Title: Capital budgeting practices in hospitals

Authors: Dean G. Smith, Joshua Wynne

Addresses: Department of Health Management and Policy, School of Public Health, University of Michigan, 109 S. Observatory Street, Ann Arbor, MI 48109-2029, USA. ' Department of Health Management and Policy, School of Public Health, University of Michigan, 109 S. Observatory Street, Ann Arbor, MI 48109-2029, USA

Abstract: We interviewed chief financial officers from hospitals and healthcare systems in Michigan regarding selected capital budgeting practices that have not been previously considered in the literature. Results revealed a variety of approaches in the development and deployment of capital budgets. Most healthcare systems used a blend of board and department-initiated input into budget development, usually with interaction between the two. The majority of healthcare systems had flexibility in the deployment of their capital budgets over time. Standard methods of project evaluation were employed by healthcare CFOs, but few used the most sophisticated tools. A host of constraints, including certificate-of-need laws and internal, mission-based motivations uniquely affect capital budgeting of not-for-profit healthcare systems. Clearly, future research will be need to understand why organisations have selected capital budgeting practices and the extent to which selection and use of capital budgeting practices matters in the efficiency and viability of healthcare systems.

Keywords: capital budgeting; financial management; strategy; hospital budgeting; healthcare budgeting; captial budgets; capital expenditure; capital investment.

DOI: 10.1504/IJHTM.2006.007875

International Journal of Healthcare Technology and Management, 2006 Vol.7 No.1/2, pp.117 - 128

Published online: 29 Sep 2005 *

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