While you were working on your demand projection plans, I was working with physicians from Woodland Ridge to gather information on demand for the new services. I think we’ve got some good information to help us get started. I talked to doctors who would be using or referring patients to the new services. They have projected how many patients they could guarantee in the first year. I also asked them to give me a sense of how much growth they expect over the life of the project. Here’s what I’ve put together:
CyberKnife
After talking with the neurosurgeons, I think we can expect 6 procedures a day during the first year. The doctors anticipate a growth rate per year of between 5% and 15%.
Alzheimer’s Unit
The physicians in the geriatric practice believe they can fill 16 beds every day in the first year of the project. Given the dramatic rise experts predict in the incidence of Alzheimer’s disease, Woodland Ridge’s geriatric doctors think the growth rate in the unit will be between 6 and 10%.
Dialysis Center
Based on the number of machines the proposals suggests installing, Woodland Ridge could perform a maximum of 90 procedures per day. I talked to the Nephrologists and they believe they could run the center at half capacity, so 45 procedures per day during the first year. As for growth, they anticipate a growth of between 6% and 10%.
Remodel
I asked Mr. Bennett about demand numbers for the Remodel and he directed me to the outsourcing company. This is the company Woodland Ridge plans to hire to staff its Emergency Department with physicians, if they decide to go with the remodel project. I talked to a representative at the company and he said that based on their experience, they would project Woodland Ridge will admit one additional patient who needs surgery every day during the first year operating the new ER. That patient will stay an average of two days in the hospital. He said they suggest talking about demand in terms of an additional surgery and a 2-day hospital stay for each day. He said growth depends on the area of the country the hospital is in, but he anticipates a growth of between 3% and 6% for Woodland Ridge.
Your Job
I'd like you to start by making sure that the numbers the doctors have given us for the CyberKnife and the Alzheimer's Unit are reasonable. I feel good about the information for the other projects, but I'm not sure how rigorous the doctors were in putting together those numbers and I just want to make sure our projections are realistic. I've attached some demographic information for the Mitchell, CO area that may help you.
Once you've completed that, here’s what you need to do.
- Based on the demand projections I’ve given you here, you need to calculate the weekly and annual demand for the first year of each project.
- Then based on the expert’s projections for growth I’d like you to create three possible scenarios for demand – high, medium and low – for each project. From there use the demand scenarios to determine the daily, weekly and annual projections for the length of that project.
- Finally, you will need to decide which demand figure you will use for your financial analysis. You can base your remaining work off any of the three demand scenarios – high, medium or low – just keep in mind during your final presentation, you’ll need to explain to your client why you chose the figure you did and the implications choosing that figure had on your analysis.
I think you should go ahead and start setting up an Excel spreadsheet for each proposal. You can use that spreadsheet to capture your demand figures here.
I’ve attached an example of a financial analysis I completed on a previous project. I thought it might be a helpful reference for you during this project. It will give you an idea of everything you will need to include on your spreadsheet, though you shouldn’t feel obligated to copy my formatting. Feel free to set your spreadsheet up any way you would like to.
I’ll review your projections once you have finished your work.
Thanks,
Abby
Abigail Vincent
Sr. Consultant
WJL Consulting
