Service Line Break Even

Maryland Home and Community-Based Services (MHCBS) is considering a major expansion that will enable it
to attract a different clientele to its organization. Currently, they serve only 34% of the frail elderly seniors and
persons with disabilities in the local area. The new chief CEO would like the organization to expand its revenue
stream by investing in a senior multipurpose center serving healthy seniors by offering them arts and crafts and
health and wellness programs. The center will also contain an Internet café offering nutritious breakfast and
lunch options.
The CEO has commissioned a needs assessment, and the study’s results reveal that there are approximately
120 seniors in the local community who are interested in this center and the CEO expects growth of the aging
population to be at least 10% each year. Cost growth across all areas of expense is expected to rise by 5%
each year. The CEO has presented her proposal and financial information to the Board of Directors, and they
have advised her that they are in full support of her strategy only if the program is a benefit to the community
and if the organization can recoup its investment in five years. The CEO has asked you if this can be achieved.
Based on the information presented in the scenario, calculate the two analyses and explain, in a brief
memorandum to the CEO, their implications.