Jiranna Healthcare owns and operates a 268-bed hospital in
the San Jose area. The hospital is Jiranna Healthcare%u2019s main facility and
is home to more than 80 on-site specialty and surgery clinics, employing over
5,000 staff. In addition to the main hospital, Jiranna Healthcare has 18
satellite clinics, containing primary care services such as pediatrics, family
medicine, and geriatric health. These facilities (hospital plus outlying
clinics) serve a total enrollee population of 97,000.

Currently, Jiranna Healthcare%u2019s centralized call center
schedules primary care appointments and handles an average of 1,500 to 2,000
calls daily with a staff of 20. Patients routinely have difficulty obtaining
access to urgent or acute care (primary care) in a timely fashion.
Additionally, the majority of Jiranna Healthcare%u2019s primary care centers
are unable to meet access standards in three out of four cases. These access
issues have a secondary effect on the call center, which experiences a much
higher call rate because members have to call back multiple times to find
available appointments. The existing process leads to overutilization of
emergency departments for urgent care and primary care concerns. In addition,
patient satisfaction has steadily declined as a result of the continued lack of
appointment availability.

To address this problem, there is a proposal to implement a
centralized nurse triage line, an off-site phone center that would be staffed
by registered nurses with a multitude of specialties (including ER nurses,
critical care, surgical, and even some nurse practitioners). These nurses are
able to offer callers medical advice encompassing the treatment of fevers,
wound care, and emergent conditions such as chest pain. The nurses are trained
to triage conditions to the appropriate level of care be that at home, at an
urgent care center, or at an emergency department.

The major cost impact is the increased salary requirement
for the phone center staff, which will entail approximately 33 multi-discipline
employees, based on workload and enrollment data. Additional elements of the
proposal include hiring an IT specialist to manage the triage line%u2019s
computer system, and facility renovations. The main benefit of this proposal is
projected cost reductions in patient care as a result of moving primary care
out of the expensive emergency-room setting.


The Capital Project Case Study, Part 2 spreadsheet provides
cash flow data (costs and benefits) for the proposal. Download and save this
Excel spreadsheet, and use the information provided to complete the following:

1. Determine the cash inflows and outflows for each year.

2. Evaluate the capital project by calculating the following

a. net present value (NPV)

b. internal rate of return (IRR)

c. modified internal rate of return (MIRR)

d. payback period

e. discounted payback period

3. Indicate whether the project is acceptable, assuming
Jiranna has a corporate policy of not accepting projects that take more than
3.5 years to pay for themselves, and assuming an 11% cost of capital.