John Daniels was in his second week as the new CEO of Memorial Hospital, a 400-bed community hospital.The hospital had an operating margin of 0.5 percent of revenue in the previous fiscal year.The previous CEO had been with the hospital for many years, and John knew that part of his work this first year was going to have to be totake a hard look at costs.

In the previous hour John had met with Dr. Bill Swift, the leader of a 30-physician internal medicine group that was a major admitter of patients to the hospital.Dr. Swift had asked if the hospital might be interested in selling the group block time on its MRI machine for its patients.The hospital was currently performing those scans, billing for them, and making the profit on them.Dr. Swift noted that he had heard of hospitals in other areas of the country selling these services to physician practices as an industrial account that enabled the practice to bill for the services and make a profit on them.He had not talked with St. Michael's Hospital, the other area hospital; he first wanted to talk with John about the possibility of buying block MRI time from Memorial.

John had said that he would talk with his staff and see what might be done.They agreed to meet in a week to talk again.John began to think about the issues involved.What are the negative and positive issues, and what should John do?