1. Summit Regional Medical Center operates as a private not-for-profit hospital, providing services to a community of 20,000 and the surrounding rural areas. Summit has maintained a banking relationship with the local community bank for decades, and a number of individuals on the hospital’s board of directors are local businesspeople who also maintain relationships with the local bank. Physicians and administrative staff of the hospital have developed a report showing that major pieces of medical equipment have become outdated by recent improvements in technology and need to be replaced. A financial review shows that new patient revenues from the use of the equipment will repay the capital investment over 5 years. The board of directors approves the purchases, and the hospital’s finance director schedules a meeting with the bank’s vice-president. The banker reports that due to an increase in nonperforming loans in the current recession and slow recovery, the bank cannot make the $1 million loan to the hospital. Another bank in the community is a branch of a major national banking system. When approached, that bank states that they only make new loans to established customers but indicates that if all of the banking relationship were to be transferred from the community bank to the national bank, the loan would be approved.

   
   

   What action should the hospital’s finance director and chief executive officer make to the board?

2. In Case Study 10-1, Summit Regional Health Center is faced with a dilemma. They can either maintain ties to the local bank and postpone the major capital acquisition or move all of their banking business to a new bank, a branch of a major national banking system. The board of directors of the bank has been informed of the issues and has requested that you, as the chief financial officer of the hospital, prepare a report for the board’s consideration, outlining the issues involved and the options available, and forward a recommendation. What items would you consider to be relevant, and what recommendation would you make to the board? 

   
   

3. The finance department of a large hospital negotiates banking services with a 3-year contract. Nearing the end of the contract period, which of the following will be used to determine the award of a new 3-year banking services contract?

   
   

    A. -Informal written bids

    B. -Request for proposal

    C.- Telephone bids

4. Which of the following will negatively impact the relationship between a medical facility and a bank?

   
   

    A.-Deterioration in the financial condition of the medical facility

    B. -The bank reporting major losses from nonperforming loans

    C.-Disruptions in national and international financial markets

    D. -All of the above

5. Farrah Singh works at Ginhi Medical Facility within the finance department. Her supervisor asked her to outline the services that the medical facility expects when looking for a commercial bank and to search for various banks that can meet the organization’s service requirements. What will Farrah have to prepare?

6.  Farrah Singh will be reviewing the federal fund rate of each bank as well. Why is the federal fund rate important when determining the medical facility’s banking needs?