Answer

VIDEO CASE STUDY

CAPACITY PLANNING AT ARNOLD PALMER HOSPITAL

The Arnold Palmer Hospital video for this case is available from Prentice Hall. (Its running time is 9 minutes.) Also note that the Global Company Profile in Chapter 6 highlights this hospital.

1. Given the discussion in the text, what approach is APH taking to match capacity to demand?

Referring to Figure S7.6, Arnold Palmer Hospital’s capacity first lagged demand (part b) and now is leading demand with incremental expansion (part a). The new building will provide sufficient capacity for several years. The top two floors (left unfinished for additional beds) and operating rooms (on the 4th floor, available for horizontal expansion) will be built out when needed.

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

Possible risks:

* Demand will not continue to grow dramatically. The hospital believes that the new building will attract new OB/GYN doctors to deliver there. The other major hospital chain in Orlando, Florida Hospital, has also just announced a major expansion. This may flood the hospital bed market in the short run.

* The population boom in Central Florida could abate with rising housing prices that are discouraging future growth. In-deed, during the 2008-2010 recession, population in Central Florida levelled off.

* There are always unforeseen disasters in medicine that could damage the hospital’s sterling reputation (e.g., lawsuits, drop in quality).

* There is a nursing shortage that could create a staffing bottleneck if not corrected. Recently, the two major hospital chains in central Florida got into a bidding war in attempts to recruit each other’s nurses.

3. Use regression analysis to forecast the point at which Swanson needs to “build out” the top two floors of the new building.

Regression analysis on the birth...