Though in years past larger hospitals or health systems (those with more than 500 beds) were somewhat insulated from economic adversity, times have changed and capital budgets are reflecting it. Nearly 52% of large healthcare facilities and 46% of small facilities (those with 199 or fewer beds) have cited decreases to their capital budgets in the past year. Meanwhile, only 27% of midsize hospitals or health systems (those with 200–499 beds) experienced decreases in the past year, and 48% reported their capital budgets have remained the same over the past year.
“I think the smaller facilities really tend to always worry about the future, so I wonder if given everything that’s happened with the economy they scaled back overall,” says LaBonte.
Declining or stagnant capital budgets aren’t just a 2011 issue, either. They’ve been an ongoing situation for all healthcare facilities over the past three years. More than half (52%) of large healthcare providers report their budgets have been declining over that period, as did 46% of small providers. Additionally, 28% of their midsize peers reported capital budget declines and 30% reported their capital budgets stayed the same during that time.
By definition, a capital expenditure is an outlay of cash to acquire or upgrade a business asset—that includes purchasing or constructing a new building or wing or upgrading an existing one—and it also encompasses clinical or technological equipment purchases. Generally, the motivation for these actions is to promote growth; however, growth may be on the back burner as healthcare leaders strive to fulfill government mandates.
That is why, LaBonte says, it is not surprising that nearly 39% of respondents are using most of their capital budgets to add electronic medical record equipment. Providers that fail to adopt certified EMR systems or can’t demonstrate “meaningful use” by 2015 will find their Medicare reimbursements decline by 1%, then by 2% in 2016, 3% in 2017, 4% in 2018, and so on up to 95% depending on future adjustments. Through an incentive that is part of the American Recovery and Reinvestment Act, providers can receive up to $44,000 in Medicare incentive payments beginning in 2011 for implementing
“When you look at the dollars that could be left on the table, it’s a compelling reason to get this done,” says LaBonte. The stimulus money that the hospitals receive, she adds, can also be used in the future for other capital projects. “There aren’t many opportunities like these to improve your cash flow and still fund future projects,” she says.