I’m looking for a current benchmark associated with hospital capital spend. Is there a certain percentage of net patient revenue, EBITDA (earnings before interest, taxes, depreciation, and amortization), or some other measure that hospitals and health systems abide by as a best practice for annual spend on big and small capital projects?
Answer: With respect to overall annual capital spend that is funded out of operations, the typical rule of thumb is that it should be no greater than the organization’s annual depreciation allowance. Capital spend on a specific item (e.g., MRI, ultrasound), a return on investment, or a payback analysis should be prepared to determine if the capital investment provides an acceptable return to the organization.
This question was answered by: Michael Neuman, CPA, FHFMA, senior vice president, finance/CFO, Kennedy-Krieger Children’s Hospital, and a member of HFMA’s Maryland Chapter.
|What do you think? Please share your thoughts on this question in the comments section below.|
The information provided through the Forum’s Ask the Expert service does not constitute legal advice, even when the advice is provided by lawyers. You need to obtain your own legal counsel for legal advice, and consider the laws and regulations that govern your state. The content and opinions expressed are those of the Forum experts, and not that of their employers or of HFMA. HFMA does not endorse the material or warrant or guarantee its accuracy. The responses are based only on the specific facts or circumstances provided. Forum experts cannot be held liable for outcomes related to any information provided.