More on Capital Finance

Hospitals look to revive capital expenditures, according to Premier

After a period of capital budget cuts and freezes, hospitals are seeing a thaw in capital expenditures, according to a survey published in the Premier healthcare alliance's September 2010 Economic Outlook analysis.

According to the survey, 69 percent of healthcare representatives said capital budgets for 2010 remained flat or increased compared to 2009. Overall, 42 percent of respondents suggested an increase in spending vs. 32 percent suggesting a decrease. For those whose budgets decreased or remained unchanged from last year, approximately 66 percent scaled back projects already in process specific to new construction/renovations and the acquisition of clinical and information technology, the report said.

When asked about the top areas in which they are trying to reduce costs in the next 12 months, commodity pricing (27 percent), physician preference use (25 percent) and pharmaceutical use (19 percent) were cited most often.

According to the report, annual market inflation rates will increase on average between 1 percent and 3.7 percent across categories such as cardiovascular services, facilities, imaging and nursing. Premier's existing contracts, excluding food service and pharmacy, are expected to increase by about 1 percent on average in the next year, lower than overall market increases, which are predicted to be an average of 2.6 percent during this time frame.

"Accounting for 25 (percent to) 30 percent of a hospital's expense, the supply chain presents a vital opportunity to help offset reimbursement cuts and has increasingly become an area of focus for the C-suite," said Premier Purchasing Partners President Mike Alkire. "But the approach to supply chain improvement needs to extend well beyond price points; it should identify opportunities to change practice and purchasing patterns to simultaneously improve outcomes and reduce costs. This can be achieved through resource utilization, standardization and aggregation strategies."

The survey found most hospital executives have health reform at the top of the list of concerns, with more than 80 percent considering "healthcare reform and changes in reimbursement" and "EHR implementation and data storage" as the most important health trends today. Seventy-three percent anticipate these two areas will have the greatest impact on their financial performance over the next year.

According to Wes Champion, senior vice president of Premier Consulting Solutions, hospitals need to identify key areas offering cost savings and revenue enhancement opportunities to offset reimbursement cuts under healthcare reform.