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What Lies Ahead for Capital Expense Budgets?

Karen Minich-Pourshadi, for HealthLeaders Media, March 7, 2011

Sometimes when you take a look back, you can see just how far you’ve come. Other times, you can see just how little progress you’ve made. Unfortunately, the latter may be more true in the case of capital expense budgets, as healthcare leaders continue to hold fast to their dollars--putting their money into only the most necessary of initiatives.

Last January I took a pulse on healthcare’s attitude toward capital spending in HealthLeaders magazine. The picture was grim at the time, especially in terms of facility expansion. With few funds to be found through investments, and banks unwilling to provide many hospitals loans, new construction and large capital purchases came to a near halt for most hospitals and health systems.

In fact, for the first time in nearly two decades, most facilities stopped building, and they waited for the economy to stabilize and the requirements for healthcare reform to become more clear.

At the time, I interviewed John Winfrey, chief financial officer at the 583-licensed bed DCH Regional Medical Center in Tuscaloosa, AL. Prior to the recession, they were poised to build a gleaming 80- to 90-licensed bed tower to help offset crowding and eliminate some of the semiprivate rooms at the hospital.

But that vision was put on hold in 2008 after the organization took its first ever financial loss due to the recession. Now 2011, I spoke with Winfrey again, and the same tower remains in limbo. “It’s almost permanently postponed. Now we’re finding our [inpatient] volumes are dropping,” he says. “We’re really concerned with taking on any major projects because of the uncertainty with the economy. We are a lot more conservative as we look at our big projects.”

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1 comments on "What Lies Ahead for Capital Expense Budgets?"


Linda Ollis, FACHE (3/8/2011 at 10:57 AM)
Hospitals and healthcare providers are certainly not exempt from the effects of an economic slowdown and protracted recovery from the recession. In fact, we need to be aware of another trend already developing in the consumer/demographic segment [INVALID] that of the widening gap between the have's and the have-nots. Decreased capital spending by smaller hospitals and safety-net hospitals who have assumed an increasing share of the underinsured and uninsured will place them at even greater risk of failure. And this risk, at a time when baby boomers are poised to make even greater demands on the healthcare system is one we should take seriously. Congress should stop blocking the progress on healthcare reform as it's clear how dire the situation will become due to inaction.