1. 
    The new facility will result in some surgeries being moved from inpatient hospital. Whether or not Coral Bay builds the outpatient facility, a competing hospital across town will build a facility. In other words, Coral Bay cannot deter the competitor from building a facility. The decrease in after-cost revenues to the inpatient hospital should
2. Be ignored in the calculation of the NPV for the outpatient facility
3. Be included in the calculation of the NPV for the outpatient facility and the NPV will increase as a result
4. Be included in the calculations of the NPV for the outpatient facility and the NPV will decrease as a result
5. To do the project, the managers must believe that the center will so more than 18 procedures per day. True or False
6. A higher payback indicated a project with lots of liquidity. True or False
7. To do the projects, the managers must believe that the center will earn more than $850 per procedure. True or False
8. The $50,000 for land improvement should be included in the incremental cash flow. True or False
9. If average revenue from procedures increases 20%, the NPV is over $8 million. True or False
10. Which should Coral Bay focus on more?
    1. Payor negotiations
    2. Land value negotiations
11. A project with larger flows later in time indicated a less risky project. True or False

 

  

 

  

 

 

CORAL BAY HOSPITAL is a 250-bed, investor-owned hospital located in Coral Bay, Florida, which is known as the Sport Fishing Capital of the World. The hospital was founded in 1946 by Dr. Rob Winslow, a promi- nent Florida physician, on his return from service in World War II. He relinquished control of Coral Bay in 1967 while it was still small and in a relatively quiet setting. However, in recent years, South Florida has expe- rienced a population explosion, which has fostered high economic growth and the need for more healthcare services. Today, under a succession of excellent CEOs, Coral Bay is recognized as one of the leading healthcare providers in the area. Coral Bay's management is currently evaluating a proposed ambulatory surgery center (ASC). (For more information on ambulatory surgery, see the Ambulatory Surgery Center Association website at www.ascassociation.org.) More than 80 percent of all outpatient surgery is performed by specialists in gastroenterology, gynecology, ophthalmology, otolaryngology, orthope- dics, plastic surgery, and urology. Ambulatory surgery requires an average of about one and a half hours to complete; minor procedures take about one hour or less, and major procedures typically take two or more hours. About 60 percent of the procedures are performed under general anesthesia, 30 percent under local anesthesia, and 10 percent under regional or spinal anesthesia. In general, operating rooms are built in pairs so that a patient can be prepped in one room while the surgeon is completing a procedure in the other room. The outpatient surgery market has experienced significant growth since the first ASC opened in 1970. By 1990, about 2.5 million procedures were