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Capital Spending Strategies in an Economic Recovery

John Commins, for HealthLeaders Media, March 9, 2012

Mark Bogen
Vice President of Finance, South Nassau Communities Hospital, Oceanside, NY

Between the equipment technology and bricks and mortar, we've invested close to $300 million in the past dozen years. A master facility plan was launched in the 1990s, culminating with the 170,000-square-foot bed tower in 2006. That success led us to continue an enhanced plan to take us into the next 20, 25 years. In 2008 we got the board to sign off on the plan right as the stock market tanked. We put it on the shelf. We resurrected it again about a year ago, and we are continuing to look at it.

We have been chasing the mythical 435-bed operating capacity as part of the overall master facility plan. But given the length-of-stay decline that we have continued to enjoy over the past four or five years and the softening of the economy and some of the elective surgeries that people are postponing, we are really now looking again at the master facility plan. We don't want to build something that is not going to be supported in the years to come under healthcare reform. With that said, the expectation is we plan to do this master facility plan, which will probably have a price tag of $200 million.

It's not so much currently the access to capital, because we have a strong balance sheet and we have had good performance these past three or four years. But even though interest rates are low, that doesn't always translate into the real cost of capital and whether you can create and demonstrate financial feasibility to ultimately borrow the money.

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