Introduction
Trinity Hospital is found in the southeast area of the United States and has up to 89 professional staff members. It offers all the basic life support services, as well as different medical solutions, which comprise general surgery, neurology, pharmacy, radiology, internal medicine, and gynecology, among others. In addition to the four other facilities, Trinity community hospital has a main branch which is a large facility consisting of four medical buildings with a floor space of 60,000 square feet (Kritchanchai, & Hoeur, 2018). Management is faced with the hard decision of whether to purchase new land, construct on their own property, or lease the location in which the anticipated orthopedic service line will be set up. The most successful method for developing orthopedic services in the hospital is analyzed by analyzing the various strategic options.
Advantages of Constructing the Orthopedic Service Line
Building Space for New Orthopedic Service Line
The first advantage of the new building is that it will be based on hospital grounds, integrated with the main functional units of the hospital. The second advantage is that it will utilize the MOBs that are not utilized for any practices. Since the hospital covers the land 25 acres of, the management will need a few procedures and legal requirements to set up the orthopedic center (Kritchanchai, & Hoeur, 2018). Given that there is no need to develop new spaces outside the hospital, it can be assumed that the project will be implemented in the shortest possible time.
Buying Space for New Orthopedic Service Line
The costs of constructing the new orthopedic service line require a minimum of $700,000 in summary. The approximate sum needed associated with purchasing space for the same facility is $600,000. There is a net difference of $100,000, with the latter investment being the cheaper option (Kritchanchai & Hoeur, 2018). Additionally, Trinity’s management can negotiate with the adjacent land owners and, as a result, arrange a less costly deal. The other advantage of buying space is that it brings Trinity hospital a new location to get new clients and a new attitude towards the hospital from the community.
Leasing Space for New Orthopedic Service Line
The advantage of leasing is that it is by far the cheapest alternative to building or purchasing new hospital buildings. This fact could have a significant impact if the new service line is not economically sustainable. Trinity Hospital would enjoy the triple net lease where the maintenance costs, taxes, and insurance of the property under the lease are deductible from tax payable (Kritchanchai, & Hoeur, 2018). In addition, leasing puts less pressure on the project’s capital outlay and budget than buying or building.
Disadvantages of Constructing the Orthopedic Service Line
Building Space for New Orthopedic Service Center
It is estimated that building a new facility will cost the hospital about $600,000 for merely gaining a space of 5000 square feet (Kritchanchai, & Hoeur, 2018). This sum seems too significant to bear, considering that the hospital depends on a limited budget. Secondly, the construction of new buildings will also crowd the campus and exert strain on the free space that has been set aside for future developments. The chief executive officer of Trinity Community Hospital stated that there is a need to preserve valuable land for future expansion (Unemployed Professors, 2021). At the same time, construction comes with a lot of miscellaneous costs for purposes of landscaping, minor fittings, and other arrangements.
Buying Space for New Orthopedic Service Line
One of the biggest problems with buying a building is the fact that Trinity may have to demolish current structures in the purchased space in case the new equipment does not fit, which could drive the cost higher. Moreover, the second disadvantage of such a decision is that there is little to be done when it comes to layout. It is even worse to renovate and modify the structures on site. There are a lot of capital incentives required. It will also take a lot more time to recoup the investment. There are other minor costs of compliance with the new regulation, such as health and safety precautions and firefighting equipment, that also increase the operating costs.
Leasing Space for New Orthopedic Service Line
Leasing limits the hospital’s opportunities to come up with ideas for acquiring new assets. Moreover, it comes with monthly rent, taxes, and maintenance costs associated with the place under the lease (Kritchanchai, & Hoeur, 2018). There is more to be lost by Trinity as the hospital may not be able to gain money should the value of the property increase in time. Further, leasing is fixed by contractual obligations meaning the hospital cannot terminate the contract before the lease period ends.
Recommendations
Currently, Trinity hospital has a 25-acre land and, over time, has become limited compared to what the campus needs to grow its operations. Congesting the hospital further is not a good idea, as there are other options, such as purchasing more land or leasing. It is known that land is an asset that appreciates with time. The time of buying land should be as early as possible since the investment continues to rise in price, and availability in prime areas may decrease. The best advice is to purchase land next to the campus, as it leaves the campus with more room for future expansion.
Conclusion
Thus, in the course of the work, the economic strategies that the hospital can undertake to rebuild the additional center were analyzed. Strategies to shrink the hospital workspace have been dismissed as irrelevant. The analysis shows that the leasing of extra space was financially unstable. Acquiring new land on a nearby campus will prove to be the most successful strategy for expanding the hospital’s professional practice.
References
Kritchanchai, D., & Hoeur, S. (2018). Simulation modeling for facility allocation of outpatient department. International Journal of Healthcare Management, 11(3), 193-201.
Position overview—CEO Trinity Community Hospital. (2021). Unemployed Professors.