Hospital Corporation Of America Harvard Case Solution & Analysis

Introduction of Company & Its Environment

            Hospital Corporation of America had been established in the year 1968 and within a very short period of time the hospital became the nations’ one of the largest hospital management company. This company was founded in Nashville Tennessee and started with a small investment in just 150 bed hospital. There were around 349 total hospitals that were owned by the company which were operating in overseas and in United States.

            In the initial period of the year 1970, the company had grown by constructing new hospitals and also achieved significant growth through the acquisition of the existing hospitals. Around 70 replacement facilities and new facilities were constructed by the company within the period from 1968 to 1981. Apart from these 70, the remaining 279 hospitals of the company were either leased or acquired by the Hospital Corporation of America.

A number of acquisitions were made by the management of the company and in acquiring other hospitals, a range of criteria were considered by the Hospital Corporation of America. These included the personnel and staff quality of the acquiring company, needs of the community for the health care services, the strategic fit of the proposed hospital with all the current hospital and as a means for expansion, the strong financial condition of the hospital and the growing pattern of the population in the area.

            A significant amount of cash was generated by the company by its significant investments in the operations of the company, however, the company still needed more external financing in order to fund the acquisition of other hospitals and construction of the new facilities. The most common sources for raising the required external financing for the company were the long term mortgage loans, revolving credits and privately placed bonds and industrial revenue bonds. These were the most common sources for raising the needed external financing for the company and other sources were not possible to be approached by the hospital companies because the propriety hospital industry was new in the market.

Along with this, the image in the eyes of the public regarding the hospital management companies was relatively poor. However, with the strong management quality, Hospital Corporation of America had emerged to become one of the strongest companies in the industry and became the first hospital management company to get recognized. Creating the desired reputation in the proprietary hospital industry was challenging task for the companies because this was one of the new phenomenon that was slowly and gradually emerging in United States.

Medicaid and Medicare entitlement programs had been launched in United States in 1965 and this was due to this the demand for the services of the hospital had stimulated significantly. Further, the growth of the hospital management companies was also stimulated as a result of the tight hospital designs, purchasing and staffing. As a result of this, the hospital management companies were able to achieve the expected revenue growth of about 13% to 14%. However, this growth rate was not much higher due to high costs of acquiring the hospitals and construction of new hospitals.Hospital Corporation Of America Case Solution


            Since Hospital Corporation of America has initiated its operations, the growth strategy of the company had always emphasized on achieving growth by increasing the range of the services offered by the hospitals under the management of the company, construction of new hospitals, acquisition of new hospitals and new management contracts being signed by the company. For an industry to be successful a successful supply chain management and a strong customer base needs to be developed to make the industry profitable, however, the efforts that have been contributed by Hospital Corporation of America in the hospital management industry were extensively substantial and to achieve this substantial investment had been made by the Hospital Corporation of America in building, acquiring new hospitals and investing in the required equipment.

            The management of Hospital Corporation of America had to work very carefully in order to achieve the required rate of return for the shareholders and become the most profitable in the industry and the acquisition activities and the construction of the new facilities had been done very aggressively by the management of Hospital Corporation of America. This successful strategy of the company had helped the company to achieve significant revenues in 1972, 1976 and 1981. The business strategy of the company was successful and the strong performance of the company also allowed the profits for the company to be increased in the same fashion as sales of the company.......................

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