Healthcare Capital Expenditures: An Evolution

(This is the first installment of a six-part series examining the role of clinical evidence in capital planning.)

In the old world of fee-based care, healthcare systems too frequently viewed capital investments as one-time decisions, largely determined by what they could afford at the time. Providers would determine the going rate for a procedure, and clinical departments were given a certain amount of leeway to acquire the technology and equipment they needed to provide care.

Volume-based calculations allowed providers to expect a predictable rate of return until profitability had been achieved. In that era, it wasn’t unusual for capital expenditure thresholds to be set as high as $25,000. Above that, a more formal committee approval process was required, characterized by a more rigorous, data-driven, and interdepartmental decision-making framework.

A Paradigm Shift

Today, in many locations of care, the threshold has fallen to anywhere between $5,000 and $10,000, depending upon a facility’s size, patient demographics, budget, profitability, and other factors. The reason? With the shift to value-based medicine, providers are now asked to deliver care at a flat rate, with reimbursement determined in large part by CMS and private insurers and based primarily upon patient outcomes—including measurable improvements in care.

The new math requires a different approach from healthcare providers. Reviewing all proposed investments through a more strategic lens will help them determine whether planned investments will support long-term goals and will enable them to incorporate into every capital acquisition decision all-important metrics that show measurable improvements in care.

The question is: how? We will examine this question in further installments.

To access the white paper from which this post was extracted, please visit our website.

Bill Donato, General Manager, MD Buyline

Healthcare veteran Bill Donato joined TractManager early in 2017.