Capital: What to spend it on and where to find it

Hospital executives who are struggling to determine which capital technology purchases to make should implement two techniques, according to the new whitepaper, "Spending Scarce Resources on the Wrong Capital Budget Requests: Not in My Hospital!," from the nonprofit ECRI Institute in Plymouth Meeting, Pa.

First, executives need to obtain a full picture of all budget requests hospital-wide, including consistent (i.e., "normalized") device descriptions and accurate pricing data. This will allow them to identify bundling and group-buy opportunities across departments or facilities.

Second, executives have to prioritize budget requests. The core issue is whether a requested item will improve patient safety, clinical care and operations. "This means asking the difficult questions about each potential purchase," says Thomas Skorup, ECRI's vice president of applied solutions. "Determining if the item to be purchased is truly more clinically effective than existing technology, and whether it will have a return on investment, can be difficult--and controversial."

ECRI recommends the following "best practices" model for capital budgeting:

  • Engage key stakeholders using an evidence-based management approach.
  • Adopt a process with enforced deadlines.
  • Communicate criteria used to prioritize and justify capital expenditures.
  • Assess each department's needs based on current trends, market pressures and demographics.

Department budget requests should include device names and descriptions, model selections, rationale for the purchase, life expectancy, financial and clinical impact, and reimbursement rates in order to facilitate this process.

While ECRI tackles the budgeting process, Deborah Gordon, JD, a partner at Seyfarth Shaw LLP in Chicago reviews current capital financing options available to healthcare providers in the April issue of hfm Magazine from the Healthcare Financial Management Association in Westchester, Ill.

"The industry is in a constant state of reform, giving lenders and investors cause to wait for the outcome of healthcare reform legislation before entering the market or deploying capital," says Gordon. "However, despite this reluctance, healthcare providers still have many options available."

These options run the gamut from traditional strategies, such as bonds and commercial lending, to nontraditional strategies, such as joint ventures, equity and public grants, she advises.

To learn more about capital budgeting:
- read the ECRI press release
- download the ECRI white paper

To learn more about financing options:
- read the HFMA's hfm Magazine article

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