In 2014, SunCoast Hospital began exploring the possibility of locating a satellite hospital in a fast-growing suburb next to its service area. SunCoast’s marketing department was given the task of determining the size of the market in the targeted area. The decision to proceed with planning for a new facility was dependent on whether the market was large enough to support a 50-bed hospital.

Although the question was straightforward, the answer was difficult to determine. Data from the decennial census (last taken in 2010) were considered the most accurate, but census data were now four years old. Data that old might be accurate enough to use (with appropriate disclaimers) in a relatively stable community, but in SunCoast’s target market, the population had grown so rapidly in a short time that the four-year-old data were likely to be far from accurate. (The 2012 population estimates for the target population were available from the ACS, but these figures were not considered current enough.) The marketing analysts considered techniques to estimate the current (2014) population in the target area. They could extrapolate trends from known data, assuming that present trends were a continuation of past trends. In this case, the analysts acquired data for the target area from the 2000 and 2010 censuses, assuming that figures from these two periods would be most realistic.

To estimate the population at the time of the study (2014), the analysts used a straight-line method to determine the average annual population increase for the area between 2000 and 2010 and then applied that rate of change to the 2010–2014 period. Thus, the calculation was as follows:

(2010 population – 2000 population) ÷ 10 years 

= (Average annual population increase × 4) + 2010 population 

= 2014 population estimate.

The equation yielded the following result:

(20,000 – 10,000 = 10,000) ÷ 10 = 1,000 × 4 

= 4,000 + 20,000 

= 24,000.

Thus, the technique generated a 2014 population estimate of 24,000 residents for the service area. This approach assumed a steady population increase of 1,000 each year. For comparison purposes, the analysts examined the year-to-year percentage increase rather than the increase in absolute numbers. The formula for that calculation was as follows:

[(2010 population – 2000 population) ÷ 2000 population] ÷ 10 years = [(Average annual percentage increase × 4) × 2010 population] + 2000 population = 2014 population estimate.

The equation yielded the following result:

(20,000—10,000 = 10,000) ÷ 10,000 = 100% ÷ 10 = 10% per year × 4 = 40% × 20,000 = 8,000 + 20,000 = 28,000.

This approach yielded an estimate of 28,000 residents rather than 24,000, indicating that the proportionate increase was relatively greater than the absolute increase.

Questions 

1. Why was a current population estimate unavailable to the SunCoast administrators?

2. What data did the analysts choose as a basis for calculating population estimates and why?

3. To use a straight-line estimation method, what assumptions have to be made?

4. Why did the two techniques yield different estimates when the same baseline data were used?

5. Given the goal of the hospital, should it have used the more conservative figure or the larger estimate?