John Evanoo
Debbie Cameron

The capital replacement process in most hospitals today starts with the department managers submitting capital replacement requests and supporting justifications including maintenance history, manufacturer recommendations, financial projections, strategic and competitive market analysis, clinical need, physician input, etc.

These requests are vetted with the requests from all the various departments by a capital review committee or a board review process with the most warranted replacements that can be accommodated by the capital funds available being approved. Each request is often judged on its own merit.

In the end, healthcare executives can usually refer to reams of documentation supporting a capital replacement decision. Rarely can any documentation, or rationale, be found for not approving the regular replacement of a piece of equipment, but equipment can also fail and require emergency replacement (usually from contingency funds outside the capital budgeting process). We scrutinize every detail of what is to be replaced or bought, often giving little thought to what is being counted on to remain in the equipment inventory during the upcoming year.

Additionally, we have no means to gauge the appropriateness of selecting one item for replacement over another. There is no common denominator in all the reams of justifications by which we can compare one replacement with another.  

As a result, there are many time bombs in hospitals in the form of obsolete, or even dangerous, equipment on the verge of failure that healthcare executives either are not aware of, or choose to overlook so as to be able to afford the latest high-tech gizmo.

Incorporating a dashboard in the overall capital planning and budgeting process provides many benefits for strategizing and tracking.

A dashboard that includes the status of all the equipment, using an objective replacement rating and scoring system, helps maintain visibility of the entire inventory including those items that may pose significant risk but never make it through the capital review process.

See sample dashboard

exhibit-webextrafeb10

By using such a dashboard:

  • Equipment item replacement priority is easily determined
  • Risk can be quantified
  • Rationale for delaying replacement can be documented
  • Contingency plans and funds can be addressed early-on

Additionally, the dashboard format can provide visualization of classes of equipment, equipment status, utilization, etc.

Dramatic capital efficiencies can be gained by the visibility afforded by the equipment status dashboard, including:

  • Redeployment can be considered for wasting assets or replaced equipment that has acceptable useful life remaining.
  • Equipment replacement decision outcomes can be investigated via scenario modeling.
  • Purchases can be timed so as to maximize the life of existing equipment or aggregate replacements for group purchases.

To sum up, a dashboard is an efficient method of analyzing many of the metrics that form the underpinnings of capital replacement decisions.

Publication Date: Monday, February 01, 2010

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