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Capital Spending Reflects New Era in Healthcare

Rene Letourneau, for HealthLeaders Media, February 10, 2014

"From a clinical integration standpoint, it just made sense for us," he adds. "As more and more payers and consumers are measuring providers on quality and outcomes, it is putting pressure on providers to manage costs across the entire continuum of care, as well as to reduce redundancy of services by providers. By having all of our patient information in one record, whether in the hospital or in an ambulatory setting, it will reduce redundancy and allow for better, faster care."

While Scripps Health already has an EHR in place in its hospitals and clinics, the organization is "constantly spending to update and upgrade" the system and to make other IT improvements, Rothberger says. For example, in fiscal year 2014, Scripps will spend $8 million on a computerized physician order entry system; $9 million on ICD-10 as part of a $30 million, three-year project; and $6 million on a patient portal that will allow patients to access their test results and schedule appointments with their primary care physician.

"We are trying to improve access for our patients with the portal," Rothberger says. "It's a competitive advantage, and it's a competitive disadvantage if you don't have it."

Spending on inpatient facilities still important

Although the trends in capital spending show a clear move toward investments in IT capabilities and outpatient care facilities, significant dollars are still being earmarked for construction and renovation projects on inpatient infrastructure.

Scripps is in the middle of a $456 million construction project to build a seven-story, 383,000-square-foot cardiovascular tower on its La Jolla campus scheduled to open in March 2015. The system's 2014 capital budget includes $100 million for this one venture, says Rothberger, noting that this is on top of the $250 million the system typically spends each year on capital investments.

"We borrowed in February 2012 to be able to deal with the front load of that cardiovascular tower, and we actually expended all those bond proceeds by the middle of 2013," he says of financing the higher-than-usual expenditure. "Now we are on our own and cash out has to equal cash in unless I am willing to reduce our cash balance, which I haven't had to do to date."

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