What Lies Ahead for Capital Expense Budgets?

Karen Minich-Pourshadi, for HealthLeaders Media , March 7, 2011

Robin LaBonte, CFO at the 79-bed York Hospital, in York, ME, is facing the same sort of reality. “Expanding your footprint costs more money, and right now it’s about being tight and using your space better--making what you have now look better and working with your existing space,” says LaBonte,.

When healthcare reform legislation was passed last March, a flurry of proposed and pending changes arrived with it. The Patient Protection and Affordable Care Act, with its “health insurance for all” axiom called for larger numbers of insured patients—thus more Medicaid admissions—which at first blush sounded like a positive and potentially profitable outcome of the law. Alas, along with the newly insured came an edict that select reimbursement rates would be cut, forcing hospitals to once again concentrate on increasing efficiency and reducing expenses.

Regardless of the need for efficiency and expense reduction, CFOs are putting some necessary projects back in their budgets—like technology and large equipment—but adding a building or a wing is still lower on the priority list. In a report released in February by L.E.K. Consulting, a moderate percentage of respondents planned to increase their purchasing in terms of facilities (38%), with the purchase of large medical devices running a close second at 37%, and small medical device purchases at 21%.

However, while healthcare financial leaders may not be pursuing these purchases in large numbers yet, the L.E.K. Consulting report also found that nearly 60% of hospital executives expected their budgets to increase this year and over the next five years, and more than 70% of hospital executives foresee expanded budgets.

“Budgets are tight, but we all know we still need to advance clinical technology and balance that with our EMR technology needs,” says LaBonte.

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1 comments on "What Lies Ahead for Capital Expense Budgets?"

Linda Ollis, FACHE (3/8/2011 at 10:57 AM)
Hospitals and healthcare providers are certainly not exempt from the effects of an economic slowdown and protracted recovery from the recession. In fact, we need to be aware of another trend already developing in the consumer/demographic segment [INVALID] that of the widening gap between the have's and the have-nots. Decreased capital spending by smaller hospitals and safety-net hospitals who have assumed an increasing share of the underinsured and uninsured will place them at even greater risk of failure. And this risk, at a time when baby boomers are poised to make even greater demands on the healthcare system is one we should take seriously. Congress should stop blocking the progress on healthcare reform as it's clear how dire the situation will become due to inaction.




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