Over 90 Total Lots Up For Auction at One Location - WA 04/08

The budget process: Science or art?

March 09, 2021
From the March 2021 issue of HealthCare Business News magazine

Last year Americans spent in excess of $3.5 trillion on healthcare, but few if any hospitals have an unlimited capital budget. This is especially evident as hospitals are challenged with the COVID-19 pandemic. Because of this, prioritizing projects can be a complex task. In a perfect world, the decision to purchase a technology should be driven with the goal to improve outcomes. But if the cost of providing the technology does not fit within a traditional reimbursement structure, it can limit other services within the organization. This can result in negative revenue generation and affect outcomes of other service lines within the organization.

With legislative initiatives such as “Never Events” and Preventable Readmissions, technology can be a directly related to direct costs savings. For this reason, quantifying the value of the combined outcomes, costs, and revenue generation requires a diverse team approach and access to solid benchmarking data.

Prioritizing the budget involves categorizing and ranking the proposed technologies. The goal is to determine what can fit within the limited capital budget while delivering the best patient care. In a simplified version, the capital budget committee should rank proposed technologies that are directed toward improving outcomes, technologies that generate positive revenue (make money), technologies that lower costs (save money), technologies directed to patient safety concerns, and technologies to replace older or obsolete systems. I recommend that key members of the capital budget committee assign a numerical value to each category. The project with the highest combined value should present itself as a priority that best fits the mission of the hospital.

James Laskaris
It bears repeating that the healthcare environment is in a constant state of change. As costs increase, needs change, and new therapies become available, identifying technologies and guesstimating their costs as part of the budget process can be a gamble. To reduce the financial risk, the budget should be an educated process based on the science of value analysis. This approach allows hospitals to target the “Right Technology and the Right Box at the Right Price” to meet the needs of their patients and the mission of the hospital, while being good stewards of the budget.

About the author: James Laskaris is a clinical expert with TractManager, now a part of symplr.

Back to HCB News

You Must Be Logged In To Post A Comment