| Course | HLTH 8750 Trends and Issues in Executive Level Management for Healthcare Administrators |
|---|---|
| Week | Week 9 |
| Paper type | Strategic commitment memo |
| Length | About 900 words, 5 pages |
| Format | Memo, APA 7 citations |
| School | Walden University |
| Program | doctoral health administration program |
| Updated | October 2026 |
Free sample paper for HLTH 8750 Week 9
Memorandum
To: Chief Executive Officer, Northgate Health
From: Vice President, Strategy
Date: Week 9
Re: The stage at which the orthopedic joint venture becomes costly to unwind, and who understood it when
Purpose and Recommendation
This memo locates the point at which the orthopedic joint venture becomes costly to unwind. Recommendation: treat signing the operating agreement with the physician partners as the commitment decision, bring it to the full board with that framing, and do not sign it until the board has seen the exit terms and the scenario analysis. The stages before it are options the system can afford to buy; the stages after it are commitments the system will find expensive to reverse. Northgate is a composite system, and figures are illustrative.
The Staged Sequence
The joint venture proceeds in five stages.
Table 1
Stages of the Orthopedic Joint Venture
| Stage | Approximate cost | What it forecloses | Exit that remains |
|---|---|---|---|
| 1. Nonbinding letter of intent | Legal and advisory fees | Little; partners may talk to others | Walk away at little cost |
| 2. Site control through an option on land | Option fee, a small share of land value | The site for other uses during the option | Let the option lapse; lose the fee |
| 3. Signed operating agreement with physician partners | Legal costs; capital contributions committed | Independent action in orthopedic ambulatory surgery in the market; terms of exit fixed by the agreement | Only under the agreement's exit and buyout terms, typically costly |
| 4. Capital build | Construction and equipment, most of the venture's cost | The capital, and alternative uses of the site | Sell the share or the building, usually at a loss |
| 5. Transfer of staff and cases | Staff moved; hospital cases moved | Hospital capacity and staff in that service line | Rebuild hospital capacity and recruit staff back |
Why the Early Stages Are Worth Buying
Real options reasoning explains why the first two stages are worth their cost even if the venture never proceeds. McGrath argued that modest early stakes in uncertain ventures purchase a right to invest more later without any duty to do so, and that the value of such options lies in the information they produce and the losses they cap (McGrath, 1999). The letter of intent and the land option do exactly that. They let Northgate learn the physicians' terms and secure a site while preserving its ability to stop if the scenario signals point toward stalled migration. Dixit and Pindyck showed that when an investment is partly irreversible and its value uncertain, there is value in waiting for information before committing (Dixit & Pindyck, 1994). The staged sequence lets Northgate wait for information at low cost, rather than waiting by doing nothing.
Real options reasoning is not an argument for indefinite delay. Options expire: the land option has a term, and the physicians will not negotiate forever. If they sign elsewhere, the option to partner with them is gone.
The Point of Irreversibility
The operating agreement is the point at which exit becomes expensive. Before it, Northgate can walk away by paying fees. After it, Northgate is bound by terms that typically include capital calls, restrictions on competing ventures in the same service line and exit provisions that require buying out partners or selling Northgate's share on defined terms. The agreement also binds the physicians, which is its purpose: it aligns their incentives with the venture, and physician ownership is associated with higher volume at owned centers (Hollingsworth et al., 2010), which is exactly the effect Northgate wants to capture. But that alignment works in both directions. Once signed, Northgate cannot easily support a competing center or reverse the venture without the partners' consent.
The capital build, which costs the most, is often mistaken for the point of no return. But by the time construction begins, the operating agreement has already fixed who pays for it and on what terms. The build is the consequence of the commitment, not the commitment itself.
Who Understood This, and When
The finance committee and the physician partners understood early that the operating agreement was the real commitment. The finance committee reviewed draft exit terms in its last meeting and noted that the buyout formula would make unwinding expensive in the first five years. The physicians' counsel has negotiated those terms closely, which suggests the partners know exactly what they are binding themselves to.
The full board has not yet seen the agreement framed that way. Its last briefing described the venture as a phased project with a construction decision to come, which invites directors to treat the build as the decision point. If the board approves the operating agreement as an administrative step, it will have made the commitment without knowing it. That is the gap this memo asks you to close.
Terms for Counsel
Counsel should review and report to the board on the buyout formula and its timing; the noncompete and exclusivity provisions; the conditions under which Northgate could exit without partner consent, such as regulatory change or sustained losses; the capital call obligations; and the treatment of hospital staff transferred to the venture. These terms determine the cost of the stalled-migration future described in the scenario analysis, and the board should see them before it votes.
Next Step
I ask you to place the operating agreement on the next board agenda as a commitment decision, with the exit terms, the scenario analysis and this memo attached, and to delay signature until the board has voted. The letter of intent and land option can proceed in the meantime, since they are the options that make the board's decision better informed.
References
Dixit, A. K., & Pindyck, R. S. (1994). Investment under uncertainty. Princeton University Press.
Hollingsworth, J. M., Ye, Z., Strope, S. A., Krein, S. L., Hollenbeck, A. T., & Hollenbeck, B. K. (2010). Physician-ownership of ambulatory surgery centers linked to higher volume of surgeries. Health Affairs, 29(4), 683-689. https://doi.org/10.1377/hlthaff.2008.0567
McGrath, R. G. (1999). Falling forward: Real options reasoning and entrepreneurial failure. Academy of Management Review, 24(1), 13-30. https://doi.org/10.2307/259034
What the HLTH 8750 Week 9 instructions ask for
Commitment memos usually ask where a staged decision becomes costly to reverse. State your recommendation at the top. Lay out the stages of the commitment in order, with what each costs, what it forecloses and what exit remains. Use real options reasoning to explain why early stages are worth paying for, without turning it into an argument for indefinite delay. Then name the stage at which exit becomes expensive, and justify it by what that stage binds, not by its cost alone; the most expensive stage is often not the binding one. Record who in the organization understood where the commitment lay, and when, since a board that approves the binding step as a formality has committed without knowing. Mark legal terms for counsel and close with a specific request.
How this HLTH 8750 Week 9 example is built
The memo opens with the recommendation to treat the operating agreement as the commitment decision. Table 1 lists five stages with cost, what each forecloses and the remaining exit. A section explains why the letter of intent and land option are worth buying, citing McGrath and Dixit and Pindyck, and notes that options expire. A section names the operating agreement as the point of irreversibility, cites Hollingsworth and colleagues on what ownership aligns and explains why the capital build is a consequence rather than the decision. A section records that the finance committee and physicians understood this before the board. The memo lists terms for counsel and asks for the agreement to go to the board.
Reading the HLTH 8750 Week 9 rubric
In a commitment memo the decisive question is whether the point of irreversibility is located precisely. A memo that treats the whole venture as one decision, or declares every stage reversible with enough effort, has skipped the week's question, and its grade reflects the omission. Heaviest credit goes to the stage where exit becomes expensive, named and justified by what it binds. Real options reasoning earns its share by explaining why paying for the early stages makes sense, and loses value when it becomes a slogan for delay. The knowledge section carries a distinct share because it tests whether the organization knew where the commitment lay before acting. Leaving exit terms to counsel and making a specific request complete the memo.
HLTH 8750 Week 9 help from the desk
Commitment memos often treat a venture as a single yes or no, or assume that the largest expenditure is the point of no return. Break the venture into its steps instead, and for each ask what the organization could still walk away from afterward and at what cost. The step after which walking away requires someone else's consent, or a large payment, is usually the real commitment. Then ask who knew that, and whether the people who will approve that step see it the same way. A memo that names the binding step, and the gap in understanding around it, gives the chief executive something specific to act on. We can write a commitment memo that locates the point of irreversibility in your venture and who understood it.
Get a HLTH 8750 Week 9 example written to your instructions
Give the desk the memo prompt, the rubric and the commitment under discussion; within 24-48 hours a staged commitment memo is delivered with its table of stages and the hinge already marked, the first at no cost. The venture and its physician partners are composite, drawn up for this example alone, and no organization's actual deal documents are paraphrased.
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HLTH 8750 Week 9 questions, answered
Where can I find a free HLTH 8750 Week 9 sample paper?
The commitment memo and its stage table are free to read on this page.
Where does the HLTH 8750 Week 9 memo locate irreversibility?
At the signed operating agreement with physician partners, which fixes capital calls, exclusivity and exit terms.
Why is the capital build not the decision point?
By the time construction begins, the operating agreement has already fixed who pays and on what terms.
Why buy the early stages?
A letter of intent and land option buy information and the right to proceed at low cost, which real options reasoning values under uncertainty.
Who understood the commitment first?
The finance committee and the physician partners, before the full board.