Healthcare News & Insights

Hospital budgets: Where’s the money going?

With all the new initiatives from the feds that affect reimbursement, budgeting is more challenging than ever. A new survey sheds some light on what hospital executives are prioritizing in their budgets right now – and where your hospital should be focusing its efforts. 

ThinkstockPhotos-466674606Premier, an alliance of hospitals and providers dedicated to improving health care, has released its Fall 2015 Economic Outlook Survey, which looks at financial trends affecting hospitals and health systems.

The survey represents the opinions of healthcare executives at facilities across the country.

Big spenders

If you feel like you’re spending more money this year on capital improvements, you aren’t alone. According to a news release on the survey, nearly 60% of C-suite hospital executives said they’d be increasing their capital spend this year. And close to 40% of them will be spending at least 10% more than they did last year.

One of the biggest drivers for spending is the Affordable Care Act and its associated requirements for hospitals to provide value-based care, along with other initiatives such as the push toward electronic health records (EHR) systems.

To meet these requirements, hospitals must invest in updates to their infrastructure to provide patients with value-based care. Research cited by Premier indicates the start-up fees for a hospital’s value-based initiative can be up to $1.7 million alone. And an additional $6 to $14 million is needed to maintain the program.

But there’s no way for hospitals to avoid setting aside this money in their budgets. If they don’t have the resources needed to transition to value-based care, they’ll face significant pay cuts and other penalties from carriers that’ll hurt their bottom lines even more.

The good news: Most hospital executives think their facilities are moving in the right direction. According to the Premier survey, 72% of respondents believe they’re successfully managing the transition from fee-for-service payments to other alternative models by making smart investments in the necessary tools to improve care quality.

With EHR adoption continuing to be a top priority, health IT is the No. 1 area where hospital executives are budgeting the most capital funds, as indicated by over 72% of survey participants. Rounding out the top three are facility renovations (nearly 52%) and imaging equipment (44%).

Patient health projects

Hitting quality targets doesn’t just depend on capital spending, however. Hospitals and health systems are also investing in population health initiatives, likely to improve the continuum of patient care across all healthcare settings.

Many survey respondents are making population health investments in areas such as:

  • expanding patient engagement in health and personal care (54.7%)
  • care management for chronic diseases (53.8%)
  • wellness programs (51.9%)
  • creation of physician and multi-specialty groups (49.1%)
  • patient outreach and reminders (47.2%), and
  • advanced population health data analytics (46.3%).

C-suite executives are also shifting their focus toward improving post-acute care networks, with 90% of survey participants saying they’d be working to expand their networks over the next three years.

Budgeting strategies

It’s important for your hospital to be thinking similarly in terms of its budgeting strategy. IT spending should be a top concern, and your facility’s EHR system should be capable of handling the increased demand for patient information reporting that’s being created by value-based care initiatives.

Your facility should also be putting aside money in the budget for population health initiatives to improve the quality of care. And it’s a good idea to place special emphasis on areas that empower patients to take control of their own health outside of the hospital (example: training clinical staff to communicate information effectively to patients during the discharge process).

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