Answer questions 1-4 about the case

HBSP Product Number THE CRIMsON THE CRIMSON GROUP NC. CENTER Erie Hospital y at Erie Hospital Dr. Christian Larson, Dr. by CathLis of some new equipment to perform operations was for the purchase performed on The price was deliveeb RACKGROUND was a a number of and existence Cleveland, Ohio, it had been in for some 40 years. Although it treated hospital's cutting-edge position required rather' upgrading of its facilities and equipment. (DRGs), ie, a to the to third-party ments based on patient diagnosis, there had been facilities ing hospital for each patient, based on that Although some and pressures on the hospital's "bottom line. with research funding, those items for research, and purchased clinical purposes to be financed from patient Because of the propos. the a harder and harder look at all capital equipment als designated for patient care purposes THE REQUEST In the case of Dr. Michaels request, the equipment was for patient care purposes. No gant Michaels had worked closely with the equipment manufacturer to determine the potential benefits of the new equipment. however, and she estimated that it would result in annual savi ings of S60.000 in labor and other direct costs, as compared with the present ipment. She also estimated that the The hospital had recently bomowed long-term to finance another project. Paul Hershenson,the Vice President of Fiscal Affairs, had informed Dr. Larson that, because of this, he was certain the hospital could obcain additional funds at 12 percent, although he would not plan to negotiate a kan specifically the purchase of equipment. He did feel, an investment ofthis type 20 the hospital paid no taxes.The hospital capital structure is shown in l COMPLICATING FACTORS probably would complications. present equipment was in good working order and second, request was at least 15 more years. "even better equipment, mplae some equ for Dr. called to completely obsolete with no resale value. would render case was prepared by Professor David W. Y oung. is intended as a basis forclass discussion and not to illus- cither clectve or inefiective handling of contaa e To oopics or reques permission o reproduce dis interna copyright Business Publications 0tpchnbsp harvard edu). Under provisions United States and cans without laws, no part of this document may be reproduced, stored, transmitted in any form orby written permission from The Gtuup (www