VIDEO CASE STUDY
CAPACITY PLANNING AT ARNOLD PALMER HOSPITAL
The Arnold Palmer Hospital video for this case is available in
MyOMLab. (Its running time is 9 minutes.) Also note that the
Global Company Profile in Chapter 6 highlights this hospital.
1. Given the discussion in the text, what approach is APH taking
to match capacity to demand?
Referring to Figure S7.6, Arnold Palmer Hospital’s capacity first
lagged demand and now is leading demand with incremental
expansion (part a). The new building will provide sufficient capacity
for several years. The top two floors (left unfinished for additional
beds) and operating rooms (on the 4th floor, available for horizontal
expansion) will be built out when needed.
AACSB: Application of knowledge
2. What kind of major changes can take place in APH’s demand
forecast that would leave the hospital with an underutilized facility
(namely, what are the risks connected with this capacity decision)?
Possible risks:
Demand will not continue to grow dramatically. The hospital believes that the new building will attract new
OB/GYN doctors to deliver there. The other major hospital
chain in Orlando, Florida Hospital, has also just announced
a major expansion. This may flood the hospital bed market
in the short run.
The population boom in Central Florida could abate with
rising housing prices that are discouraging future growth.
During the 2008–2010 recession, population in Central
Florida leveled off.
Unforeseen disasters in medicine could damage the hospital’s sterling reputation (e.g., lawsuits, drop in quality)
There is a nursing shortage that could create a staffing bot
tleneck if not corrected. Recently, the two major hospital
chains in central Florida got into a bidding war in attempts
to recruit each other’s nurses.
AACSB: Reflective thinking
3. Use regression analysis to forecast the point at which Swan
son needs to “build out” the top two floors of the new building.
Regression analysis on the birth data in Table S7.3 yields:
Y = projected births = 5,873 + 466x
(where x = time in years. x = 1 is 1995, x = 2 is 1996,…
x = 20 is 2014.)
The R = .94, so R2 = .88, a high coefficient of determination.
To forecast the point at which the top two floors will need to
be built out, we examine 2015, x = 21 y = 15,658. For 2016,
x = 22 y = 16,124.
So the top two floors may need to be built out by 2016.
The following plot of births over years indicates what is happening
with the actual number of births. This plot may spark an interesting
discussion of the limitations of statistics and suggest more analysis
before building out the additional two stories in 2016. Why did
births increase through 2008 but drop in 2009–2011? Is the modest
increase through 2014 significant?
Births at Arnold Palmer Hospital, 1995–2014
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Operations Management: Sustainability and Supply Chain Management, 12th Edition (Free Ebooks Download)
Jay Heizer, Texas Lutheran University
Barry Render, Graduate School of Business, Rollins College
Chuck Munson, Carson College of Business, Washington State University
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