“Healthcare Organizations Are Wasting
Millions Of Dollars Annually Because They Don’t Have A Rigorous Process To
Value Justify Their Capital Expenditures.”
Without a rigorous value justification process,
healthcare organizations literally purchase billions of dollars of capital
equipment (new and used) annually to replace their old technology,
maintain or improve their physical plant or start up new programs. In
fact, based on my observation, most hospitals don’t even have a capital
expenditure committee or technology value team in place to determine if
their capital expenditure purchases are even needed, let alone value
justified. Instead, most capital expenditure justifications are made
behind closed doors of the administrative suite with the department head
or chair-person that requested the equipment and without a formal process
to weed out bloated capital budgets and feature rich non-conforming
expenditures.
Three Steps To Reduce Your Capital
Expenditures By 25% or More
If you are serious about reducing your capital
expenditures by 25% or more, here are three steps to make those savings
happen:
1. Open Up
Your Capital Expenditure Process To Peer Review
Most hospital’s capital
expenditure decision making process involves the CEO, CFO, COO, division
vice president and the department head or chairperson who requested the
expenditure, which limits input from unbiased and disinterested parties
who could greatly contribute to this decision.
A much better way to
evaluate capital expenditures is to form a capital expenditure committee
or technology value team made up of clinical and non-clinical members who
have no stake in the capital purchase being proposed so they can give
senior management untainted and unvarnished opinions on the
appropriate-ness of each purchase.
2. Start
Your Capital Purchasing Evaluation Process Early
Allow your capital
expenditure committee or technology value team to participate in your
capital expenditure “vetting” process as early as possible, preferably
when capital expenditures are submitted to the office of the vice
president of finance for review. Let this committee or team financially
justify and prioritize your hospital’s capital expenditures in
consultation with the requesting departments, prior to submission to your
finance committee for final approval. Naturally, your CFO or budget
director would chair this committee or be the value team leader, so that
he or she could tie together all the loose ends required to meet your
capital budget policies and procedures.
3. Value
Justify All Capital Purchases With Value Analysis
Don’t accept that the
requesting departments have all the answers and have looked at all of the
possible functional alternatives available to your hospital. Make sure
that value analysis tests are performed on all capital expenditures by
your capital expenditure committee or technology value team, before any
bid is sent to interested vendors or purchase orders are released.
These three steps, if applied religiously to each
capital expenditure requested by your department heads and chairperson,
will position your hospital to reduce their capital expenditures costs by
25% or more without even breaking into a sweat.
Capital Expenditures + Peer Review + Value Analysis = Big Savings
The winning formula for dramatically reducing your
capital expenditures requires an “open” process of clinical and
non-clinical peer review of all capital expenditures as early in the
process as possible. It also requires a vigorous application of the
techniques of value analysis to evaluate your capital expenditures, thus
eliminating feature rich non-conforming expenditures that are bloating
your capital budgets and wasting millions of dollars a year in unnecessary
purchases.
Robert T. Yokl - President - The
HCP Group, Ltd.