Objective risk adjustment improves calculated ROI for capital projects.

Abstract

Most healthcare organizations can ill afford to assume risk for which they are inadequately compensated. When capital projects are being considered, factoring risk with an adjustment to the projected cost of capital can increase the calculated return on investment and improve the net present value of anticipated cash flow. This adjustment factor, however, should reflect the capital structure of the organization, historical average returns, and variance in the context of the market, the specific industry, and similar projects being considered.