Case 6-MBA683
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This week we'll discuss MIDCARE Hospital, case 6 in your book. On page 170
(subhead strategy decisions at the board retreat for those of you with ebooks)
two board members ask hard questions about whether or not the hospital
should "acquire and operate additional medical practices; and affiliate with
other service providers, including through an asset merger." What do you
think? Should that happen or not? Back up your recommendations with data
from the case and outside resources, as needed.
MIDCARE Hospital is a 240-bed community hospital located in Hillsboro County. The
hospital has been struggling financially for several years, and the board of directors is
considering a number of strategic options to improve its financial performance. One of the
options that the board is considering is to acquire and operate additional medical practices. The
board believes that this would allow the hospital to increase its patient volume and revenue, and
it would also help to diversify the hospital's revenue stream. Another option that the board is
considering is to affiliate with other service providers, including through an asset merger. The
board believes that this would allow the hospital to share resources and expertise with other
organizations, and it would also help to improve the quality of care that it provides to patients.
However, there are pros and cons of each of these options, and I believe that applying these
recommendations would help the hospital in the long run.
As the board noted, the acquisition and operation of additional medical practices is a
means for MIDCARE to enhance its financial performance. This is because it will allow the
company to raise its revenue and decrease its expenses. In Table 6.1, MIDCARE has 89 services
that are provided. If we look into the active staff in Table 6.2, we see that MIDCARE has 32
active staff in Internal Medicine, but in Allergy and Immunology has the lowest staff, while
Family Practice and Cardiology are second lowest in active staff. Therefore, by acquiring more
practices, MIDCARE will be able to spread its fixed costs across a larger patient base, resulting
in reduced costs per patient. Additionally, by acquiring practices in various geographic areas,
MIDCARE will be able to reach a broader range of patients and increase its market share.
However, there are also some dangers connected with acquiring additional medical
practices. For example, MIDCARE might overpay for a practice, or the practice might not be as
profitable as expected. Additionally, acquiring more practices will require MIDCARE to invest
more capital and management resources. Overall, the advantages of acquiring additional medical
practices outweigh the risks. By acquiring more practices, MIDCARE will be able to raise its
revenue, decrease its expenses, and reach a broader range of patients. This will lead to improved
financial performance and a stronger position in the healthcare industry.
The second plan would be for MIDCARE to affiliate with other service providers,
including asset merger. This would allow MIDCARE to expand its reach and offer a wider range
of services to its clients. Additionally, MIDCARE would be able to take advantage of the
expertise and resources of other providers, which could help it to improve its own services. For
example, MIDCARE could affiliate with a provider that specializes in mental health services.
Because in Table 6.1, there are only eight active staff in Psychiatry. This would allow MIDCARE
to offer its clients a more comprehensive range of services, and it could also help MIDCARE to
better understand the needs of its clients. It is important to note that asset merger is a complex
process that can be difficult to execute successfully. MIDCARE would need to consider a
number of factors before proceeding with this plan, including:
●
The financial implications of the merger:
This includes the costs of the merger, the
potential for synergies, and the impact on MIDCARE's financial performance.
●
The legal implications of the merger:
This includes the need to comply with all
applicable laws and regulations, as well as the potential for legal challenges to the
merger.
●
The cultural implications of the merger:
This includes the need to ensure that the two
organizations have compatible cultures and that the merger does not disrupt the culture of
either organization.
●
The operational implications of the merger:
This includes the need to integrate the two
organizations' operations, as well as the potential for disruption to operations during the
merger.
MIDCARE would also need to consider the following factors:
●
The strategic fit of the two organizations: Are the two organizations a good fit for each
other strategically? Do they have complementary strengths and weaknesses?
●
The management team: Are the management teams of the two organizations compatible?
Do they have the skills and experience necessary to successfully execute the merger?
●
The employee relations: How will the merger be communicated to employees? How will
employee concerns be addressed?
●
The customer relations: How will the merger be communicated to customers? How will
customer concerns be addressed?
MIDCARE would need to carefully consider all of these factors before making a decision about
whether or not to proceed with the asset merger. It is important to carefully consider all of the
potential risks and benefits before proceeding with this plan. If MIDCARE is not careful, the
merger could end up being more harmful than helpful. In addition to financial, legal, cultural,
and operational implications, MIDCARE would also need to consider the following when
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evaluating a merger:
●
Strategic fit: the extent to which the merger would allow MIDCARE to achieve its
strategic objectives.
●
Level of integration: the extent to which the merger would allow MIDCARE to
consolidate its operations and achieve economies of scale.
●
Timeline: the extent to which the merger would allow MIDCARE to achieve its strategic
objectives in a timely manner.
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