Capstone Chapter 3

CapstoneChapter 3

BostonChildren’s Hospital

CurrentCompany Operations

Organizationfinancial aspects

BostonChildren’s Hospital has been making profits continuously. Accordingto Weisman (2014) Boston Children’s Hospital earned the highestrevenue in the state of Massachusetts in 2014 after making $ 157.7million revenue compared to its competitors (such as North ShoreMedical Center) that made a loss of up to $ 20.3 million. Apart frommaking money through operations, the hospital collect funds throughthe Boston Children’s Hospital Trust, where its largest source offunds is individual donors followed by gifts from other foundationsas shown in Appendix 1.

Organizationalhierarchy and leadership style

BostonChildren’s Hospital has an established structure through whichinstructions flow from the executive to the junior staff. The topleader of the hospital bears the title “president” or the “chiefexecutive officer” who is responsible for the overall management ofthe organization. The CEO is assisted by the executive vice presidentwho is in charge of health affairs and also acts as the chiefoperating officer. Below the executive vice president are two seniorvice presidents, several executive directors, heads of departments,divisional heads, and junior staff (Boston Children’s Hospital,2015). Although Boston Children’s Hospital has a hierarchicalstructure, its management has adopted an inclusive leadership style,which means that all members of staff take part in the process ofdecision making.

Humanresource aspects

BostonChildren’s Hospital is among the largest pediatric care facilitiesin the U.S., which employs about 1,025 medical doctors, 384scientific staff, about 922 interns and residents, 1,596 nurses, andclose to 9,000 full-time as well as part-time junior staff (BostonChildren’s Hospital, 2015). In spite of being a large health carefacility, its hourly compensation ($ 14.00-17.00) is quite lowcompared to the industry average, which is $ 23.01-40.08 per hour(Kaplan University, 2015). Being a medical training and teachingcenter, Boston Children’s Hospital has several employee trainingprograms that seek to enhance their skills and ability to deliverquality care. Most of these training programs are designed forinterns and resident members of staff, who play a critical role inhelping the hospital, address the challenge of staff shortage. Inaddition, Boston Children’s Hospital acts as an equal employmentemployer, where people are recruited on merit irrespective of theirsocial characteristics, such as gender, disabilities, or age (BostonChildren’s Hospital, 2015).

Laborrelations issues

Althoughthe shortage of employees has not been an issue of concern at thehospital in the past, the Boston Children Hospital is currentlyexperiencing a shortage of qualified pediatricians, physicians, andregistered nurses (Schell, Lavieri, Toriello, Martyn &amp Freed,2014). This shortage has resulted in long working hours for theavailable employees. Boston Children’s Hospital experiences minimumconflicts with its members of staff, but the issue of shortage ofemployees coupled with long working hours could reduce the motivationof the current workforce in the future.

Legaland ethical issues

TheBoston Children Hospital has been engaged in several legal battlesfor different reasons. For example, some parents have accused thehospital of detaining their children against their will. In one ofthe recent cases, Justina Pelletier, a 15 year old girl, was retainedagainst parents will after the health care professions diagnosed herwith a mitochondria disorder and the court was the only solution tothe child released (Tate, 2014). The hospital has also been accusedof failing to protect the privacy of its clients. In 2015, BostonChildren’s Hospital was charged a $ 40,000 fine following a databreach that affected more than 2,159 clients (McGee, 2014). Thebreach occurred when an unencrypted laptop was stolen from thehospital’s premises, which was an indication of negligence on thepart of the hospital’s management. Several parents have raisedcomplaints against the hospital for abduction as well as thekidnapping of their children. These ethical and legal issues aredetrimental to the image and the future growth of the hospital.

of technology as well as an information system

BostonChildren’s Hospital was among the first pediatric health carefacilities to implement a fully integrated information system in theU.S. The hospital`s information system was integrated from a set ofinterrelated divisional applications, such as a scheduler, clinicalorder module, and the medical records manager (McGee, 2014). Thismotivated the hospital to develop a comprehensive electronic healthrecords management system that helped the management in enhancingefficiency within the hospital. In early 2015, Boston Children’sHospital adopted a computational Health Informatics Program, which isa computer-based program used in enhancing staff training andresearch (Boston Children’s Hospital, 2015). The program alsofacilitates faster information processing as well as efficientcommunication within the hospital. Moreover, the hospital uses robotsto perform different tasks (such as surgery) in a more accurate andfaster way.


Thereare three industry environmental factors that might threaten thegoing concern of Boston Children Hospital and other pediatric carecenters. First, the shortage of health care providers, especially thequalified physicians and pediatricians, is a global challenge thataffects all health care organizations. For example, it is estimatedthat the health care industry in the U.S. will experience a shortageof 46,000-90,000 physicians by the year 2015 (Japsen, 2015). Thiswill reduce the hospital’s capacity to deliver quality care.Secondly, modern health care organizations are competing on the basisof the latest technology, which means that organizations that willfail to adopt more efficient innovations will face the risk ofclosing down out of stiff competition. Moreover, a persistentincrease in the per capita cost of delivering health care services isa significant threat to pediatric health care centers (Japsen, 2015).This trend can be attributed to the high cost of modern technologyand the high rate of inflation that has increased the cost ofequipment and facilities used by hospitals. A combination of theseindustry challenges might affect the rate of growth and profitabilityof Boston Children’s Hospital in the future.

Corporateand business strategies

Missionand goals

Theits mission statement, Boston Children’s Hospital intends to offerthe highest level of quality care, become the leading source ofdiscovery as well as research, and enhance the overall well-being ofchildren and their families. The hospital has two major goals, whichinclude establishing partnerships with community-based organizationsin order to help Boston address the most pressing medical challengesand providing services that benefit children locally and result in asystematic change (Cammisa, 2014).


Theoverall corporate strategy adopted by Boston Children’s Hospitaldirects the organizations towards a future growth in terms of anincrease in the volume of clients and geographical coverage. Thehospital plans to growth through the construction of new facilitiesin new cities and expand the current facilities (Boston Children’sHospital, 2015). In addition, the hospital plans to grow through theacquisition of established health care facilities. For example, thehospital will acquire Children’s and Women’s Physicians ofWestchester LLP in 2015 (McCluskey, 2015). All these growthstrategies are within a single line of business, which is thedelivery of pediatric care.

Genericcompetitive strategies

AlthoughBoston Children’s Hospital has not managed to become the costleader in the region, it has made a significant progress in ensuringthat its services are affordable to all people. This has beenachieved through an effective collaboration with insurers operatingin the state of Massachusetts in order to keep prices low and theoverall cost of care below the medical inflation (Boston Children’sHospital, 2015). In addition, Boston Children’s Hospital is anon-profit making organization, which helped it to deliver care toits clients at an affordable price.


BostonChildren’s Hospital uses two functional strategies to attaincompetitive advantage in the health care sector. The first strategyis innovation, where all innovative strategies are based on the useof the modern technology. For an instant, the hospital has developeda platform that allows all members of staff to access informationabout the bed management and electronic records in real time from anycampus (McCluskey, 2015). Boston Children’s Hospital demonstratedits commitment to innovation in 2009 by establishing a well staffeddepartment referred to as “Technology and Innovation DevelopmentOffice” that helps the organization adopts the most relevanttechnology in the market, thus enhancing its competitive advantage(Boston Children’s Hospital, 2015).

Controlsfor compensation and reward system

BostonChildren’s Hospital has a compensation that is used to determinesalaries and benefits for employees in different categories. Forexample, the policy indicates al benefits (including medical cashout, health insurance, disability insurance, and dental insuranceamong other benefits) that employees in each category are entitledto, which means that employees will know when their right to faircompensation are violated (Boston Children’s Hospital, 2015).


BostonChildren’s Hospital makes the highest revenue in the state ofMassachusetts compared to its competitors. Although the hospital hasan established organizational structure, it adopted an inclusiveleadership style that allows the management to integrate thecontribution of all stakeholders when making decisions. The hospitalhas more than 10,000 employees who undergo regular training to ensurethat they are able to offer quality services and remain up-to-date.Boston Children’s Hospital has experienced minimal conflicts withits employees, except the ongoing increase in the workload that isassociated with the shortage of health care professionals, especiallypediatricians. The hospital has fought several legal battles thatresulted from kidnapping of children and cases of data breach. Themanagement has been investing heavily in the modern technology withthe objective of increasing efficiency, quality, and competitiveadvantage. However, the future growth of the hospital might beaffected by industry challenges that include an increase in the costof health, the demand for modern technology, and the global shortageof experienced health care professionals.

Themission of Boston Children’s Hospital is to offer quality care,invest in research, and enhance the well-being of children as well astheir families. The current corporate strategy will help the hospitalto grow by establishing new health care facilities, expanding thecurrent ones, and acquiring others. The ability of Boston Children’sHospital to deliver care at a low cost has increased its competitiveadvantage. In addition, innovation has helped the hospital insustaining the current competition in the health care sector. Anestablished compensation policy gives employees an assurance thatthey will be fairly paid for the services they deliver to clients.


Ball,M., Weaver, C. &amp Kiel, J. (2013). Healthcareinformation systems: Cases, strategies, and solutions.Berlin: Springer Science and Business Media.

BostonChildren’s Hospital (2015). About us: Our leadership. BostonChildren’s Hospital.Retrieved October 20, 2015, from

Cammisa,L. (2014). BostonChildren’s Hospital’s approach to community health: Using: Usingprograms to achieve systematic change.Boston: Community Asthma Initiative.

Japsen,B. (2015). U.S. doctor’s shortage could hit 90,000 by 2025. Forbes.Retrieved October 20, 2015, from

KaplanUniversity (2015). Whatis the average income of a pediatric nurse?Lauderdale: Kaplan University.

McCluskey,P. (2015, May 21). Children’shospital set to expand.Boston: Boston Globe Partners.

McGee,M. (2014, December 22). BostonChildren’s fined for breach.Princeton, NJ: Health Care Information Security.

Schell,J., Lavieri, S., Toriello, A., Martyn, K. &amp Freed, G. (2014).Strategicmodeling of the pediatric nurse practitioner workforce.Ann Arbor, MI: University of Michigan.

Tate,K. (2014, February 19). Exposed: Boston Hospital takes custody ofmultiple children against parent’s will. Truthin Media.Retrieved October 20, 2015, from

Weisman,R. (2014, May 14). Mass hospital profits rose last year, report says.BostonGlobal Media Partners, LLC.Retrieved October 20, 2015, from


Source:Boston Children’s Hospital (2015)

CapstoneChapter 3

HospitalCorporation of America

Currentcompany operations


HCAhas been recording a continuous growth in its profitability since thefinancial year 2011 as shown in Figure 1. For example, the companyrecorded a profit of $ 36.9 billion in the financial year 2014, whichwas an 11.6 % growth in profitability compared to the previousfinancial period (Patrick, 2014). This growth has been attributed toseveral factors, which include an improvement in the economicconditions, a rapid growth in the outpatient clients, and thedecision to go public. In addition, the rate of growth in revenue isconsistent with the rate (5.65 %) of growth in EPS, which is anindication of sound financial status.

Figure1: Revenue growth trends for 2013 and 2014

Source:Patrick (2014).

Comparedto its competitors, HCA has been making more profits. For example,the operating revenue of $ 36.9 billion made in 2014 was almost twiceof the revenue made by the second health care organization known asthe Community Health System, which made $ 18.6 billion (Sander,2015). Although HCA financial performance is sound, cases of fraudhave been reducing its revenues through mandatory settlements (Mahar,2013). This is also likely to affect the company’s ability makerevenues in the future given that customers are will trust with thecompany and shift to its competitors.

Organizationalhierarchy and leadership structure

HCAuses a hierarchical type of leadership structure to govern itsoperations. The overall leader of the corporation bears the title,the chairman and the chief executive officer. The CEO is assisted bya group of leaders who play different roles. These leaders includethe senior vice president in charge of finances senior vicepresident in charge of Nashville campus, senior vice president incharge of clinical excellence, president in charge of physicianservice group, senior vice president in charge of corporate affairs,senior vice president in charge of chief nursing executive, presidentin charge of the American Group, president in charge of the NationalGroup (HCA, 2015). The vice presidents are assisted by heads ofdepartments, who are in turn assisted by heads of sections. Inoverall, HCA adopted a top-down leadership approach where orders andinstructions flow top-down. This style has been criticized forlimiting the autonomy of health care providers and forcing them toadopt the overall goal of making money, which might limits HCA’scapacity to deliver quality care (Denning, 2015).

Humanresource aspects

HCAis among the largest health care system in the U.S., employing about204,000 people. The company has been recognized as the organizationwith the best compensation scheme in the health care industry (HCA,2015). Apart from paying market competitive salaries to its staff,HCA has numerous benefits, including medical benefits, educationalbenefits, retirement benefits, long-term disability benefits, andCorePlus benefits that cover legal as well as short-term disabilityexpenses (HCA, 2015). Although exact figures of the salaries are notmade public, HCA’s compensation scheme is believed to be among thebest in the health care sector.

Laborrelations issues

HCAhas not experienced serious conflicts with its unionized members ofstaff, but there are two issues that have raised employee concerns.First, some nurses have raised complaints after being overworked,which are an indication of the poor working conditions at HCA healthcare facilities (Nyceve, 2006). Secondly, involuntary call-offs haveaffected registered nurses, whose unions have been engaging inconfrontations with the management of HCA. Although these laborrelation issues may appear to be minimal compared to HCA competitors,they might affect the company’s capacity to retain its experiencedhealth care professionals, which will in turn reduce the company’scapacity to deliver quality care as it promises in its missionstatement.

Legaland ethical issues

AlthoughHCA holds that integrity and honesty are some of its core values, thecorporation has been associated with negative ethical as well aslegal issues. For example, failure to pay taxes on time is anunethical issue that has damaged the reputation of HCA. The RevenueAgency of Florida filed a case against HAC for the failing to payclose to % 10 million taxes (Dixon, 2014). This is also likely toaffect the reputation of the company and clients’ trust in thecompany, which will in turn reduce its profitability in the future.In addition, HCA was required to make a settlement of 1.7 million inthe year 2014 after the discovery of a Medicare fraud (Sherman,2014). These legal and ethical issues have cost the organizationfinancially and in terms of its reputation. These factors can beattributed to poor and ineffective leadership.

Moreover,HCA has experienced some legal battles with its trauma centers wheresome clients claimed to have been served by incompetent providers,while other centers were alleged to have been established withoutfollowing the legal procedures (Hassee, 2013). HCA was also sued in2015 by a woman who received trauma treatment from an unqualifiedprovider, which means that the company has been employing incompetentstaff (Walser, 2015). This practice is likely to affect the overallquality of services in the long-run and prevent HCA from pursuing itsmission of delivering quality care to its clients.

Technologyand information system

Manyhealth care organizations use technology as a reliable method forenhancing efficiency as well as quality in the process of deliveringservices to their clients. HCA has been using an electronic healthrecord system to enhance quality and contain the cost of offeringservices to its clients across both the outpatient and inpatientsettings (Dixon, 2014). Apart from the use of efficient informationsystems and EMR, HCA has been investing in technology-basedequipments with the objective of enhancing patient outcome. Forexample, the use of robots to perform surgeries has allowed thecompany to perform less invasive surgeries.

Industryenvironment factors

Allorganizations operating in the health care sector are affected by twomajor factors. First, an increase in the cost of delivering servicesis an industry-wide challenge that is likely to continue affectingHCA. This challenge can be attributed to an increase in the rate ofinflation in the global economy and continued demand for the adoptionof the latest technology (Dixon, 2014). Secondly, population aging iscontinually adding pressure on hospitals, requiring them to investmore in long-term care services.

Corporateand business strategies

Companymissions and goals

HCA’smission is to care and enhance human life, which is accomplished bystriving to offer cost-effective and quality care. Some of the HCA’sgoals include an increase in inclusion as well as diversity, increaserecycling of some materials to cut on cost, increase a focus onyouth, children, and education organizations (HCA, 2015).

Definitionof company’s strategy

HCA’slong-term strategy is to grow through diversification. The companyhas been growing by diversifying its geographical coverage byinvesting in established economies and expanding its range ofservices. However, HCA has been adopting new services that arerelated to each other and within the health care sector. According toHCA (2015) 159 out of 165 facilities owned by HCA offers a broadrange of health services that include general surgery, neurosurgery,cardiology, orthopedics, and internal medicine. All these diversifiedservices are related to each other.

Genericcompetitive strategies

HCAis considered as one of the most competitive health careorganizations in the United States. HCA’s management adopted thecost leadership strategy in 2013, with the objective of giving thecompany a competitive advantage. HCA achieves its cost leadershipstrategy by focusing on the economy of scale and innovativemanagement (HCA, 2015). The two strategies allow HCA to deliverservices at the lowest cost compared to its competitors.


HCAintends to invest in physical engagement, which includes the increasein capital investment and development of new access points, such asoncology centers, imaging, and surgery facilities. After thediscovery of the fact that the number of outpatient clients has beenincreasing exponentially, HCA has developed an investment strategythat seeks to develop more outpatient facilities and acquire morehospitals in different geographical regions (Lai &amp Wang, 2014).All these investment plans seek to help HCA exploit emergingopportunities and overcome the stiff competition in the health caresector.

Functionalstrategies for a competitive advantage

HCAapplies two functional strategies to enhance its competitiveadvantage in the market. The first strategy is efficiency, which isachieved with the help of the modern technology and confirmed withthe effective use of resources. For an instant, the in initiativetaken by the company to reprocess OEM single use devices have helpedthe company to the cost of delivering services as compared to itscompetitors (Healthier Hospitals, 2012). Secondly, the use of thelatest technology (such as the surgery robotics) is a clearindication of the fact that HCA’s management considers innovationas a key pillar in enhancing its competitive advantage.


HCAis among the most profitable health care organizations in the U.S.,and its financial performance is attributed to its capacity todeliver services at a low cost coupled with an increase in demand foroutpatient services. The company uses a hierarchical leadershipstructure that limits its efficiency in terms of deliveringinstructions. Poor working conditions and involuntary cut-offs arethe major sources of conflict with employees. Failure by themanagement to pay taxes in time and engagement in fraudulentactivities has affected the reputation of HCA in a negative way. HCAadopted the EHR and surgery robots to enhance efficiency as well asquality. The increase in the population of older adults, who are moresusceptible to illnesses and an increase in the cost of deliveringservices are some of the industry factors that will affect HCA nowand in the future.

Fromits mission statement, it is clear that HCA intends to serve itsclients better by offering them with quality, but affordableservices. HCA’s long-term strategy is to grow by diversifying itsservice as well as geographical coverage. In addition, HCA enhancesits competitive advantage through its cost leadership strategy.Moreover, the management of HCA seeks to help the organization takeadvantage of emerging opportunities by developing new access points.Additionally, HCA has managed to enhance its competitive advantagethrough innovation and efficiency.


Denning,S. (2015). HCA: The unsustainable private equity bubble in care. Forbes.Retrieved October 19, 2015, from

Dixon,M. (2014, December 13). Florida revenue agency battling hospitalgiant HCA $ 10 million tax bill. Naples.Retrieved October 19, 2015, from

Hassee,T. (2013, September 30). HCA hospitals seek rehearing in traumabattle. HTHealth.Retrieved October 19, 2015, from

HCA(2015). Investor relations: Executive officers. HCA.Retrieved October 19, 2015, from

HealthierHospitals (2012, March 30). Efficient use of resources: Reprocessingof single use devices at HCA. HealthierHospitals.Retrieved October 19, 2015, from

Lai,R. &amp Wang, R. (2014). HospitalCorporation of America: Recommendations.Eugene, OR: University of Oregon.

Mahar,M. (2013, June 14). Medicare fraud and for-profit hospitals: A storythat never ends. HealthInsurance Resource Center.Retrieved September 24, 2015, from

Nyceve,B. (2006). Dangerous conditions and silenced nurse at Frist owned HCAhospital. KosMedia LLC.Retrieved October 19, 2015, from

Patrick,M. (2014, December 30). HCA Holdings outpatient services see revenuegrowth. YahooFinance.Retrieved October 19, 2015, from

Sander,M. (2015, April 18). HCAstill no. 1 in revenue bides time on big deals.Washington, DC: Crain Communication Incorporation.

Sherman,A. (2014). Rick Scott oversaw the largest Medicare fraud in thenation’s history, Florida Democratic Party says. PolitifactFlorida.Retrieved October 19, 2015, from

Walser,A. (2015, September 4). HCA trauma patient sues hospitals formalpractice, claiming no specialist was able to treat her. ABCAction.Retrieved September 24, 2015, from

YahooFinance (2015). HCA Holdings, Inc. YahooFinance.Retrieved October 19, 2015, from

Appendix 1: HCA’s income statement

Period Ending

Dec 31, 2014

Dec 31, 2013

Dec 31, 2012

Total Revenue




Cost of Revenue




Gross Profit




Operating Expenses

Research Development

– &nbsp

– &nbsp

– &nbsp

Selling General and Administrative




Non Recurring

– &nbsp

– &nbsp

– &nbsp





Total Operating Expenses

– &nbsp

– &nbsp

– &nbsp

Operating Income or Loss




Income from Continuing Operations

Total Other Income/Expenses Net




Earnings Before Interest And Taxes




Interest Expense




Income Before Tax




Income Tax Expense




Minority Interest




Net Income From Continuing Ops




Non-recurring Events

Discontinued Operations

– &nbsp

– &nbsp

– &nbsp

Extraordinary Items

– &nbsp

– &nbsp

– &nbsp

Effect Of Accounting Changes

– &nbsp

– &nbsp

– &nbsp

Other Items

– &nbsp

– &nbsp

– &nbsp

Net Income




Preferred Stock And Other Adjustments

– &nbsp

– &nbsp

– &nbsp

Net Income Applicable To Common Shares




Source:Yahoo Finance (2015)