Green Valley Medical Center Harvard Case Solution & Analysis

Introduction

Green Valley Medical Center was incorporated with a government grant in 1930. This medical center was operated with a 330 beds and run as a non for profit organization which is affiliated with the large universities that are located in the middle type town’s couple of hours away from two state urban centers.

Green Valley Medical Center had already set up its brand name by which it faces no obstacle in generating their revenues, during the period of its success, the board of the Green Valley Medical Center is deciding to implement the capital budgeting system. Under the practice of traditional capital budgeting system, the board of trustees and the CFO of the Green Valley Medical Center give high priority to the medical equipment’s, and this policy applied by Green Valley Medical Center is exposed to subjectivity and not stated in any form of documents.

On the other hand, the newly elected CFO of Green Valley Medical Center is not familiar with the capital budgeting system used by the large hospitals such as Green Valley Medical Center. But he is aware of the practices that are being carried out by the private hospitals and he was certain that the techniques were familiar to him.

However, the CFO presumes through this capital budgeting system is a better balance of information that will be used for evaluation that leads to the unbiased results in rejecting or approving the capital budgets requested by the different departments of Green Valley Medical Center.

What are the key elements of GVMC’s strategy?

The Green Valley Medical Center operates as a non for profit organization which comprises around 330 beds with a state university located in the mid-size town couple of hours from the two state urban centers. It is the only one regional hospital in the state. The green valley medical center has the facilities of cardiology, neurology, and oncology, and their staff is specialized in the research, teaching, and clinical care. For supporting large expansions and improvement, the Green Valley Medical Centerissue a municipal revenue bond.

The key elements embedded in the Green Valley Medical Center strategy are its service department and its administration department did not take part in its capital budgeting process. The green valley medical center was operating as a non-profit organization established in the hospital with the federal grant organization, and growth with the continued support of government revenue, the board of directors and former CFO was preferred to invest in medical equipment.

As the director of cardiology mentioned in the material of the case that the doctor had gotten a tradition, the number and mission of the hospital. Closer to the needs of the hospital and the patients were. These doctors could bring more benefits to hospitals, such as increased turnover directly, be useful in qualifying hospital and reputation.

The best medical team could bring more patients and income, so the medical center could get more revenue grant and the state to invest more capital. In addition, the valley was a specialized medical center in cardiology, oncology and neurology university hospital. The hospital was widely considered to conduct research and innovative medical community for his work, so the doctors had to invest in spending or operating medical equipment to continue his research.

Why does the existing capital budgeting system need to be changed? 

Due to the subjective nature of the capital budgeting system that is being followed in the Green Valley Medical Center, they adapted a more objective approach in dealing with the constraints of capital budgeting decisions. In order to determine the existing capital budgeting system, the quantitative and qualitative analysis in the capital budgeting decision-making process should be incorporated. On the other hand the importance of all the departments of Green Valley Medical Center should be focused while making capital budgeting decision making process.

The following areas should be considered while making capital budgeting system decision. The main focus over the current capital budgeting process is over the medical equipment which are being currently used by the green valley medical center. The board of trustees of the hospital’s and previous CFO has been previously maintained a general practice of providing a high priority of medical equipment’s.

However, the practice of current green valley medical center is not clear and its subjectivity. According to the director of the cardiology department, the medical domain always gets out successfully in the competition with the administration department when it comes to the capital resource allocation. According to the physician, administration is the necessary part of the .............................

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