You are a junior analyst at a 500-bed nonprofit hospital in a competitive metropolitan market. You have been asked by the CFO to work on the financial operating plan for the upcoming fiscal year. The finance department has stated that the hospital's anticipated revenue is $60,000,000, with a 6% operating margin. The hospital administration is only allowing you to recommend up to a maximum of two projects to the CFO.

You have been asked to consider making a proposal for the following service line requests:

1. A new EMR system, 10-year payback with $1,000,000 outlay. The system will update current the platform to meet new regulations and, according to the vendor, provide better clinical outcomes.
2. Overhaul of the cardiovascular lab, rooms 2 and 3. Costs of $900,000 a room are estimated. The updates will generate a 3% return above what the hospital has historically seen due to advances in operational efficiencies.
3. New parking garage with an estimated cost of $3,600,000 (can be amortized over 5 years). The garage will add an additional 125 covered parking spots on the campus.
4. Purchase a 50-physician practice at a cost of $2,800,000.The group is also considering a similar offer at a competing hospital. The practice presently has a strong utilization in your facility.

Proposal:

1. Name and describe three components of the health care finance system that are present in the assignment.
2. Describe how the components you selected interact with one another and how this interaction informs your decision-making process.
3. Explain the steps and information you would need to make your recommendations.
4. Describe which two projects you would recommend and provide rationale.
5. Explain why you would not recommend the other two projects and provide rationale.
6. What if this hospital was a for-profit system, would your answer change? Why or why not?