Integrating capital budgeting techniques.

Abstract

A.J. Hogan, in "Capital Expenditure Planning: The Value of Information to Hospitals," published in 1987 in Hospital and Health Services Administration, illustrated the value of information to the expenditure process. He noted that knowing what your competitors are up to, as well as where your facility stands in the market, can enable all concerned to make better judgments. One of the likely outcomes of good judgments is the efficient use of all resources. Unfortunately, Hogan's model draws on a non-existent computerized regional planning agency with the authority to approve or deny proposals. Integrated strategic financial planning also illustrates the value of information. In this case, information is readily available. The sources are the administrators: finance, accounting, marketing, and planning experts, doctors, nurses, statisticians, and epidemiologists. Each can make a unique contribution to the process, and together they can effectively guide the organization's capital budgeting programs. We have illustrated that there does exist a planning model that can work with the plurality of viewpoints in today's hospitals to produce the "most informed" decisions with known sensitivity to the decision criteria used.