Bring Healthcare Capital Spending Into Line to Meet Budget Challenges

November 17, 2010

By Keith O’Leary

Today, everyone’s got an eye on healthcare costs—pricey new therapies, medical malpractice lawsuits and concerns over caring for aging baby boomers are constantly in the news. In fact, the New York Times has just offered up a “Budget Puzzle” that lets readers make deep cuts in federal spending. In just a few minutes, you’ll see just how quickly you can balance the U.S. budget if you get healthcare costs in line.

Compare the constantly escalating costs of healthcare delivery with the healthcare facilities picture. One-third of hospital CFOs reported to the Healthcare Financial Management Association (HFMA) that their buildings were in worse physical condition now that they were 10 years ago, and nearly half said that their infrastructures were deteriorating faster than they could make capital improvements.

The problem, in part, has been that healthcare systems have been consolidating while taking in more patients—a recipe for wear and tear. At the same time, budgets have been underfunded because healthcare delivery has become enormously competitive and often bottom-line focused.

Now, while many healthcare providers are finally able to make the capital planning decisions required to increase the physical size of their facilities and to accommodate technology upgrades, the capital spending growth rate still lags the total operating expense growth rate for most healthcare providers. In other words, providers are spending more money, but they’re not increasing their budgets to grow and maintain their facilities in a proportionate manner.  But some health systems, like Wellmont Health, which spends $30 to $40 million each year on 1.3 million square feet of facilities, have their capital spending under control and are able to fearlessly take on multi-year projects.

What’s your take on trends in healthcare capital spending—have you got a solution in place to understand and control costs?

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