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Capital Spending Reflects New Era in Healthcare

Rene Letourneau, for HealthLeaders Media, February 13, 2014
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Mark Bogen, senior vice president and CFO at South Nassau Communities Hospital, a 435-bed hospital in Oceanside, N.Y., with annual revenues of approximately $425 million, also sees the need for more ambulatory capacity, but says that because his organization is located in one of the most densely populated areas in the country, buying a large piece of land and building new is not an option.

Instead, South Nassau is on a mission to buy as many surrounding buildings as possible to accommodate the growth in its ambulatory business. Bogen says the organization's current patient service revenue is 60% inpatient and 40% outpatient, but he expects to see that change over the next five years to a 50-50 split.

"We've been doing a real estate plan of trying to buy as many properties in and around the hospital campus as we can as they become available. There needs to be an ambulatory component to our longer-term capital investment strategy as we acquire docs," he says.

Nick Barto, senior vice president for capital finance at Catholic Health Initiatives, an 87-hospital, $10.7 billion nonprofit health system based in Englewood, Colo., says his organization is increasing the number of its ambulatory sites as part of a strategy to "increase market share and experience organic growth."

Barto says CHI also wants to expand its outpatient capacity because treating patients in an ambulatory setting is more cost-effective than treating them in the hospital—something that will become increasingly important in a value-based payment structure.

"With risk-sharing models, it's important to have lower-cost settings that are traditionally more convenient to the patient," he says.

CHI's goal is to provide 65% of care in an ambulatory setting and 35% in an acute care setting. "We want to reach that level of nonacute care revenue by the year 2020," Barto says.

Major IT investments to continue

Hospitals and health systems know that their reimbursements are becoming increasingly tied to successful population health management and, accordingly, they are continuing to invest heavily in electronic health records and other IT enhancements to manage patients efficiently throughout the entire network of care.

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