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PubMed1989

Allocating capital systemwide. Who gets how much and why.

The maturing of multi-institutional healthcare systems has created a need for systemwide approaches to managing investment in capital expenditures. Historically, hospitals have allocated capital using traditional capital budgeting techniques, including discounted cash flow, net present value, and internal rate of return methodologies. Now systems can use a multifactored model to allocate capital among member hospitals. This approach uses historical and projected financial and statistical information to quantify the risks member hospitals face. At the system level, capital allocation decisions should start with the strategic and financial planning processes. Catholic systems face an additional caveat: The system's mission statement drives the planning processes. Conceptually, the capital allocation plan is an attempt to value each hospital as a going, or viable, concern. From this perspective, value is understood as a function of expected return, the certainty of the return, and the return offered by similar investments in other hospital markets. Despite the many determinants of business and financial risk, much of the variance in asset market value can be explained through five assessment criteria: market demographics, position within the market, historical and projected financial performance, historical utilization, and third-party reimbursement mix.

Capital Expenditures↗
PubMed2001

Increasing the efficiency and flexibility of capital funding for public and private hospitals.

This paper outlines the recent history of capital funding in the health sector in Australia. It focuses on the trends in capital expenditures and the roles of the public and private sectors. The demand for future capital funding will depend upon a number of factors, including the state of the current capital stock and uncertain future impacts of technology and changes in patient demands. Because of these uncertainties, capital funding for the future must be flexible to meet any changes in operations and demand. The paper highlights the possible use of joint ventures between various public and private organisations, based on the principles of competition and cooperation.

Australia↗
PubMed1987

Implementation of mobile decentralized pharmaceutical services in a community teaching hospital.

Administrative strategies that were used to justify mobile decentralized pharmaceutical services in a community teaching hospital are discussed. The report describes the problems prompting the pharmacy's review of its centralized unit dose drug distribution and i.v. admixture services, the evaluation of alternative solutions, the proposal submitted to hospital administrators, the implementation process, and an analysis of fiscal impact. A decentralized system using mobile medication carts was considered the best alternative because it integrated distributive and clinical functions and offered efficiencies in drug distribution; anticipated capital expenditure costs and personnel costs were also lower than the costs of alternatives. The conversion to the new system increased the pharmacy personnel budget by $174,455 annually, representing the addition of 13.8 full-time equivalent (FTE) pharmacists and elimination of 10.4 FTE technicians and interns. The increased personnel budget was offset in fiscal year (FY) 1982-83 by documented savings of $47,000 from pharmacists' clinical activities and by calculated savings of $132,400 in nursing time. Excluding capital expenditures of $19,800 for the medication carts, implementing mobile decentralized services saved the hospital $4945 in FY 1982-83. Mobile decentralized services is a cost-effective approach for providing integrated drug distribution and clinical pharmacy services.

Costs and Cost Analysis↗
PubMed1984

Health systems agencies and state health planning development agencies; certificate of need reviews--HRSA. Notice regarding adjustment of the expenditure minimum for annual operating costs.

This notice provides necessary information for each State which chooses to adjust the capital expenditure and annual operating cost expenditure minimums that are used to determine whether proposals are subject to review under a State's certificate of need program. The notice also provides guidance to assist a State Health Planning and Development Agency (State Agency) in determining the exact minimum dollar figure it will use and in seeking further information.

Capital Expenditures↗
PubMed1994

Influences on the use of capital by public hospitals.

This paper examines key influences on the volume of capital employed by public hospitals. Empirical models are constructed and analysed separately for total capital employed and for plant and equipment only, using data from 68 Victorian hospitals. Such data provide an empirical base to guide government decisions on funding capital expenditure in hospitals. The analysis finds that the proportion of hospital expenditure devoted to outpatients and teaching, and the proportion of funding derived from government all influence the level of capital utilised per inpatient. The model provided a reasonable fit for plant and equipment, but much improved data coverage and consistent valuation of land and buildings are required to adequately explain influences on total capital.

Ambulatory Care↗
PubMed1989

Act now to maximize Medicare payments for capital.

Anticipating a change in the way Medicare pays for capital costs, healthcare organizations should evaluate their capital expenditure plans. To maximize payments under the current system, they should create an equipment acquisition plan that brings the greatest capital costs during the equipment's early life. They then should determine a cost allocation method that assigns the greatest allowable capital costs to Medicare.

Capital Expenditures↗
PubMed1978

Economic impact analysis for certificate of need applications.

State certificate of need laws to assess the appropriateness of capital expenditures by health care providers are now mandatory for states which desire federal funds. The cost-effectiveness of proposed projects must be identified. The economic impact analysis outlined here provides for review of the capital and operating costs of and the resource demands made by a proposal. The approach presented provides for a sequential series of increasingly sophisticated analyses required as projects become more complex and use more highly technical resources.

Capital Expenditures↗
PubMed1979

Clear federal strategy is emerging for cost control.

The author states that the purpose of governmental cost containment initiatives is to gain control over hospital capital expenditures, utilization, payment and quality assurance. He suggests that the costs of hospital operation should be completely re-examined stating that the reform of the hospital payment system is emerging as the energizing factor which will stimulate proper allocation of capital resources and effective utilization and quality assurance. O'Hare outlines the potential of the federal strategy. Recent legislation (PL 93-641 and PL 95-142) has mandated that hospital financial and statistical data be made available to federal agencies. He concludes that a dominant federal role in cost containment strategy threatens to abolish individual differences between institutions and their ability to be responsive to local needs. The author urges hospital leadership to take a more active position in implementing a cost containment strategy.

Capital Expenditures↗
PubMed2001

The manager and equipment decisions: is that in the capital budget?

Although any decision to purchase a piece of capital equipment involves a number of the organization's functions, the department manager has some significant responsibilities in the selection and acquisition of capital equipment. Except for unavoidable replacement of essential equipment that fails unexpectedly, capital purchases must ordinarily be planned in advance through the annual budgeting process. The department manager is ordinarily the organization's primary source of information in major capital expenditure projects; therefore, it is essential that the manager follow a logical process for identifying and evaluating alternative equipment choices and perform a consistent economic analysis of the alternatives.

Budgets↗
PubMed1986

NPV vs. IRR: with capital budgeting, which do you choose?

The standard that defines quality health care rises as new technologies and procedures become available. To the health care financial manager, maintaining quality health care becomes a twofold problem--how to keep up with the latest developments while staying within budget guidelines. Two methods of analyzing capital expenditures are available to the financial manager, IRR and NPV. The latter is the safest and most reliable. NPV takes into account present market conditions and neither penalizes nor overly rewards either the buyer or seller of a particular project. This article is the first of a two-part series on capital budgeting in health care and takes the financial manager beyond the pure arithmetic of NPV and IRR to show the depth and meaning behind the arithmetic.

Accounts Payable and Receivable↗
PubMed1998

The determinants of health expenditure in the OECD countries: a pooled data analysis.

This paper uses international health expenditure and the latest OECD data to investigate the determinants of aggregate health expenditure. The study differs from most previous studies in two principal ways. First, it uses a somewhat larger sample for estimation, with pooled time-series, cross-section data for 22 OECD countries for a 20-year period. Most previous work has used a purely cross-section approach: in this case, the small sample size reduced the statistical reliability of results and limited the number of hypotheses that can be tested simultaneously. Second, and following from this, a more extensive range of hypotheses is tested, with particular emphasis on those relating to the contractual relations between payers, providers and patients. The findings show, for example, that the use of primary care "gatekeepers" seems to result in lower health expenditure and also that the way of remunerating physicians in the ambulatory care sector appears to influence health expenditure; capitation systems tend to lead to lower expenditure than fee-for-service systems.

Cross-Cultural Comparison↗
PubMed1999

A strategic approach to allocating capital in healthcare organizations.

Using a strategic capital-budgeting method based on principles of decision analysis can help healthcare organizations allocate capital effectively when meeting requests for capital expenditures. This eight-step method requires establishing evaluation criteria, classifying proposals by area of investment, ensuring that proposals are complete and easy to understand, determining costs of proposals, rating proposals with respect to individual criteria, setting priority weights for criteria, calculating weighted value scores for each proposal, and ranking proposals by benefit-cost ratios. The results provide a reliable basis for optimal capital allocation.

Budgets↗
PubMedDate not supplied

Privatizing health care: caveat emptor.

Many Western European countries are moving toward privatization of their health care systems. The United States' health care system, since it is almost entirely privatized, is therefore worthy of study. Doing so raises several questions. How is privatization being managed in the US? How could its management be improved? What management lessons must be kept in mind if it is to be used effectively? What potential pitfalls should European countries consider as they move toward greater privatization? With operating costs, European countries must avoid the mistakes that have led to dramatic increases in annual health care costs in the US, simultaneous with reductions in access and quality. Doing so requires designing systems that promote hospital behavior consistent with a country's health objectives. With capital costs, an approach must be designed that allows policy-makers to work closely with both managers and physicians in order to make strategically sound choices about access and quality. Such an approach will require physicians to incorporate their clinical judgments into community standards of care, and to adopt a regional (rather than an institutional or personal) perspective in the determination of any incremental capital expenditures. By making regulation proactive and strategic, rather than punitive, health policymakers in Western Europe can achieve the best privatization has to offer without feeling the sting of its unintended consequences. In so doing they can help to move their health systems toward achieving the multiple and illusive goals of access, quality and reasonable cost.

Capital Expenditures↗
PubMed1993

Integrating capital budgeting techniques.

A.J. Hogan, in "Capital Expenditure Planning: The Value of Information to Hospitals," published in 1987 in Hospital and Health Services Administration, illustrated the value of information to the expenditure process. He noted that knowing what your competitors are up to, as well as where your facility stands in the market, can enable all concerned to make better judgments. One of the likely outcomes of good judgments is the efficient use of all resources. Unfortunately, Hogan's model draws on a non-existent computerized regional planning agency with the authority to approve or deny proposals. Integrated strategic financial planning also illustrates the value of information. In this case, information is readily available. The sources are the administrators: finance, accounting, marketing, and planning experts, doctors, nurses, statisticians, and epidemiologists. Each can make a unique contribution to the process, and together they can effectively guide the organization's capital budgeting programs. We have illustrated that there does exist a planning model that can work with the plurality of viewpoints in today's hospitals to produce the "most informed" decisions with known sensitivity to the decision criteria used.

Budgets↗
PubMed2001

HIPAA: wake-up call for health care providers.

The Health Insurance Portability and Accountability Act (HIPAA) may have an overall negative financial impact on health care providers across the board because of the significant amount of capital expenditures that could be required to ensure compliance (including, potentially, a complete overhaul of many organizations' technological, process, and security systems). The impact of HIPAA on an individual health care system will be determined by the current state of that organization's information technology system, as well as its preparedness in the coming months. Although it is extremely difficult to estimate total systemwide costs of HIPAA compliance, estimates range from $5.8 billion to $43 billion.

Capital Expenditures↗
PubMed1983

Cost benefit analysis of radiological protection: a case study of remote after-loading in gynaecological radiotherapy.

The ICRP system of dose limitation requires radiation exposures to be kept "as low as reasonably achievable" (ALARA). The International Commission on Radiological Protection (ICRP) advocates a form of cost benefit analysis for this purpose, in which a comparison is made between the costs of protective measures and the benefits of reduced radiation exposure. In the UK, the National Radiological Protection Board (NRPB) has been developing a framework for the practical application of cost benefit techniques to aid the evaluation of investments in radiological protection. One such investment, being undertaken at a number of radiotherapy centres, concerns remote after-loading equipment to replace the use of radium in the treatment of gynaecological cancers. The introduction of such equipment can offer a complete solution to the radiological protection problems associated with manual radium insertions but involves large capital expenditures on equipment and shielded treatment rooms. This paper describes a cost benefit analysis of introducing remote after-loading equipment at the Christie Hospital and Holt Radium Institute in Manchester. In accordance with the NRPB framework, it is shown that the introduction of after-loading equipment, when housed in appropriately protected rooms, should result in a substantial net benefit and would therefore be justified on radiological protection grounds according to the ALARA principle.

Bed Occupancy↗
PubMed2002

The funding of private hospitals in Australia.

Private hospitals are an essential component of Australia's complex mix of public and private health funding and provision. Private hospitals account for 34.3 per cent of all hospital separations, and over half (56.2%) of all same-day separations. The revenue (funding) of the sector approached $4 billion by 1998/99, and as a result of its recent rapid growth capital expenditure in the sector was nearly $550 million in the same year. Private casemix of private hospitals is distinctive, and characterised by a high proportion of surgical procedures in general (48.1 per cent), and more than a majority of all services in such areas as rehabilitation, orthopaedics (shoulder, knee, spinal fusion, and hand surgery), alcohol disorders, same day colonoscopy and sleep disorders. This chapter synthesizes data from a multitude of sources to produce a comprehensive picture of Australia's private hospital sector and its funding. It examines the funding (revenue) sources of private hospitals, and considers how and why private hospitals approach the issue of funding from a different perspective than their public sector colleagues. To illustrate how Australian private hospitals approach revenue (funding) strategically, a series of indicative types of hospitals is explored.

Australia↗
PubMed1985

The impact of regulation and payment innovations on acquisition of new imaging technologies.

Increasing concerns about the cost of health care in this country and uncertainties about the marginal benefits of the growing number of diagnostic imaging techniques available to clinicians have resulted in a number of changes in regulatory and payment policies that could have a major impact on the rate at which technologic innovations are adopted in the future. Three of these policies--FDA premarket approval, Medicare's prospective payment system, and state-run capital expenditure review programs--have been examined in this article. Experience with the FDA premarket approval process has been limited. The diffusion of MR imagers, the first imaging devices to have required premarket approval, does not appear to have been constrained by the premarket approval process. In contrast, the existence of certificate-of-need regulations and the institution of prospective payment are likely to restrain the rate at which hospitals acquire new technologies in the future. This impact is likely to be most marked in the case of technologies that increase the cost of patient care. The challenge to manufacturers will be to develop new techniques that improve patient care at an affordable price or that maintain the current quality of care at less cost. Researchers and clinicians, in turn, will need to identify those innovations that are likely to be most beneficial and to develop the data necessary to help utilize limited health care dollars in a fiscally and socially responsible way.

Aged↗