healthcare capital budgeting

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In the “Money Well Spent” by Keith O’Leary (2011) he discussed the best practices for optimizing facility capital investments. He acknowledges that there is a growing demand for new infrastructure, larger demand for patient safety, and an increasing number of patients that creates a strain to holding a facility afloat. He stresses that without a strategic plan in place to make sure that capital spending is proportionate with capital plans and budgets, facilities can run the risk of misallocating capital in least favorable ways. That is why this resource is useful since we are handling precious hospital money that isn’t ours and the decisions on how to allocate funds can affect the long-standing operations of the facility.

O’Leary goes on to state that there are three key areas of vulnerability which include accountability, communication and process efficiency. Data is typically spread across departments and not centralized. Rapid reconciliation of spending is thus difficult due to the intensive data collection process across the departments. This also leads to poor visibility into the data and lags down the decision-making process and creates hardship to control spending. Therefore, he recommends taking these disparate data sources and placing them into a central repository. Once available, it creates a real-time approach and thus eliminates lag time between reporting and reconciliation of funds. As for communication, the capital budget process is usually done annually and as a static financial event. For example, when requests for spending are made, it goes through the proper channels like department managers who first must obtain prior approval before action can take place. The decisions are all made based upon the annual financial event. On the other hand, a capital spend management system can create a more dynamic approach and accommodates any unforeseen needs that may pop up throughout the year. Stakeholders can also readily engage in the requisition process because information is already available to see and use. Multiple departments are also provided the real-time information to help the facility merge its capital budgeting operations. And last efficiency is increased by standardization. Without standardization the capital budgeting process can be a manually intensive process. There is a lack of consistency and many hours must be aggregated to a master spreadsheet to them be used as budget tracking. This can be found when there are individual departments or regional facilities doing their own processes for budgeting. The time gained by having process standardization creates more time to focus on other critical needs.

O’Leary, K. (2011, December 5). Money well spent. Retrieved May 10, 2018, from

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