Breakdown approach helps managers select projects.

Abstract

In an era of increased financial strain, effective capital budgeting is critical to a hospital's continued viability. Without accurate estimates of a project's costs and benefits, however, even the most sophisticated selection method is subject to a capital manager's prediction errors. Rather than use typical performance reports to evaluate particular projects or the managers proposing them, administrators should scrutinize the assumptions behind managers' predictions. A decomposition or divide-and-conquer approach can assist in this analysis.