Inadequate capital spending threatens hospitals' ability to meet future demands

Healthcare Purchasing News, Feb, 2004

Increased demands by an aging U.S. population, reimbursement pressures, heightened patient expectations, and technical innovations are forcing many hospitals to focus on short-term margins without spending sufficient capital to support their long-term needs. As a result, the quality of nearly half the nation's hospital facilities and from ability to meet future demand for services are in jeopardy.

According to a report from the Healthcare Financial Management Association (HFMA) in partnership with GE Healthcare Financial Services (with research conducted by HFMA and PricewaterhouseCoopers LLP), hospitals' capital spending on fixed assets (property, plant, and equipment) has been relatively flat in recent years, in contrast to sharply rising demand for hospital services. Findings show that 41 percent of medical institutions are not investing enough capital to keep ahead of asset depreciation, posing a potential threat to the continued health and vitality of many providers. The report says the number of hospitals with limited capital access has grown in recent years to 19% in 2001, up from 11% in 1997. This trend, coupled with the current report's findings of flat and often inadequate capital spending, points to potential threats for some hospitals. Those that straggle with their financial health are less creditworthy, decreasingly able to invest in the future and, as a result, may find their financial health diminishing further.