cont’d) The board has come back with more question that they want you to add to the original paper: Compare and contrast the kinds of decisions that are made in the Cancer Center capital investment decision analysis for the for-profit and non-profit healthcare facilities using the four stages of capital decision making process. What information is needed by the CFO to evaluate the Cancer Center capital investment project? Who, internally from the healthcare system and externally, should be involved in the capital investment decision process to determine the feasibility of the Cancer Center?

Development of Paper Cover Page Introduction (1st two (2) paragraphs) of Phase 4 IP and Phase 5 IP Key Assignment Draft Scenario Question 1: What are the key financial policy targets for which the board is responsible for? List and explain each. Question 2: How does the financial planning and strategic planning of the new for-profit status align with the financial and strategic plans of the existing community hospital status?

Paper (cont’d) Question 3: Explain how management control is used in conjunction with the financial plan. With the takeover, would the ABC Community Hospital CFO need to consult with XYZ Healthcare System executives for the decision making? Question 4: A financial plan may be thought of as a bridge between two balance sheets. What are the major categories of assumptions that must be specified to project a future balance sheet, given the current balance sheets from the ABC Community Hospital and now XYZ Healthcare System? Question 5: Compare and contrast the kinds of decisions that are made in the Cancer Center capital investment decision analysis for the for-profit and non-profit healthcare facilities using the four stages of capital decision making process.

Paper (cont’d) Question 6: What information is needed by the CFO to evaluate the Cancer Center capital investment project? Question 7: Who, internally from the healthcare system and externally, should be involved in the capital investment decision process to determine the feasibility of the Cancer Center? References Page

Phase 5 IP Template Page 1: Cover Page Page 2: Introduction Page 3: Question1: Page Title Page 4: Question 2: Page Title Page 5: Question 3: Page Title Page 6: Question 4: Page Title Page 7: Question 5: Page Title Page 8: Question 6: Page Title Page 9: Question 7: Page Title Page 10: References

Questions