Dispute Case

SHOULDICE CASE STUDY

1. Utilization = actual/design = 450 / (90*7) = 71.43%
2.

| Beds Required | Check-In | Mon | Tues | Wed | Thurs | Fri | Sat | Sun | Monday | 30 | 30 | 30 | | | | | Tuesday | | 30 | 30 | 30 | | | | Wednesday | | | 30 | 30 | 30 | | | Thursday | | | | 30 | 30 | 30 | | Friday | | | | | | | | Saturday | 30 | | | | | 30 | 30 | Sunday | 30 | 30 | | | | | 30 | Total | 90 | 90 | 90 | 90 | 60 | 60 | 60 |
Utilization = 540 / (90*7) = 85.71%
The bed capacity would change on Saturday, Sunday, and Monday. The table shows an increase in the bed capacity utilization. The total bed capacity utilization rate will increase from 71.43% to 85.71%.

3. If the number of beds is increased
Expansion using addtl revenue from expansion and current revenue:
Revenue:
$700/operation (average rate/operation – surgeon’s fee; $1,300 – $600)
Expansion will bring total 200 operations/wk (40 operations per day for 5 days in a wk) = 10,400 operations/yr
$700 * 10,400 operations/yr = $7,280,000/yr
Cost: $100,000 per bed * 30 beds = $3,000,000
Value:
Revenue – Cost=
$36,400,000 ($7,280,000 * 5 yrs) – $3,000,000 = $33,400,000
Current revenue:
Revenue:
$700/operation (average rate/operation – surgeon’s fee; $1,300 – $600)
150 operations/wk (30 operations per day for 5 days in a wk) = 7,800 operations/yr
$700 * 7,800 operations/yr = $5,460,000/yr
Cost:0

Value:
Revenue – Cost
$27,300,000 ($5,460,000 * 5 yrs) – $0 = $27,300,000
Expansion supports the highest payoff so it would be