Since opening day, Arnold Palmer Hospital has experienced an explosive growth in demand for its services. One of only six hospitals in the US to specialize in health care for women and children, Arnold Palmer Hospital has cared for over 1.5 million patients who came to the Orlando facilities from all 50 states and more than 100 countries. With patient satisfaction scores in the top 10% of US hospitals surveyed (over 95% of patients would recommend the hospital to others), one of Arnold Palmer Hospitals main focus is the delivery of babies. Originally built with 281 beds and a capacity of 6,500 births per year, the hospital steadily approached then passed the 10,000 births. Looking at the Table, Executive Director Kathy Swanson knew an expansion was necessary.

With continuing population growth in its market area serving 18 central Florida counties, Arnold Palmer was delivering the equivalent of a kindergarten class of babies every day and still not meeting the demand. Supported with substantial additional demographic analysis, the hospital was ready to move ahead with a capacity expansion plan and a new 11-story hospital building across the street from the existing facility.

Thirty-five planning teams were established to study such issues as specific forecasts, services that would transfer to the new facility, services that would remain in the existing facility, staffing needs, capital equipment, accounting data, and regulatory requirements. Ultimately, Arnold Palmer Hospital was ready to move ahead with a budget of $100 million and a commitment to an additional 150 beds. But given the growth of the central Florida region, Swanson decided to expand the hospital in stages: the top two floors would be empty interiors to be completed at a later date, and the fourth floor operating room will be doubled in size when needed. With the new facility in place, we are now able to handle up to 16,000 births per year, says Swanson.

Year	Births	Year	Births
1995	6,144	2005	12,316
1996	6,230	2006	13,070
1997	6,432	2007	14,028
1998	6,950	2008	14,241
1999	7,377	2009	13,050
2000	8,655	2010	12,571
2001	9,536	2011	12,978
2002	9,825	2012	13,529
2003	10,253	2013	13,576
2004	10,555	2014	13,994

1. Given the capacity planning discussion in the text (See Figure S7.6), what kind of approach is being taken by Arnold Palmer Hospital toward matching capacity to demand? What are the advantages and disadvantages of this by approach by the hospital considering its actual demand?
2. What are the factors affecting the demand for Arnold Palmer Hospital? Discuss and explain how each factor affects the demand. Do these factors support the use of the capacity planning approach of Arnold Palmer? Discuss and justify your answer.
3. What kind of major changes could take place in Arnold Palmer Hospitals demand forecast that would leave the hospital with an underutilized facility (namely, what are the risks connected with this capacity decision?). Based on your research, how likely will these changes occur? What are the trends over time for at least two of these variables? Plot them and analyze the trend.
4. Use regression analysis to forecast the point at which Swanson needs to build the top two floors of the building, namely, when the demand exceeds 16,000 births. Show your regression graph, equations and computations and explain how it affects the hospital plans. Are Arnold Palmers plans realistic enough? When should they build additional capacity? Justify.
5. Do a regression analysis for each of the two factors affecting the demand against the demand of the hospital. Make some analysis of these two regression analysis and how it affects the hospitals decision to add capacity.
6. What are the factors affecting the adding of capacity to the hospital? Can the hospital actually match the demand? How should the hospital manage these factors?
7. What other factors should the hospital consider in matching the demand? Discuss each.
8. What are your reflections, learnings and insights from the case?