go into detail, take a side and then talk about the counter side. In late January 2014, the (fictional) Lincoln Memorial Hospital of Yonkers is holding its annual strategic retreat for top executives. The retreat is held on a Friday and Saturday at the Taconic Hotel, a small hotel on the Hudson River. Item 1 on the agenda is a proposal by the hospital’s vice president of marketing, Jonah Strong, who has suggested that the hospital move to a 100% organic food policy for patients as a means of distinguishing itself from competitors.
Lincoln Memorial is a for-profit hospital owned by a large health-care provider, OmniHealth, which owns 11 other hospitals in 3 states. OmniHealth management is concerned that profits have been stagnant for the past 3 years at Lincoln Memorial and has informed Lincoln’s CEO, Dr. Sandra Maxwell that the company would like to see a return to 2% to 3% growth per year. Dr. Maxwell is prodding her executive staff to come up with new ideas to control costs and increase revenues.
Lincoln Memorial is an above-average sized hospital of 575 beds that offers a diverse range of medical services, from emergency care to maternity, pediatrics, cancer treatment, and so forth. Although it is not facing competition from other large hospitals in the area, a new trend toward small local clinics seems to be taking business away from Lincoln.
Lincoln is trying to control costs to stay attractive because the average cost of a stay at Lincoln is currently $1,925/day, which puts Lincoln slightly above several other competitors. As a result, Lincoln’s marketing approach is to vaunt its superior services. This is becoming increasingly hard to do as the main hospital building dates from 1968 and is beginning to need a renovation, which could cost over $10 million.
When the idea of the all-organic option was put on the table, Dr. Maxwell was approached by the vice president of human resources, Martin Torres, who informed her that the doctors and nurses would insist that food in the hospital’s cafeterias would also be organic, so that costs could escalate. The Food Services Director, Jennifer Wang, is extremely opposed to the idea. Ms. Wang tells Maxwell:

Do you have any idea how hard it is to source organic food for 1,000 people per day? Our patients and staff are used to eating food like tomatoes and spinach out of season, and that’s when organic prices go sky-high, sometimes even three times higher than conventional. Right now, the average food cost per patient is running at $55 a day and we’re billing them $125 just for food. If we have to go to 100% organic, my costs are going to go up at least 20% and we’ll have to pass that on, it could add $30–$50 per day to the cost of a hospital stay. Patients are already disturbed by the current cost per day, if this is what pushes us over the $2,000-a-day threshold, I’m afraid you’ll get sticker shock.

On the other side, Jonah Strong, the marketing vice president, has argued that it would be worth it:

Have you been to the Whole Foods recently? It’s packed every day, with very long lines, and those people are our customers. They’re already voting for organic with their pocketbooks. Organic food consumption is going up 20% per year and now we’re getting patients who get very upset if we can’t tell them if their food has GMOs. There’s no way we can keep bringing patients in, with all these new clinics, unless we can distinguish ourselves. If we don’t jump ahead of the other hospitals and distinguish ourselves first, one of the other hospitals will beat us to the punch.

Dr. Maxwell asks you to prepare the strongest arguments you can think of, on one side or the other, for presentation at the executive retreat. (Roughly 1 page)