hospital construction, ceiling access

How to Be Strategic in Hospital Capital Budgeting

Posted by HEPACART on Sep 19, 2016 10:00:00 AM
Healthcare spending is top of mind across a broad spectrum of stakeholders. Patients want to know what they’re paying for, hospitals want to know how they can stay afloat and maintain patient satisfaction, and lawmakers want to know how they can keep costs down and keep insurance companies happy. When all of these opinions and concerns come into play, hospitals are left with a lot of difficulty in creating satisfactory budgets that meet everyone’s needs.

Still, developing budgets and in particular capital expenditure plans, is a critical part of running a hospital effectively. Following are a few ways to ensure that you are considering the strategic and big picture impacts of your spending plan.

Why Strategic Capital Budgeting is Critical

Your capital expenditure planning is how you spread out the costs of important upgrades, renovations, healthcare construction projects and other big ticket items. When you can allocate these funds well, you will not only be able to improve your facility’s overall performance but will have the necessary budget left over for unplanned expenditures that will undoubtedly come up over the course of your year. On the other hand, if you are not strategic with your planning, you can run into shortages that can become real problems.

Common Hospital Capital Expenditure Mistakes

There are a few common mistakes that facility administrators make when deciding on capital expenditures. For example, it is easy to fall into the trap of not using consistent criteria to evaluate all expenditure requests. When you view different investments against different criteria, it impossible to get a meaningful comparison to decide what to prioritize. Another common mistake that can be related to decision criteria is a lack of meaningful documentation. You should document the processes with which you evaluate expenditures and track those expenses so that they can be reviewed and used in future planning.

The biggest mistake in hospital capital expenditure planning is not planning at all. When you make big investments only as the need for them arises, you can quickly end up using your entire budget before all needs are met. Strategic planning for the long term is essential.

Always Solve for ROI

Many capital expenditure requests that come in are necessary improvement, but not all are. What is most important in deciding how to spend your capital budget is determining how the investment will pay off regarding your facility’s goals. You must be able to demonstrate the ROI of each investment for it to be strategically sound. Calculating ROI might sound obvious, but there are plenty of expenditures that seem attractive but may not be essential. Some upgrades may be able to wait another year, or there may be lower cost options to achieve the same results. The value of other expenditures may not be obvious at first, but could have a significant ROI. For instance, portable ceiling containment equipment does represent some cost, but by investing in a piece of equipment that not only makes ceiling access work more efficient but also makes the facility and patients safer, you are getting a significant return.

No two healthcare facilities will be the same, but when you make capital expenditure choices with the ROI for your unique needs in mind, you will be confident that you are moving your facility in the right direction.

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