CASE 5-A East Mercy Medical Center Dorothy Jacobs was recently hired as assistant administrator of the East Mercy Medical Center. She is a new graduate of a well-regarded master's degree program in hospital administration and is expected to incorporate some advanced thinking into the apparently lax practices at East Mercy. Hospitals have recently been under increasing pressure from both government and local sources because of escalating costs. Although members of the board of directors of East Mercy feel that cost considerations are secondary to quality care, its members also are sensitive to the increasing public pressure. East Mercy is located in a rapidly growing area and is experiencing capacity limitations. In particular, according to staff personnel, the obstetrics, adult medical/surgical, and pediatric wards are "bursting at the seams". East Mercy is considering an extensive expansion program, including expansion of the obstetric, adult medical/surgical, and pediatric wards. The board has allocated a total of $400,000 for new beds in these three wards. Dorothy is presently trying to determine how many beds current demand levels justify for each ward and how many beds to actually add, given the $400,000 cost constraint. Dorothy and her staff have computed statistics based on the current year's patient census data in each of the three wards. These figures are as follows: WARD AVERAGE NO. BEDS USED PER DAY STANDARD DEVIATION Obstetrics 24 6.1 Surgery 13 4.3 Pediatrics 19 4.7 Histogram plots of bed usage show a close approximation to a normal distribution for each department. The present capacity of each ward is: Obstetrics 30 Surgery 20 Pediatrics 24 The hospital's architects have given the following estimates of the cost of adding one bed and all necessary supporting equipment to each of the wards: Obstetrics $20,000 Surgery $26,000 Pediatrics $15,500 It is possible for a ward to exceed its capacity, but according to state guidelines, this should not occur more than 5% o the time. Dorothy is in the process of preparing a report to the administrator showing how many beds are to be added to each of the three wards.

$400,000 cost constraint.
WARD AVERAGE NO. BEDS USED PER DAY STANDARD DEVIATION
Obstetrics 24 6.1
Surgery 13 4.3
Pediatrics 19 4.7
The present capacity of each ward is:
Obstetrics 30
Surgery 20
Pediatrics 24

The hospital's architects have given the following estimates of the cost of adding one bed and all necessary supporting equipment to each of the wards:
Obstetrics $20,000
Surgery $26,000
Pediatrics $15,500

It is possible for a ward to exceed its capacity, but according to state guidelines, this should not occur more than 5% o the time.
Dorothy is in the process of preparing a report to the administrator showing how many beds are to be added to each of the three wards.