Super Committee's Failure Will Affect Capital Planning
What does the Congressional Super Committee's failure to come to consensus on a deficit reduction plan mean for healthcare financial leaders? For starters, CFOs will be taking a hard look at large capital spend projects in 2012 and beyond.
"You may not want to add that new wing because the cost of capital is about to go up," says Ken Perez, senior vice president of marketing and director of healthcare policy for MedeAnalytics, a performance management software vendor.
One week ago, leaders of the Joint Select Committee on Deficit Reduction, charged with finding at least $1.2 trillion in deficit reductions, failed to reach agreement on budgetary cuts. The stall triggers automatic cuts to a broad range of domestic programs, such as Medicare, starting in 2013.The committee's impasse is expected to reverberate through the economy. Economists and politicians agree that the lack of agreement on a debt reduction plan could slow economic growth significantly.
What's more, no swift solution is in sight. "There will be no easy off-ramps on this one," President Obama says. He has pledged to veto any legislation that would stop the automatic cuts.
The uncertainty at the federal level cascades down to individual hospitals. "I wasn't all that shocked nothing came out of the Super Committee. This [lack of consensus] just continues to make [CFOs] uncertain," says Robin LaBonte, CFO at the 79-bed York (ME) Hospital. "Not knowing what's going to happen [with the budget cuts] means we also don't know how to prepare our budgets for the coming year."
Although the full extent of the debt ceiling debacle will not be felt nationally until 2013, when the proportional cuts take effect, healthcare leaders could feel it sooner if capital lending rates increase.