Good Samaritan Community Hospital Case Study

1. Problem

The Good Samaritan Community Hospital is an L-shaped five-storey concrete building with a total capacity of 140 patient beds. With the steadily increasing occupancy over the years, the high demand for confinement concerning the limited availability of beds often created situations where new patients could not be admitted because of lack of space and had to be referred to other hospitals in other towns even though GSCH would have had the capability to treat them. Physician-consultants who practiced at the hospital often bitterly complained about not being able to have their patients admitted at the time they wanted. Considering the situation, the hospital’s Board of Directors proposed for the need of expansion to accommodate increasing number of patients with high demand of confinement, however, the problem was how to fund the project.

1. SWOT Analysis

1. Areas of Consideration

The cost of the construction of the proposed expansion wing was estimated to be 5.8 million pesos. The major concern of the hospital was how to finance the said project. Since the hospital offers affordable medical care, it is hard for them to raise bigger capital. The accumulated retained earnings of the hospital was only 3.5 million pesos, an amount adequate for the purchase of the additional furniture, non-medical supplies, and medical equipment required by the expansion but not for the construction of the building. The hospital has to consider also the budget allocation for the costs of materials, labor, contractors, and project manager’s services on the said construction. In this regard, there is also a need to hire additional qualified staff for the expansion. Several of the stockholders were unwilling or unable to put in more capital, and they were less willing to invite new investors because of dilution that move would have in their holdings. The hospital has to consider the recognition of their shareholders to provide them a fair return on their investments as compensation for the risks they undertook. The hospital wants to negotiate with financial institutions willing to extend a long-term loan, however, the Asian economic crisis of the previous year had made such loans scarce and expensive.

1. Alternative Forces of Action

To apply for a loan from the bank is one alternative force of action to finance the expansion.  This can provide immediate funds to ensure smooth operation of construction to cover materials and labor.  However, care must be taken to consciously consider payment on installment basis for such loan plus interest that it would not be delayed or should be paid on or before due date so as not to incur penalty.

The second possible solution is that GSCH will issue or authorized share in order for them to gain money for the expansion of the wing. Issuing or authorizing a share would be a very cost effective approach to help the expansion of the hospital. Stocks from the hospitals offered to the public might not be affordable but then it offers a unique benefits package. The advantages of issuing share is they can get money from the shares they issue to expand the hospital.