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Capital Spending Reflects New Era in Healthcare

Rene Letourneau, for HealthLeaders Media, February 10, 2014

As provider organizations look ahead to redesigning their care delivery models and taking part in more risk-based payment structures, their capital spending plans must keep pace with their evolving needs.

This article appears in the January/February 2014 issue of HealthLeaders magazine.

The Patient Protection and Affordable Care Act is a game changer for hospitals and health systems, which are bracing for new reimbursement models based on value, the continued shift in patient volume from the inpatient to the outpatient setting, and the movement toward population health management.

As a result, provider organizations are making major capital investments in their IT capabilities to increase their ability to manage patient records throughout the care continuum and reduce overutilization and duplication of services and in their ambulatory facilities to drive new levels of revenue and more inpatient referrals.

Outpatient volume drives decisions

"The ambulatory side is a big focus for us," says Richard Rothberger, corporate executive vice president and CFO at San Diego–based Scripps Health, a five-hospital, 1,323-bed system with $2.6 billion in fiscal year 2013 revenues.

"We see all of our growth opportunities coming from ambulatory so we bought some land in Oceanside, Calif., and plan to build a supersite with multispecialty clinics, advanced imaging, urgent care, and those kinds of services in a community we don't serve today."

Rothberger expects the building to be completed in 2016 at a cost of $60 million to $75 million. "As it is being defined now, we are looking at building an 85,000-square-foot building with a parking structure," he says.

In addition, Scripps is expanding an orthopedic musculoskeletal center that has for years had a backlog of patients trying to get appointments. The $10 million investment will increase patient access and help drive revenue, Rothberger says.

"It's one of these excellent services we provide that has been limited by size," he says. "We expect it to be a huge growth opportunity."

The expanded outpatient capacity is also expected to result in increased referrals to inpatient services and added patient convenience, Rothberger notes. "We are trying to feed our large infrastructure on our hospital campuses. We are also trying to reach into the community so people don't have to travel so much. We want to give them the opportunity to see their practitioners closer to home and are trying to offload a lot of expensive work away from the hospital."

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