MEMORANDUM

TO: Capstone Professionals, Inc.

FROM: James Higgens, President
MIDCARE, Inc.

DATE: Month day, YR

RE: Organizational Analysis

Per our agreement for consulting services, this memorandum outlines the deliverables required by MIDCARE, Inc. The following is to be addressed in your comprehensive case study report.

1. Assess the governing board and governance practices of MIDCARE, Inc. Your analysis must consider board membership, member qualifications, use of committees, and selection of policies. Indicate three to five recommendations, along with rationale, for improvement in the governance practices of the organization. CONFIDENTIAL: A board member has been charged with a significant federal white-collar crime. The hospital has no policy concerning this situation. What is our responsibility in this type of situation? What are the ethical implications? Make recommendations regarding MIDCARE, Inc.’s next actions, if any.

2. Using ratio analysis, assess the financial health of MIDCARE, Inc. and identify particular areas of strength or weakness.

3. There is interest in Jasper to have its own hospital. We believe if a Certificate of Need (CON) can be secured, it will take a minimum of four years for a new hospital to be operational. Another consideration is the new highway between Capital City and Jasper which will change hospital utilization. Estimates indicate that once the highway is complete, hospitals located in Middleboro will lose approximately 15 percent per year of the utilization from Jasper. This lost utilization will be absorbed by the hospitals located in Capital City. Present a plan that explains recommended actions. The plan should cover the period before and three years after the new road is opened.

4. A proposal has been presented to develop a new satellite emergency department (ED) in Jasper. This new facility would have all the services typically found in an ED with a laboratory and imaging capability. For significant trauma, it would also have direct medical helicopter services to our hospital in Middleboro and a medical center in Capital City.

Satellite ED Planning Parameters ($)

Expected annual revenue per year for 15,000,000
next five years

Expected operating expenses, excluding 8,000,000
depreciation, per year for the next
five years

Initial cost of building and equipment 25,000,000

Salvage value at end of five years 5,000,000

We expect that our cost of capital will be six percent. The city of Jasper is willing to lease us the needed land in the Jasper Industrial Park for 99 years at a nominal annual cost. There is, however, a possibility that this facility may need to make an annual payment in lieu of taxes to the city of Jasper. If this occurs, we need to make provisions for a 20 percent income tax rate. It is also likely that a CON will be needed for these services. Please make a recommendation as to whether MIDCARE, Inc. should develop this satellite ED. If yes, recommend a plan. If not, indicate how this project might be changed so that it could become an acceptable project.

5. We are concerned about the increasing age of our medical staff. Assuming that physicians will exit professional practice at age 70, assess the physicians by specialty and location who may need to be replaced. Indicate whether MIDCARE, Inc. can establish age restrictions for members of its medical staff. Current medical staff bylaws make no mention of age restriction. Are there any ethical concerns? How should these be addressed according to a Christian worldview? We are interested in whether the age of a physician influences the number of patient days associated with his or her practice. In other words, as age increases, does patient day generation decrease? Also, what is the relationship between physician office location and patient day generation? Do physicians with offices farther away from Middleboro generate fewer patient days than physicians closer to Middleboro? Lastly, we are also interested in whether the profiles of physicians affiliated with Medical Associates are similar to or different from non-Medical Associate physicians affiliated with the hospital. What are the strategic implications of your analysis and the increasing percentage of MIDCARE, Inc.’s patient days being generated by physicians affiliated with Medical Associates? What should we do to ensure we have the appropriate medical staff to serve our community’s needs over the next five to ten years?