Capital expenditure trends in California hospitals: 2002-2007.

From 1997 to 2001, hospitals expanded their capital expenditures by only 1% while future capital investment was expected to grow by 14% (Healthcare Financial Management Association 2004). Analyzing California hospital data from 2002 to 2004 to 2005 to 2007, the author identified and classified capital expenditures into 4 major types. Between the 2 study periods, growth in capital purchases exceeded 23% for medical equipment, expansion, and maintenance types of projects. Large nonprofit hospitals capturing a greater share of the market and serving fewer uninsured and government payers had a greater number of these types of capital purchases.

Measuring human capital cost through benchmarking in health care environment.

Each organization should seek to maximize its human capital investments, which ultimately lead to increased profits and asset efficiency. Service companies utilize less capital equipment and more human productivity, customer service, and/or delivery of service as the product. With the measurement of human capital, one can understand what is happening, exercise some degree of control, and make positive changes. Senior management lives or dies by the numbers and if Human Resources (HR) really wants to be a strategic business partner, HR must be judged by the same standards as everyone else in the health care organization.

Comparing apples to apples: the relative financial performance of Manitoba's acute care hospitals.

This paper presents comparative financial ratios that can be adopted by health system administrators and policy analysts to begin to evaluate the performance of acute care hospitals. We combined financial, statistical and clinical information for 73 acute care hospitals in Manitoba for fiscal 1997/98 to calculate 15 indicators of financial performance. Our findings suggest that there is variability between hospital types in their average costs per weighted case, cost structure and financial performance.

New AICPA standards aid accounting for the costs of internal-use software.

Statement of Position (SOP) No. 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use," issued by the American Institute of Certified Public Accountants in March 1998, provides financial managers with guidelines regarding which costs involved in developing or obtaining internal-use software should be expensed and which should be capitalized. The SOP identifies three stages in the development of internal-use software: the preliminary project stage, the application development stage, and the postimplementation-operation stage. The SOP provides that all costs incurred during the preliminary project stage should be expensed as incurred. During the application development stage, costs associated with developing or obtaining the software should be capitalized, while costs associated with preparing data for use within the new system should be expensed. Costs incurred during the postimplementation-operation stage, typically associated with training and application maintenance, should be expensed.

Lease or buy: optimizing capital equipment procurement.

Many physician group practices struggle over whether to buy or lease equipment. While purchasing has been the traditional method of acquiring equipment, leasing often can be more cost-effective. Conducting a lease-versus-purchase analysis can help group practices arrive at the most cost-effective decision. Careful consideration of the alternatives can lead to the best use of the group's resources to meet its financial goals.

A hospital capital price index.

This paper describes the development of a price index for hospital equipment. Based on 10 years of hospital capital acquisition data from a large teaching hospital, equipment acquisitions were categorized and weights derived for each category. Using national producer price indexes for each of these categories, a national hospital equipment index was derived for 1981 to 1991. Forecasts for 1991 and 1992 were then made. The resulting index indicated that price movements of our hospital capital equipment index were very similar to the Implicit Gross Domestic Product Deflator, an index that measures price changes for the nation's Gross Domestic Product. However, because of the relative importance of several categories of equipment (scientific instruments, computers), more widespread data on hospital equipment expenditure patterns would be desirable in order to validate these results.

Measuring geographic variations in hospitals' capital costs.

The Health Care Financing Administration (HCFA) has proposed incorporating hospital capital payments into the Medicare prospective payment system. HCFA's proposal includes an adjustment to capital payments for geographic differences in capital costs, derived from the prospective payment system area hospital wage index. Alternatively, the geographic adjustment could be based on an area construction cost index. Geographic construction cost indexes calculated from the cost per square foot of finished structures or from construction labor and materials input prices are evaluated in this article.