You are the vice president of a 60-bed cardiac hospital. Last year your hospital generated about $80 million from inpatient care and about $40 million from outpatient care. Sixty percent of overall revenue comes from Medicare; 5 percent comes from Medicaid. Your profit margin was 2.5 percent. Three general hospitals and two other cardiac hospitals serve the metropolitan area's 620,000 people (you draw patients from a ten-county area). The hospital appears to offer exceptional quality.

In cardiac care, the hospital is well above the national average, and patients are much more satisfied than average. For example, 93 percent of patients received beta blockers, which is well above the national average of 87 percent, the state average of 82 percent, and the local average of 84 percent. In addition, 94 percent of heart failure patients were provided appropriate discharge instructions, which is well above the national and local rates (76 percent). The readmission rate equaled the national average. Your CEO recently asked, "What's health reform going to do to us? What opportunities seem likely to open as a result? What challenges will we face? How will it affect our revenues and how will it affect our costs?”

Write a memo for the CEO and the Board. Focus on the major issues. What two main things should you be thinking about? Be sure to explain why these two things will be important and why they are likely to change.