Reduction in the sales would require a strategy to increase their revenues – setting up an outpatient centre so as to increase the revenues earned. If the hospital opened a centre for outpatient surgeries, they would help increase the revenues. This would create a balance as the inpatient surgeries earned the community hospital less revenue and the outpatient surgeries would bring in more revenue. (Muth, 2002). To avoid competition, it was advisable to market their outpatient centre and ensure that all their patients realized that they now conducted outpatient surgeries so that all people in the area could visit the community hospital more than other hospitals in the area. This would lead to an increase in total net income for the hospital a they marketed their new centre.
If the community hospital invested in the total amount put in, as shown above, due to fluctuations in the prices of equipment each year, they would expect $11,223,557.62 if they increased the amount at rate of 3% per year due to irregularities. The best they could get from the invested amount per year if the rate increased the same way would be $11,483,660.76. The worst case if the rate of income due to irregularities became lower at the same rate per year would be $9,591,959.65.
The worst scenario in the analysis above would help the community hospital to gauge whether or not they were willing to bear the risks from the invested amount. The worst case would happen if there were other hospitals in the area that offered more quality services for their outpatient surgeries thus posing great competition for Twin Falls. Another loss would occur if the prices of equipment increased at a very high rate in a year thus leading to more charges for everything they require to purchase. Also, if the market of outpatient surgeries decreased over the years, which was very unlikely, they would have the worst case scenario.