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Established in 1987, ABC Community Hospital not-for-profit is an acute care hospital located in an east coast Metropolitan area. With a staff of nearly 200 physicians and specialists, 800 employees

Established in 1987, ABC Community Hospital not-for-profit is an acute care hospital located in an east coast Metropolitan area. With a staff of nearly 200 physicians and specialists, 800 employees and 100 volunteers, they offer a full range of healthcare services. They are accredited by the Joint Commission. The hospital has been profitable for the last 5 years with a profit margin of 3-4%. The mission of ABC Community Hospital is to provide accessible and comprehensive healthcare services in a convenient and cost-effective manner to the people who live in our community.

At the last Board meeting, hospital administration and the Board of Directors began to discuss a proposal to build a new wing devoted to a Cancer Center and ancillary services devoted to the treatment of cancer. The new wing would have 30 acute care beds, four surgical operating rooms, intensive care unit and extensive support services, including physical therapy and hospice care. All patient rooms would be private. There are no Cancer Centers within a 200 mile radius of the hospital service area.

The Board of Directors is concerned with taking on the additional debt for the Cancer Center. They have tasked the CFO with developing a financial plan and strategic plan that will outline the impact of the Cancer Center on the financial status of the hospital. They want you to address the following areas:

  • What are the key financial policy targets for which the Board is responsible? List and explain each.
  • Create the strategic and financial plan for the new Cancer Center proposal within the framework of the hospital’s mission statement.
  • Explain how management control is used in conjunction with the financial plan. Include the integration of the financial plan with management control.  Indicate the phases of management control.
  • What are the major categories of assumptions that must be specified to project a future balance sheet? What are the set of programs or activities to which the organization will commit resources during the planning period?
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