Mary Johnson, The Trauma Unit Director, Must Decide What Cap ✓ Solved

Mary Johnson, the Trauma Unit Director, must decide what cap

Mary Johnson, the Trauma Unit Director, must decide what capital expenditure funding proposal to request for the coming year. Her trauma unit operates at over 90% capacity. A lead trauma surgeon is proposing a new surgery program that will require additional space and state-of-the-art equipment and has been lobbying hospital board members. What should Mary decide to ask for? How should she craft a strategy to justify her request? Use course material to support your recommendations; be creative, thorough, and organized.

Paper For Above Instructions

Executive summary

Mary should request a phased capital proposal that prioritizes (1) immediate capacity relief through targeted space reconfiguration and short-term throughput investments, (2) medium-term expansion of operating room (OR) capacity and adjacent support space to enable the new surgery program, and (3) acquisition of essential state-of-the-art surgical equipment tied to defined volume and quality targets. The funding strategy should combine hospital capital reserves, philanthropic support for program development, and a multi-year financing plan. Mary will justify the request with a data-driven business case: needs assessment, demand and capacity modeling, return-on-investment (ROI) and payback analysis, clinical outcome and quality projections, operational risks, and a stakeholder engagement plan aligned to institutional strategy (Kaplan & Norton, 1996; HFMA, 2017).

1. Needs assessment and problem definition

Begin with a concise statement of the problem: the trauma unit is operating >90% capacity, creating access bottlenecks, longer wait times, and potential negative quality impacts (IOM, 2006). Document current throughput metrics (ED-to-OR time, OR utilization, ICU/ward occupancy, cancellations), patient mix, seasonal peaks, transfer acceptance rates, and projected demographic / referral growth. Cite evidence linking high occupancy to worse outcomes where applicable (Celso et al., 2006). This frames urgency and clarifies whether the primary constraint is space, staff, equipment, or a combination.

2. Define the requested scope and options

Rather than a binary ask (“build now” vs “don’t build”), present three options with cost, timeline, and impact:

• Option A — Optimize existing space and processes (low capital): reconfigure recovery bays, add portable equipment, implement lean flow improvements to increase effective capacity by X% within 6 months (IHI, 2018).
• Option B — Moderate renovation and selective OR expansion (moderate capital): convert / repurpose adjacent clinical space to add 1–2 ORs and additional pre/post-op bays, plus targeted equipment purchases to enable the surgeon’s new program within 12–24 months.
• Option C — Full new-build or major expansion (high capital): create a dedicated trauma/surgical pavilion with state-of-the-art infrastructure and multiple new ORs, timeline 24–48 months.

Provide capital cost estimates for each option and incremental operating costs (staffing, maintenance). HFMA guidance recommends presenting scenarios so the board can compare cost, risk, and strategic alignment (HFMA, 2017).

3. Financial justification and economic modeling

Prepare pro forma financials and sensitivity analyses. Include:

• Volume and revenue forecasts tied to the new program and expanded capacity (CMS reimbursement assumptions and payer mix) (CMS, 2020).
• Incremental contribution margin per case, break-even analysis, and projected payback period for capital (Baker & Baker, 2018).
• Non-financial economic benefits: reduced diversion, fewer transfers out, improved quality metrics that reduce penalties and readmissions (Porter & Teisberg, 2006).

Run conservative, base, and aggressive scenarios and present ROI ranges. Use graphical visuals of payback curves and cumulative cash flows to make the case compelling for finance-focused board members.

4. Clinical quality, safety, and strategic alignment

Link the proposal to improved clinical outcomes and institutional strategy. Cite the trauma center standards and how the expansion supports trauma system performance and accreditation (ACS Committee on Trauma, 2014). Show projected reductions in time-to-OR, length-of-stay, and mortality or complication rates based on modeled throughput improvements and literature evidence (Celso et al., 2006). Demonstrate alignment with the hospital’s strategic goals (market growth, academic mission, community benefit) using Balanced Scorecard language (Kaplan & Norton, 1996).

5. Stakeholder analysis and engagement plan

Map stakeholders: trauma surgeon proponents, nursing leadership, anesthesiology, OR management, facilities, finance/CFO, hospital CEO, board members, payers, community/ donors. For each, outline interests, likely concerns, and tailored messages. Address potential conflicts (e.g., surgeon lobbying) by showing collaborative governance for the proposed program: defined clinical leadership, volume thresholds, performance metrics, and transparent capital governance (IHI, 2018).

6. Implementation, timeline, and risk management

Provide a phased implementation plan tied to the chosen option: immediate process changes (0–6 months), renovation/modest expansion (6–24 months), equipment procurement and program roll-out (12–36 months). Include a risk register: cost overruns, delays in permits, provider recruitment, changes in payer policy, and mitigation strategies (contingency budgets, staged procurement, philanthropy). Describe metrics for go/no-go gates at each phase.

7. Financing strategy and alternative funding sources

Recommend a blended funding model: part capital reserve, part debt or lease financing, and targeted philanthropic fundraising for program endowment and specialized equipment (HFMA, 2017). If the surgeon is a strong advocate, suggest capturing philanthropic interest but avoid sole reliance on donor-driven specifications — the clinical/operational needs must drive equipment choice. Assess tax-exempt bond issuance if the hospital credit profile supports it, or equipment finance/lease for rapid acquisition.

8. Metrics, reporting, and accountability

Define a concise dashboard of KPIs that will be reported to the board quarterly: OR utilization, case volumes by service line, access metrics (ED boarding hours, transfer acceptance), clinical outcomes (infection, mortality), financial performance vs. projections (revenue, contribution margin), and patient experience (AHRQ/CAHPS) (AHRQ, 2014). Tie executive incentives and operational accountability to these measurable goals.

Conclusion and recommended ask

Recommended formal request: approval of Option B (moderate renovation and selective OR expansion) with a not-to-exceed capital authorization of $X million (detailed line-item budget attached), conditional on meeting predefined volume and quality milestones. Request initial funding for immediate process optimization and detailed design work (10–15% of project cost) to fast-track site planning and ensure accurate costing. This balanced approach addresses urgent capacity constraints, enables the surgeon’s program with controlled risk, and provides clear financial and quality-based return metrics for the board (HFMA, 2017; Kaplan & Norton, 1996).

References

• American College of Surgeons Committee on Trauma. (2014). Resources for Optimal Care of the Injured Patient. ACS COT.
• AHRQ (Agency for Healthcare Research and Quality). (2014). TeamSTEPPS and Patient Safety Resources. AHRQ.
• Baker, J. J., & Baker, R. W. (2018). Health Care Finance: Basic Tools for Nonfinancial Managers (6th ed.). Jones & Bartlett Learning.
• Celso, B., Tepas, J., Langland-Orban, B., et al. (2006). A systematic review of the effect of trauma-center care on mortality. Journal of Trauma, 60(2), 371–377.
• Centers for Medicare & Medicaid Services (CMS). (2020). Hospital Inpatient Prospective Payment System (IPPS). CMS.gov.
• Healthcare Financial Management Association (HFMA). (2017). Capital Planning and Budgeting: Best Practices. HFMA.
• Institute for Healthcare Improvement (IHI). (2018). How to Improve: Science of Improvement. IHI.
• Institute of Medicine (IOM). (2006). Hospital-based Emergency Care: At the Breaking Point. National Academies Press.
• Kaplan, R. S., & Norton, D. P. (1996). The Balanced Scorecard: Translating Strategy into Action. Harvard Business School Press.
• Porter, M. E., & Teisberg, E. O. (2006). Redefining Health Care: Creating Value-Based Competition on Results. Harvard Business Review Press.