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Methods for developing relative need criteria to accompany a health care capital expenditure limit.

In recent years capital spending in the health care industry has escalated tremendously, and most forecasters agree that needs will increase at an even faster rate throughout the 1990s. As a result of this trend, there is a dire need to develop effective and equitable controls on capital spending in health care. One of the capital payment options under consideration is the establishment of a lid on capital expenditures and the concomitant allocation of capital to health care providers whose applications are the most meritorious. The purpose of this article is to present some ideas and methods for the development of a relative need system to accompany a capital expenditure limit and to supplement and expand the absolute need determinations of the typical CON process.

Capital Expenditures

Capital expenditures and the availability of funds.

Data on capital expenditures and the availability of funds assembled from the annual financial and service records of 42 short-term voluntary hospitals in New York City over two decades were used to analyze the behavior of annual capital expenditures on building and equipment assets. Desired expenditures on capital as a factor of production are viewed as being the result of changes in anticipated output and of the substitution of capital for labor. Actual capital expenditures in each year also reflect the availability of flows of nonoperating revenues and the completion of capital programs initiated in previous years. Nonoperating revenues include philanthropy and earnings on financial assets as principal sources. A monetary revenue series, adjusted for changes in hospital charges, was used to measure output and thus to seperate the effects of demand for hospital services and supply of funds on investment behavior. The data were approached as annual aggregates for 42 hospitals over the years 1946-1966 and as annual hospital averages for teaching and nonteaching hospitals over the same period. In both approaches four causal factors-output, substitution, the flow of nonoperating revenues, and a distributed lag-explained about 95 per cent of the sample variance of capital expenditures. Allowing for available funds reduced the average time required for 95 per cent completion of a capital adjustment from 7 to 3 years. Responsiveness of hospitals to these economic variables suggests that socially desired investment can be attained by (a) "monetizing" needs of groups now underserved; (b) improving availability of funds if used for acceptable public purposes; and (c) including consumers in determining institutional and regional priorities.

Charities

Developing capital expenditure proposals.

A seven-step approach to the identification of problems and problem resolutions leads to a written capital expense proposal. These steps are outlined with examples for clarification.

Capital Expenditures

Implementation of mobile decentralized pharmaceutical services in a community teaching hospital.

Administrative strategies that were used to justify mobile decentralized pharmaceutical services in a community teaching hospital are discussed. The report describes the problems prompting the pharmacy's review of its centralized unit dose drug distribution and i.v. admixture services, the evaluation of alternative solutions, the proposal submitted to hospital administrators, the implementation process, and an analysis of fiscal impact. A decentralized system using mobile medication carts was considered the best alternative because it integrated distributive and clinical functions and offered efficiencies in drug distribution; anticipated capital expenditure costs and personnel costs were also lower than the costs of alternatives. The conversion to the new system increased the pharmacy personnel budget by $174,455 annually, representing the addition of 13.8 full-time equivalent (FTE) pharmacists and elimination of 10.4 FTE technicians and interns. The increased personnel budget was offset in fiscal year (FY) 1982-83 by documented savings of $47,000 from pharmacists' clinical activities and by calculated savings of $132,400 in nursing time. Excluding capital expenditures of $19,800 for the medication carts, implementing mobile decentralized services saved the hospital $4945 in FY 1982-83. Mobile decentralized services is a cost-effective approach for providing integrated drug distribution and clinical pharmacy services.

Costs and Cost Analysis

The impact of regulation and payment innovations on acquisition of new imaging technologies.

Increasing concerns about the cost of health care in this country and uncertainties about the marginal benefits of the growing number of diagnostic imaging techniques available to clinicians have resulted in a number of changes in regulatory and payment policies that could have a major impact on the rate at which technologic innovations are adopted in the future. Three of these policies--FDA premarket approval, Medicare's prospective payment system, and state-run capital expenditure review programs--have been examined in this article. Experience with the FDA premarket approval process has been limited. The diffusion of MR imagers, the first imaging devices to have required premarket approval, does not appear to have been constrained by the premarket approval process. In contrast, the existence of certificate-of-need regulations and the institution of prospective payment are likely to restrain the rate at which hospitals acquire new technologies in the future. This impact is likely to be most marked in the case of technologies that increase the cost of patient care. The challenge to manufacturers will be to develop new techniques that improve patient care at an affordable price or that maintain the current quality of care at less cost. Researchers and clinicians, in turn, will need to identify those innovations that are likely to be most beneficial and to develop the data necessary to help utilize limited health care dollars in a fiscally and socially responsible way.

Aged

Homes or hospitals? Contradictions of the urban crisis.

Medical expansion is threatening to eliminate many urban residential areas, despite criticisim that argues for comprehensive planning, reduced costs, less concentrated power in the health sector, and a reversal of "medicalization." Our research on expansion, which grew partly from personal participation in a local struggle against expanding institutions in Boston, revealed certain tensions in combining sociomedical research with concrete political practice. From events in Boston and from an exploratory review of periodicals, we recognized that medical expansion and community conflict occur frequently in cities throughtout the United States. Based on general theoretical perspectives from organizational analysis and political economy, we made several hypotheses that we tested through a questionnaire sent to all hospitals in the 20 largest cities of the United States and through other data available on the same hospitals. In large part, this empirical study confirmed our theoretical expectations that (a) larger medical centers show a greater tendency toward territorial growth than smaller hospitals; (b) bureaucratic and administrative dynamics lead to facilities that do not necessarily enhance patient care; (c) despite short-term cycles of expansion and contraction in public hospital growth, expansion projects are widespread and generate considerable political conflict; (d) because of the state's contradictory roles in regulation and social capital expenditures, opposition to medical expansion comes more from community organizations than from governmental monitoring or planning bodies; and (e) the needs of capital determine that medical expansion has a more detrimental impact on housing than on commercial or industrial facilities. Future expansion of private medical facilities is more likely than that of public facilities, although much private expansion may receive public subsidization. As ideologic patterns are demystified, the contradictions between medical expansion and housing needs can provide a focus for successful community organizing.

Boston

Implications of certificate of need legislation for institutional pharmacy practice.

Federal certificate of need legislation (Section 1122 of Public Law 92-603)aimed at the elimination of costly, duplicative or unneeded health care expenditures is discussed. This law applies only to institutional providers receiving federal reimbursements. The key issues for pharmacy are that proposed substantial changes in service and capital expenditures of $100,000 or more must be justified to local and state comprehensive planning agencies prior to implentation. Failure to comply with the legislation can result in a reduction or withholding of federal reimbursement.

Costs and Cost Analysis

Clinical laboratory management: a critical evaluation.

The clinical laboratory is described as a system with an enquiry component or demand side, where control of test utilization is the mandate of the clinical physician or surgeon, and a production component or supply side, where answers to clinical questions are generated and control of test data production is the mandate of the laboratory physician. Supply side unit costs are maintained by increased production effectiveness brought about by the judicious manipulation of supply costs; labor costs; and capital expenditures for automated equipment, robots, and information technologies. The pathologist's prime role as controller of the supply side is outlined, as are the clinical physician's prime role and pathologist's subsidiary role in control of test use on the demand side.

Capital Financing

Defective modernization and health in Mexico.

This paper uses data gathered in a semi-arid, mountain region of the border state of Sonora, Mexico to illustrate that modernization and the importation of urban ideas and values can influence health status in unexpected ways. It traces the historic process of modernization in a rural municipio, relating this to social promises and economic cycles in Mexico. Modernization is seen to encompass life standard improvements and access to medical care; extension of road and transportation systems; and the widespread availability of information and education, as well as lifestyle changes required to incorporate these 'urban' influences. Reviewing the link between climate and health in arid lands, the paper notes that such modernization can be a well-meaning intrusion upon a set of cultural and social practices which had proved adaptive in dealing with climatic extremes. Initial modernization produces impressive declines in mortality and morbidity, as illustrated in an analysis of mortality figures and causes in relation to age cohorts and decades for the years 1955-1984. However, reductions in epidermic-related infant mortality are shown to be offset by increases in deaths due to trauma, chronic conditions and endemic disease. An analysis of morbidity for the year 1983-84 indicates that continuing high rates of infectious disease are related to conditions which result from increasingly defective modernization. To maintain technology, including water, electrical, and sewage systems, continual capital expenditure on both the public and private level is required. The economic crisis in Mexico is reducing available funds at a time when the community has adjusted its traditional lifestyle to incorporate technological improvements. In light of this, it is likely that inroads against infectious disease will not just continue to be stalemated, but could actually be reversed. This finding has implications for towns and villages on both sides of the Mexican-American border.

Adolescent

Laparoscopic treatment of polycystic ovarian syndrome.

Laparoscopic techniques show a number of advantages in comparison with the classic ovarian wedge resection for the treatment of PCOD. An equally high ovulation rate is achieved with less trauma, and fewer postoperative adhesions result in a higher pregnancy rate. The procedure may be done on an outpatient basis with reduced operative and recovery time. No clear advantages have so far been shown to exist for any of the available techniques, i.e. laparoscopic biopsy, electrocautery, and the four laser systems (CO2, Nd-YAG, argon, KTP). It appears, however, that the laser techniques will be the methods of choice for the future. They combine optimal precision of operation handling with maximal safety and excellent bleeding control. With laparoscopic biopsy traumatic bleedings may occur, which can occasionally be difficult to control. With electrocautery, burns due to the uncontrolled effect of electric current have been described. Optimal application of the laser techniques requires extensive personnel training and experience. The laser equipment requires considerable capital expenditure of the order of 20,000-70,000 pounds. The exact mechanism by which induction of ovulation and regular cycles are induced is yet unknown. Alteration of the ovarian surface including the underlying tissue particularly the atretic follicles leads to a significant postoperative change of the pathophysiological mechanism. The following factors are postulated to be responsible for postoperative ovulation: 1. The drainage of the follicular fluid which contains high androgen levels results in an acute reduction of the intraovarian androgen level. 2. With coagulation and/or vaporization of the atretic follicles androgen production is significantly limited. 3. This localized reduction of androgen decreases their inhibitory effect on follicular maturation. 4. Lowered androgen levels result in diminished peripheral conversion of androgen to oestrogen and decreased positive feedback on LH production. 5. The secondary reduction of ovarian inhibin permits a rise of FSH secretion which results in a normal LH:FSH ratio.

Electrocoagulation

Capital investment for the future of biomedical research: a university chief financial officer's view.

The author explores the subject of capital needs in university biomedical research. Three main topics are covered: the universities' need for capital (which is great and growing fast); the sources of capital for universities (private donations, state and federal governments, institutional funds, and debt); and a review of federal policy, to determine whether the federal government is part of the problem of meeting universities' capital needs or part of the solution. For each topic, important assumptions, questions, and possible future trends and dangers are reviewed. The author calls for the university research community to face the difficult issues he has raised and consolidate their thinking in order to avoid potential dangers and to ensure the health of university science into the 21st century.

Capital Expenditures