Making the business case for capital projects
There’s more competition than ever for healthcare capital dollars. Decreasing reimbursements, a rise in the number of services offered and a drop in patient volume mean a shrinking revenue pool for capital projects. Given this rationing situation, it is more important than ever that capital expenditure requests fully outline the benefits and costs of undertaking a new service or replacing an old asset. Requests should also answer the following questions outlined below.
For new equipment requests:
- Who is requesting the equipment?
- What new procedures will we be able to do once we have this piece of equipment?
- How many of those procedures do you estimate we will do in the first year? Second year?
- Who will perform these procedures?
- How much is the Medicare reimbursement for these procedures?
- What supply costs are associated with each new procedure?
- Will this equipment require a maintenance agreement going forward? If so, how much is it?
- Does this equipment need the support of IT, plant operations or Biomed? If so, you need to have their review. The rule of thumb is: If it has a plug, they need to review it.
For replacement equipment requests
- How old is the current equipment? What is the current usage?
- How many times has it been out of service?
- Is the item repairable? If so, what is the cost?
- What benefits would come with replacement?
Not all capital requests will be financially justifiable. If the request doesn’t have a positive return, additional effort needs to be taken to explain the need. Those who can quantify the costs and benefits of a project and clearly explain the need will certainly be taking a step in the right direction for ensuring a serious evaluation of their request.