Academic journal article Entrepreneurship: Theory and Practice

Sanders Hospital and Health Center: A Case Study

Academic journal article Entrepreneurship: Theory and Practice

Sanders Hospital and Health Center: A Case Study

Article excerpt

This case study examines Sanders Hospital's (fictitious name) decision on a strategy for developing a specialized cardiovascular program. Cardiovascular services had been identified as an opportunity to assist Sanders better compete in the turbulent hospital industry. The hospital was in the process of determining the best alternative for seizing and pursuing this opportunity. Two options were under consideration. First, Sanders could implement the program internally and compete directly in the market. The second option was to jointly develop the cardiovascular program through an alliance with one of the two regional hospitals who were contemplating entering Sanders' market area.

In March of 1991, Terry Stein, CEO of Sanders Hospital, a small community hospital located in the southeastern portion of the United States, was pondering the effects of an all-too-frequent scenario. The hospital had once again seen a patient transfer to a nearby competitor's hospital to have a surgery performed. The previous week a man had been brought in by ambulance to Sanders, the closest hospital. After the doctors saved the man's life, he was told that he needed immediate heart by-pass surgery. However, the patient requested to be transferred to a nearby competitor's hospital to have the surgery performed. The next day, the man was transferred and the by-pass was successfully performed.

Mr. Stein, the Board of Commissioners, management, and affiliated physicians and staff were considering options for the future of Sanders Hospital (SH). While certain competing hospitals had established themselves as leaders in specialized fields of medicine (e.g., cardiovascular services), SH, and some of the smaller hospitals in the area, had not. Mr. Stein believed that when potential customers went elsewhere for specialized services, they tended to stay with the competitors for all of their hospital needs. Therefore, the loss in revenues was greater than just those for specialized procedures, which were, alone, very substantial.

For several months, the group met to identify opportunities for improving hospital performance. Substantial changes in methods of reimbursement for medical services, medical technology, and needed renovation and expansion all threatened the future of SH. Adding urgency to the situation was a projected decline in the hospital's performance

Mr. Stein realized the necessity for an entrepreneurial response to Sanders' opportunities and threats to improve its competitive position in a rapidly changing health care environment. Cardiovascular services bad been identified as a potential opportunity to help SH improve its financial performance and better compete in the health care industry. A decision had to be made on what was the best method for developing or acquiring the resources needed to enter this new line of business. Two options were under consideration. The first was to pursue the venture internally. The other option was the creation of a joint venture with one of the two regional heart centers currently competing in the market.

Mr. Stein recognized some of the risks involved in developing new services. Would the cardiovascular program be able to attract enough people to "purchase" the service quickly enough, or at a high enough price, to make a profit? Also; depending on the method chosen for implementing the diversification strategy, could Sanders compete with other hospitals with stronger resources that might follow Sanders into the market?

Mr. Stein was to meet with the board in three days. At that time the Board of Commissioners planned to make a final decision on the course of action to be taken. He was determined to have a recommendation to present to the board at that time.

BACKGROUND

Sanders, a public hospital, was built in 1975 at a cost of $4.75 million. It was financed by a bond issue that was to be repaid through a property tax in the newly created hospital district. …

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