Service Line Development Task 1

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Service Line Development Task 1 A. In order to decide if it’s best for the hospital to build, buy or lease space for a new orthopedic service line we will have to discuss many advantages and disadvantages in detail. 1-2a. To start with constructing a Physical Therapy center should be considered. The Chief Financial Officer stated that it would cost the company $120 per square foot for 5,000 square feet to construct. If this center were built on hospital property it would cost a total of $600,000. This would be an advantage to the hospital, as their leaser wouldn’t supervise them. They would be free to make decisions and worry about the monitoring that goes along with leasing. They would be independent and not have another owner overseeing daily activities. A major disadvantage to building on the hospital groups would be the CFO’s statement regarding lack of space to extend on campus. This problem leads to the idea that it may be a better option to build off site, but it’s important to thoroughly consider all benefits and risks involved first. 1-2b. The next option to be discussed is buying both a building and lot adjacent to the hospital. The Chief Financial Officer stated that this should cost around $700,000, which includes both the building and the lot. The positives of buying both lot and building would be that the hospital would not have to worry about expanding on space and depletion of their already limited supply of property. Another advantage is the fact that the depreciable life is 20 years. This means that the hospital wouldn’t have to worry about a depreciable value for at least 20 years and then the hospital could claim the depreciation value. The biggest disadvantage of this would be the cost. By choosing this option the hospital would be risking using up any extra reserve which might not be the best as the CFO stated that the hospital needs to

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