ANALYSIS OF HOSPITAL LOCATION DECISION IN THE MID SOUTH DISTRICT
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ANALYSIS OF HOSPITAL LOCATION DECISION IN THE MID SOUTH DISTRICT
TABLE OF CONTENT
1.0 Introduction…………..………………………………………………..3
1.1The decision-making process…………………………………………..5
1.2 Total costs analysis………………………………………………………………5
1.3 Facilities planning………………………………………………………………….7
1.4Feasibility analysis………………………………………………………………….8
1.5 Labour analysis………………………………………………………..10
1.6 community and site evaluation………………………………………..12
1.7 Environmental and government regulation………………………….14
1.8 infrastructure analysis…………………………………………………..15
1.9 Service provision…………………………………………………………16
1.10 Conclusion………………………………………………………………..17
1.11 References………………………………………………………………..18
ANALYSIS OF HOSPITAL LOCATION DECISION IN THE MID SOUTH DISTRICT
1.0 INTRODUCTION
The research is aimed at providing a better understanding of the strategic business drivers behind the location decision-making process. The selection criteria will also be established in relation to the consortium’s broader objectives of providing the best health services for the whole district on top of promoting economic development and the living standards of individuals. the growing need for employment opportunities in the west region of the district as identified by the economic development planners in the district require the establishment of a huge health enterprise, especially in the most deprived areas of the district in order to create such opportunities and promote living standards. It has been noted that the cardiovascular hospital admissions are very high in the Alderman Town and the Woolen Mill. These deprived regions still record the highest proportion of work-force mortality rates in the district.
The Mid-Southern District has for quite a long time experienced poor health services, especially basing on the fact that the district is autonomous and self-contained in relation to provision of health services. The district is densely populated with various towns that are not so well developed. The district is characterized by high unemployment rates, poor education, poor transport links, high levels of health hazards, poverty, inadequate social amenities and regular migrations in search for greener pastures. The district is generally subjected to poor living standards. These factors in addition to dietary aspects have exposed many individuals to various health problems such as cancer and low birth weights which generally result to cardiovascular diseases during a later time in life. That the shareholders will require 15-20% returns from their investment requires sufficient consideration of a promising location.
This paper is aimed at evaluating the ‘assessment case study’ with the consequent provision of the most satisfactory decision to be followed by the consortium which intends to establish a large self-contained, up-to-date and fully lacquered hospital design that will meet the needs of the of all residents of the Mid Southern district. The site chosen is supposed to ensure maximum provision of medical services to the whole district, substantial reduction of unemployment in the district, minimization of total costs and maximization of profits.
The location of a business requires consideration of both the external and internal factors (Madura, 2006; Picle and Abrahamson, 1986; Gasper, 2005). The factors comprise of political, geographic and social characteristics (CP Practice) order to provide the most outstanding and appealing proposal in relation to the location of the one hospital for the entire district under the consortium rather than the NHS, many factors need to be considered. These are: the population trend in the potential business locations; availability of necessary infrastructure or the ability to extend it; availability of political support; capital requirements; availability of both skilled and unskilled labor; quality of life; availability of customers;competition; accessibility; availability of room for expansion and compatibility with the community (Harper, 2003). The consortium will definitely win the tender upon complete and thorough consideration of these factors. The provisions of the “assessment case study’ has clearly indicated the variations of these factors in the different parts of the district. The aim of conducting a thorough evaluation of the prospective location is to maximize the profits accrued from the transaction.
1.1 THE DECISION-MAKING PROCESS
Locating a business in a middle or low-income environment reduces investment returns (Pickle and Abrahamson, 1986; Gasper, 2005). The hospital is meant to provide medical services for the whole district and should therefore be located at strategic place that targets all classes of people. Location decision making should incorporate human, financial and environmental factors (Boone & Kurtz, 2010; Pickle and Abrahamson, 1986). The ultimate location in this case study is the Dams Nature Reserve since it is less costly and the potential of maximizing profits is high. Employment opportunities will be boosted and improvement of living standards will be realized. The Dams Nature Reserve is in the best strategic place to reach the whole population.
The evaluation of the case study will incorporate the economic model as per the rational decision process provided. The consortium is confronted with three different alternative courses of action. These alternatives are attached with different consequences. The decision-making process will therefore require the alternatives to be ranked in relation to all possible sets of consequences. The rationale behind ranking the preferred consequences for any business is majorly to minimize production costs while maximizing profits (Cyert, Simon and Trow, 1956). Location influences the outcome of the business (Madura, 2010). The most suitable location for the consortium is the Dams Nature Reserve. The following analysis was made in order to come up with the preference.
1.2 TOTAL COSTS ANALYSIS
The business must establish the maximum total costs that are likely to be incurred in the new location (Location Strategy, 2011; Pickle and Abrahamson, 1986). These include construction, labor, utilities, taxes, land, and distribution costs. Other costs to be considered include transportation costs and the loss of the responsiveness of customers if the location is established away from the customer base.
The construction costs in the three potential locations are varied. The old colliery will definitely require the largest amount of construction costs due to the need to clean it up and sterilize it before it can be built upon. The possibility of the site having once been used as a hazardous chemical dump further increases the chances of greater risks. The nature reserve records low costs due to the few problems rather than draining of the land. The derelict woolen mill complex records mid-costs.
The old colliery has readily available unskilled and semi-skilled labor. Additionally, there is high unemployment rate which will probably lower the wage labor cost. The unavailability of skilled labor coupled with the inadequate accommodation facilities will require large amounts to attract the professional workers to the place. The nature reserve on the other hand contains skilled labor but not unskilled and semi-skilled labor. This implies that the labor cost in the nature reserve is lower than that of the old colliery. It is cheaper to attract unskilled and skilled labor than skilled labor. The statistics indicate that Woolen town is characterized by the highest proportion of unskilled labour and the lowest proportion of highly skilled workers, partly due to absence of sectors that require skilled labor. The woolen mill can be rated with Woolen town since they are very close.Generally, the district has a low wage economy, with many investors fearing to put up a large business. This implies that the production labor costs will not be very high. The utilities around these locations are inadequate especially at the old colliery. The nature reserve is at least better because there is a golf site around it and accommodation services are adequate. The woolen mill contains adequate accommodation but no recreation facilities. The old colliery will definitely require development of new accommodation facilities for the staff. The nature reserve is thus the most preferable location in terms of utilities.
The distribution costs at the nature reserve are much less compared to the other two because of the presence of private health facilities around the reserve. The assessment of tax was not done because most probably the tax requirements are constant in all the prospective locations.
The land at the nature reserve is the most favorable for construction, followed by the old mill, then the old colliery. The land environment at the old colliery is at greater risk in terms of cost due to the purported chemical dump. The land is of poor quality environment with scarcity of green grasses which will probably make the area unattractive. The most preferred location in terms of land is thus the nature reserve because of its favorable environment. However, some costs will definitely be incurred in striking a deal with the local authorities to allow the consortium establish the hospital in the location. Conclusively, the nature reserve is the most cost-effective location.
1.3 FACILITIES PLANNING
This involves determination of the amount of space the business will require for its short-term and long-term objectives (Location Strategy, 2011, Schmenner, 1982). The woolen mill is congested with little room for expansion of the car parks and the premises at large. The old colliery has enough space for expansion for both short-term and long-term goals, but the quality of environment is wanting. The ‘old colliery’ notion by the public will never attract prospective shareholders, customers and workers even if the place had facilities. Again other investors will definitely dread establishing business in the old colliery due to the ‘Old Colliery’ notion. The nature reserve has a conducive environment with sufficient space for expansion. The environment in the nature reserve is attractive to the public and every person is aware of the place considering the environmental activism and media concerns about the newt and insect issue. The place will be favorable for a hospital because there is sufficient accommodation with the golf site that will probably attract prospective shareholders to the region. Thus the nature reserve is the most suitable location in terms of facility provision for both long-term and short-term goals.
1.4 FEASIBILITY ANALYSIS
This refers to the assessment of all forms of operating costs and other factors related to different locations (Location Strategy, 2011).According to Oprea (2010), feasibility analysis aims at addressing the question of whether the alternative course of action would possibly lead to the achievement of enterprise or individual goals, basing on the available resources and the specific restrictions. The major considerations in a feasibility analysis are the financial, physical and legal issues. The feasibility analysis is expected to address issues that will guide on the alternative course of action, that is, the most suitable location for the business, the predetermined site or investment funds (Oprea, 2010; Pickle and Abrahamson, 1986). the components of a feasibility analysis are: assessment of the physical and legal characteristics of the location; estimation of demand for the space; analysis of the competitive space; estimation of acquisition, construction and rehabilitation costs; estimation of the cost and availability of borrowed funds; estimation of absorption rates; development of cash-flow schedules and; evaluation of the estimated flow of cash with regards to the satisfactoriness of the expected consequence (Oprea, 2010). The feasibility analysis seeks to establish whether the proposed site will ensure maximum realization of profits on top of achievement of all other business objectives (Oprea, 2010).
The proposal is therefore intended to ensure that the business will establish a satisficing balance between the consortium’s and shareholders objectives in the long run. The minimum rate of return on the dividends is supposed to be between 15%-20% with a probable increment in the long run. This implies that proper analysis of the operation costs and the investment returns need to be considered. In order to maximize profits while minimizing operational costs, all the above components must be considered.
Legally, the tax costs are not provided in the case study; it can thus be presumed that the legal factors are constant but for the short-term newt problem in the Dams Nature Reserve. Physically, accommodation services are very much adequate around the Woolen Mill. This would not cause too much burden to the consortium because they will not start budgeting on provision of new apartments for their employees like in the old colliery. The nature reserve consists of recreational facilities such as the golf sites on top of accommodation and the environment is favorable for the hospital location because it is not contaminated very much like the old colliery. Since there is readily available skilled labor in the nature reserve unlike in the old colliery, the labor cost will not be as high. Getting unskilled and semi-skilled labor is less costly compared to hiring skilled labor. Unlike unskilled and semi-skilled workers, professional workers usually require inducements with promises of large sums of salaries and other benefits. The nature reserve is definitely the best region in terms of labour, accommodation and availability of other services. There is adequate space for expansion in the Old Colliery and the Dams Nature Reserve but the Woolen Mill would require much operational costs to develop car parks and new transport links. The borrowed funds are readily available which does not need to raise alarm. The acquisition and construction costs will be highest in the Old Colliery due to the need to clean and sterilize the place and provide accommodation, followed by the Dams Nature Reserve due to the need to pay off the authorities, then lastly the Woolen Mill which will require car parks and new transport links. There is no competitiveness in the district due to many investors fearing to establish large businesses.
1.5 LABOR ANALYSIS
Labor analysis is the determination of labor availability in the prospective locations in the long-term and short-term objectives (Location Strategy, 2011).The analysis comprises the description of the employed workers in the region including their wage rates, occupational classifications, number of establishments employing people and gender participation (Pigg, n.d; Pickle and Abrahamson, 1986). There has been a relative increase in population in the west of the district which comprises the Woolen Mill and the Dams Nature Reserve. Families with children locate in these regions that are most accessible to employment opportunities. The East is experiencing a relative loss of population and a decline in the working age population, that is, between twenty-four and sixty-five. The population outcome in the east is the unexpected growth in the over sixty-five age group. Thus the east of the district is suffering a relative fall in population with the elderly representing an ever growing proportion of the population. This case study does not give substantial information on gender participation and the current employing sectors. Therefore, the old colliery is not a good location in terms of labor characteristics. Additionally, the old colliery has unskilled and semi-skilled labour but no skilled labour. The population composition will not provide any skilled or unskilled labor whether for short term or long-term goals of the consortium. The region itself is not favorable for attracting professional staff because of the perception of the locations as ‘the old colliery’ which is characterized with the poorest environmental quality, inadequate accommodation and utilities, poor transport links and the notion that the place was once a chemical dump. No professional staff will want to associate themselves with such a place! The complexity of acquiring professional staff in the region will probably lead to minimized profits due to an increase in total labor costs. The labor wage for professional staff will be extremely high in the old colliery. The population around the woolen mill and the nature reserve comprises of prospective labor availability both in the achievement of short-term and long-term goals. The west of the district and Alderman town have seen population rises above the district wide average and strong increases in the numbers of children over four years of age and middle age-aged householders, that is, between thirty-five years and fifty-five years. The woolen mill records the largest percentage of unemployment, with a very small percentage of skilled workers and a very large percentage of unskilled workers. The fact that there are high unemployment rates will definitely reduce the wage cost. The nature reserve is comprised of a large percentage of unskilled labor and very small percentage of unskilled labor. This implies that the place is attractive and will definitely pull unskilled and semi-skilled workers from the other towns provided that there are relatively good transport links. There will not be so much difficult to acquire sufficient labor in the nature reserve. Therefore, in terms of labor requirements, the nature reserve is the most suitable region, followed by the old woolen mill, then the old colliery.
The growing demand for business to create employment opportunities in the district will boost the consortium’s proposal for a central hospital that will serve the whole district. The growing feeling that a new hospital will be an opportunity to raise the skill level of the general population will actually work for the consortium because it will provide a large avenue for employment opportunities of the growing labor force. The short-term objectives of the consortium must comprise training of the semi-skilled labor which will be a bit costly; the long-term goals will be easily achievable because there won’t be much illiteracy of the staff. The public will back the idea of setting up a hospital in the west owing to the fact that the population comprising the labor-force group is concentrated in the west.
1.6 COMMUNITY AND SITE EVALUATION
Community and site evaluation involves the scrutinizing of the compatibility of the business with the community (Location Strategy, 2011; Talloo, 2007).Compatibility of the business with the community greatly determines the appropriate location (Talloo, 2007). The case study indicates that 81% of citizens in the whole country are opposed to a PFI financed hospital. The potential joint action group comprising of trade unions and other community bodies to protest against the PFI will work against the consortium during the achievement of short-term goals. Sufficient publicity is required for the consortia to succeed, with inducements to the members of the public, offers and education on the importance of establishing a hospital under the PFI program. The public most probably does not understand how a PFI program will work. The consortium is therefore faced with the challenge of proving to the public that the PFI program is more beneficial that NHS program because there are more finances supplied in the production process. The old colliery has a very supportive community. The people around the location are very much for the idea and this could promote the business to flourish. The old woolen mill does not have opposition either. Therefore, these two locations are preferable in terms of community compatibility. The nature reserve on the other hand is very protective of the location majorly because it is a wildlife site for newts and rare insects. There is so much of opposition from the public especially the environmentalists and media which will really work against the hospital. However, adequate publicity given on the importance of medical services at the place and the fact that the surrounding towns such as Alderman and Woolen are deprived of health would work for the consortium. However, the possibility of the media and other activists supporting other consortia with an alternative location is very high and this would really work against the hospital. Again, the need for a favorable environment to subscribe for shares in the payments will require that the issue of compatibility with the community be the first priority. Therefore, despite the fact that the consortium can pay off the local authority to clear the newt and insect problem, the activists will instill resentment in the surrounding community which will cause the consortium to look selfish. The needs of the people should be the priority. This means that the woolen mill would be the best alternative in such situations, considering the fact that MP Hillary Thompson has already instigated the idea of putting up a hospital in the region. But still Hillary Thompson could have bought the idea of constructing the hospital at the nature reserve due to availability of space for expansion, availability of utilities, availability of accommodation, better transport links and the relatively lower costs but for the resentment by the community which would work against her re-election. She will definitely prefer the Woolen mill because the community is not against the construction on top of the fact that it will promote economic development in the region by creating employment opportunities to the flooded youth in the region. There is a substantial percentage of skilled staff as well as the largest percentage of unskilled and semi-skilled labour. Since Hillary is the most promising politician in the district and she is advocating for a hospital in the west, the consortium must not object to this because political backup is very important to the success of the business. There is need for proper analysis of the situation at hand. Still, the consortium will have to pick the nature reserve because of its long-term goals. The fact that the consortium is supposed to establish utilities for the staff and other relevant issues such as the hospital being the central medical service in the whole district will require that the hospital be located in a place that will encourage further adjustments or expansions. Proper publicity of the importance of the hospital and the availability of another favorable region for the newts and insects experiments will dilute the environmental activism issue with time and the hospital will achieve its long-term goals. The most preferred location in terms of environmental regulation for short-term goals is the old colliery but for long-term goals it is the nature reserve.
1.7 ENVIRONMENTAL AND GOVERNMENT REGULATION
The environmental regulations may determine the community’s relationship with the business (Location Strategy, 2011; Talloo, 2007). Government policies greatly influence business locations either through constraints that prevent establishment of businesses in certain regions or incentives and deals that induce the establishment of businesses in particular locations. The political environment at the old colliery is greatly encouraging to start the business. Businesses in the nature reserve have been restricted because of the newt issue, which the bank representative feels is not a big issue because the consortium can easily convince the authorities to set up the hospital. Definitely, the consortium can strike a deal with the relevant authorities to establish a hospital at the place and relocate the newt transactions to some other place. Arguably, research about newts does not need to be located in a place which has the probability of providing essential medical services for the whole district because it does not involve interaction with the external environment. The Wildlife Trust can relocate the newts and the rare insects to some place that is still cool and decongested in order to fully concentrate on their experiments.
1.8 INFRASTRUCTURE ANALYSIS
This refers to consideration of the modes of transport and telecommunication required and the forms of telecommunication services and equipment needed (Location Strategy, 2011; Talloo, 2007).According to Mara (n.d), high quality infrastructure is an essential requirement for the success of a business. The infrastructure in the district is not well developed. The transport links around the district are generally poor. The telecommunication sector is somehow promising basing on the percentage of the district compared to the whole country. The different towns record varied levels of development in terms of transport links and accommodation. A business must be located at a region with adequate visibility and convenience for the customers and labour. The old mill records the poorest transport links especially from the west which comprises of more developed places that will definitely boost investment returns. The nature reserve has better transport links considering the fact that it is close to a railway station with relatively good bus services. The region is recorded to have good transport links between the west and the middle of the district. This will definitely ensure the budget costs are not too high. The old mill only covers short bus rides and motorway access from the middle of Woolen. Therefore, the accessibility of the hospital will not be convenient enough because the west and other parts of the district would find it difficult to commute to the hospital. Therefore, they would opt for other medical services offered around their vicinity. Furthermore, the inadequacy of car parks and the possibility of establishing new transport links will increase the budget costs for the consortium. The best location in terms of transport links is the nature reserve.
1.9 SERVICE PROVISION
The major objective of the consortium is to provide the best health services in the region with the best facilities for the staff. In short, the hospital is meant to be the central medical centre for the whole district. In this respect, the hospital must be located in a region which caters for the most deprived individuals in the whole district. The target customers for the consortium are those regions deprived of health provisions and medical care. The case study indicates that a fifth of the District’s population resides in regions which have the most complex inter-related issues of social exclusion and there is a substantial clustering of these areas within the district. Alderman Town East comprises of the highest proportion of deprivation followed by Coal Town South.The west Woolen town and the East Coal Town areas record the highest proportion of public health issues. The economic conference proposed for establishment of a hospital in the most deprived areas in order to boost the economic development in the district. This implies that the idea of setting up a hospital in Alderman town will contribute to the economic development goals in the district. Thus the support of economic planners in the district will be available for the consortium and their idea of constructing a central health care in the nature reserve will be easily be bought upon complete and thorough persuasion.
There is generally poor health in the whole district. Chemical Town, Coal Town and Woollen Mill recorded the highest proportion of low birth rates and hospital admissions for cancer related diseases. Admissions for cardiovascular diseases are highest in the Woollen Mill and the nature reserve. This implies that health service provision in these areas is wanting. The case study however ranks the Alderman Town as the most deprived region in the district. Setting up a hospital in the Dams Nature Reserve which is at the mid-west region of the district with fairly good transport links and high population will provide a better avenue for health care, economic development and employment opportunities which will ultimately improve living standards in the district.
1.10 CONCLUSION
The preference for the hospital location is the Dams Nature Reserve. This is because of the favorable factors in the region as discussed above. Profits will be maximized and there will be a satisficing balance between the consortium and shareholders.
1.11REFERENCES
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