Since opening day, Arnold Palmer Hospital has experienced explosive growth in demand for its services. One of only six hospitals in the U.S. to specialize in health care for women and children, Arnold Palmer Hospital has cared for over 1,500,000 patients who came to the Orlando facility from all 50 states and more than 100 other countries. With patient satisfaction scores in the top 10% of U.S. hospitals surveyed (over 95% of patients would recommend the hospital to others), one of Arnold Palmer Hospital’s main focuses is delivery of babies. Originally built with 281 beds and a capacity for 6,500 births per year, the hospital steadily approached and then passed 10,000 births. Looking at Table S7.4, Executive Director Kathy Swanson knew an expansion was necessary.

Table S7.4

Births at Arnold Palmer Hospital

1995 6,144
1996 6,230
1997 6,432
1998 6,950
1999 7,377
2000 8,655
2001 9,536
2002 9,825
2003 10,253
2004 10,555
2005 12,316
2006 13,070
2007 14,028
2008 14,241
2009 13,050
2010 12,571
2011 12,978
2012 13,529
2013 13,576
2014 13,994

With continuing population growth in its market area serving 18 central Florida counties, Arnold Palmer Hospital was delivering the equivalent of a kindergarten class of babies every day and still not meeting demand. Supported with substantial additional demographic analysis, the hospital was ready to move ahead with a capacity expansion plan and a new 11-story hospital building across the street from the existing facility.

Thirty-five planning teams were established to study such issues as (1) specific forecasts, (2) services that would transfer to the new facility, (3) services that would remain in the existing facility, (4) staffing needs, (5) capital equipment, (6) pro forma accounting data, and (7) regulatory requirements. Ultimately, Arnold Palmer Hospital was ready to move ahead with a budget of $100 million and a commitment to an additional 150 beds. But given the growth of the central Florida region, Swanson decided to expand the hospital in stages: the top two floors would be empty interiors (“shell”) to be completed at a later date, and the fourth-floor operating room could be doubled in size when needed. “With the new facility in place, we are now able to handle up to 16,000 births per year,” says Swanson.



1. Do a regression analysis for each of the two factors affecting the demand against the demand of the hospital. Make some analysis of these two regression analyses and how it affects the hospital’s decision to add capacity.

2. What are the factors affecting the adding of capacity to the hospital? Can the hospital actually match the demand? How should the hospital manage these factors?


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