Managing Finance and Operations

Assignment Brief

Module Title: Managing Finance and Operations

ASSIGNMENT QUESTION

Scenario:

New LifeTraining Plc

You are the business service manger of the New Life Private Healthcare (Group) Plc which is has successfully won a large number of primary care delivery contracts across the UK. They seek to challenge the market position of Virgin Healthcare in all elements of the market. The group is profitable and has an average cost of capital of 7% . Group CEO, Professor Sobia Schburt is keen to expand the group operations into the private nursing residential care market and are currently focusing upon East Anglia, and have identified a two potential locations, the first is in Suffolk and is a property offered for sale and the second is in Norfolk where the property is offered under a 25 year lease. The Board have decided not to proceed with the lease option as the Suffolk project has potential financial support from the local health and social care partnerships; even though Norfolk option produced a net present value in excess of £4m over 5 years. The proposed building will provide for a 50 bed unit with occupancy rates vary from 80%-95%. Any decision must be normally be financially viable within 5 years. The NHS will pay for 10 beds and Social Services 20 beds. If Social services are selected as the preferred partner then the highest occupancy rate is more likely to be achieved.

To guide you the Board set out some broad parameter for you to consider within your report:

• Legal and regulatory factors to be considered,

• Operational issues and restrictions including expectations and performance measures to be used by the Board to measure success of the project.

Managing reputational risk

• A critical review of the investment opportunity. You should include recommendations for pricing per bed day and your recommendation included in your investment appraisal

• Critical evaluation of associated risks

• Proposed service performance measures.

• Clear recommendation to the Board whether to collaborate with public sector contributors or to run all 50 beds commercially

As the recently appointed Development Manager you have been asked to a prepare detailed report for the board covering:

1. An evaluation of operational and regulatory factors to be considered by the board 25% This requires research into the relevant environment and application of operations management theory.

2. Estimate the Income and Expenditure projections, incorporating any operational and regulatory costs you feel the proposal may be missing and estimate the potential price per bed day to achieve group margins. This requires relevant costing and price mark up

3. A critical evaluation of the financial worth of the current proposal AND an alternative evaluation including all costs and revenues you deem to be appropriate. 40% Contribution analysis, breakeven, payback and NPV should be applied to the case materials alongside your critical challenge to the proposal with associated re-modeling of financial plans. Critical evaluation is as important as the technical analysis.

4. A detailed and fully evaluated conclusion with clear recommendations for the board to consider 10%

For assessment purposes marks will be awarded for style, layout and structure 10% In developing your revised proposal you are encouraged to review all aspects such as pricing, operational costs, financing, cost of capital.

Sample Answer

Managing Finance and Operations: Investment Appraisal for New Life Training Plc

Introduction

New Life Training Plc, a growing private healthcare group, has achieved notable success in primary care contracts across the UK and now seeks to diversify into the private residential nursing sector. Two potential sites have been identified: one in Suffolk (a property for purchase) and one in Norfolk (available under a 25-year lease). Although the Norfolk option offers an estimated net present value (NPV) exceeding £4 million over five years, the board prefers the Suffolk project due to potential financial support from local health and social care partnerships. As Development Manager, this report evaluates the operational, financial, and regulatory implications of the Suffolk proposal, with the aim of recommending whether the group should pursue collaboration with public sector partners or operate fully commercially.

Operational and Regulatory Factors

Legal and Regulatory Framework

The healthcare and residential care sectors in the UK are heavily regulated under the Health and Social Care Act 2012, the Care Standards Act 2000, and the Care Quality Commission (CQC) regulations. The Suffolk facility must comply with CQC registration, staffing standards, infection control requirements, and health and safety legislation. In addition, collaboration with the NHS or local authorities brings public accountability requirements such as data transparency, safeguarding audits, and compliance with local Integrated Care Boards (ICBs).

If the organisation partners with social services, contracts will likely fall under Section 75 agreements of the NHS Act 2006, which formalise joint working between health and local government bodies. This route introduces complex reporting and monitoring duties but may provide operational stability and guaranteed bed occupancy.

Operational Considerations

Operationally, the proposed 50-bed facility must achieve an occupancy rate between 80% and 95% to remain financially viable. Staffing ratios, skill mix, and quality assurance frameworks will be crucial determinants of performance. Industry benchmarks suggest that direct labour accounts for roughly 60–65% of total operational costs in care homes. Efficient rota management, flexible staffing, and digital record systems can reduce cost pressures while maintaining quality.

Moreover, the Suffolk site’s physical acquisition may entail renovation, compliance upgrades, and capital investment before operation. Unlike the Norfolk lease option, ownership transfers asset risk but provides long-term equity value and stability. The property could also serve as collateral for future borrowing if expansion continues.

Continued...