Strategic Capital Planning: A Two-Part Framework

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

In making capital evaluations more strategic, healthcare systems can start by recruiting a diverse group of leaders to review major proposals. These committees should include clinical, operational, and financial leaders from areas such as health transformation, hospital management, strategic planning, information systems, procurement, and budgeting, plus key executives from a system-based health plan, medical group, or clinical program. A typical committee often includes:

  • Finance: These members are tasked with evaluating every big-ticket purchase with a granularity and rigor that ensures the final decision is beneficial not only to patient care, but to the hospital’s bottom line. Finance—typically a business administrator embedded within a specific service line—must balance each department’s strategic needs with the revenue goals and cost-savings targets required to achieve and maintain profitability.
  • Physician Advocates: Physician representatives of the clinical service line most affected by a capital expenditure carry significant influence in the evaluation of suppliers, equipment comparison, and the ultimate decision: to buy or not to buy? In part, because they wield such clout, this group can also find itself advocating for preferred technologies or suppliers before all the evidence has been considered.
  • Revenue Cycle Management: Of utmost concern to the revenue cycle is how and whether—and how much—CMS and private payers will reimburse caregivers for any procedure involving the technology being considered. Will providers encounter problems with pre-authorization or denied claims, and if so, for what specific applications or patient populations?
  • Value Analysis: In addition to service line representatives, it’s best to involve applicable value analysis professionals sooner rather than later to maximize collaboration and value throughout the facility. In close coordination with bioengineering, they’ll conduct research on the health technology under consideration, the suppliers and the intricacies of their service level agreements, and any consumables or med/surg devices required to support the ongoing use of the equipment. What resources will be needed to update, repair, and maintain this technology? These professionals perform systematic reviews of the clinical evidence, communicating the quality and direction of research findings. Comparative effectiveness appraisals are a key component of this process.
  • Purchasing: Once a supplier and technology have been chosen, supply chain will be responsible for negotiating the terms of the deal: sale price, service contracts, plus any software or consumables required for successful operation. Additionally, is there any meaningful value in the inventory being replaced? And if so, what’s the best way to maximize it?

Asking the Important Question

Assuming this core team is already defined, the next step in the evolution toward strategic capital planning requires a kind of Socratic approach to every project. Service line business administrators must first consider their hospital’s core clinical competencies and goals, taking into consideration their current and future community demographics (including competitive technologies within the local market). This is a rigorous, future-facing process that asks (and answers) the question:

“Who are we as a hospital, and how does our approach to the acquisition of healthcare capital equipment—whether it’s this particular equipment or device, or future ones—support that long-term mission?”

Only after this is answered should the broader capital planning team’s focus pivot to a specific technology or supplier.

Now is when clinical evidence becomes critical to the success of the pending decision-making process—with implications for both patient care and the future viability of the hospital’s mission.

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.