In today's fast-paced healthcare environment, budgeting season can feel like one of health systems' most drawn-out, tedious processes. To help streamline the budgeting process for 2024, we have put together four essential questions for your team to answer related to capital budgeting. By answering these questions, your organization can create a customized budget strategy that ensures organizational alignment of priorities, maximizes efficiency, and proactively addresses potential risks and obstacles.
- What technology do we currently utilize to budget for and manage capital equipment?
Your health system most likely relies on a range of solutions to tackle various processes. The first step in building a budgeting playbook requires inventorying existing technology solutions, how they integrate (if they do at all), and how you utilize the data from each system. Your inventory will probably include some or all of the following:
- A legacy CMMS platform to view asset lists and fleet health and handle work order management and maintenance
- A financial planning tool for forecasting, accounting, and financial management
- An ERP to track procurement, manage workflows, and serve as a repository for contracts and other essential documents
- Separate tools for utilization tracking and cybersecurity risk management
Once you have completed your technology inventory, you will need to identify and reconcile any gaps and inconsistencies in your data. Historically, this has required your team to manually fill in missing information, remove duplicates, and keep a pulse on parent-to-child OEM relationships.
- What do we want to invest in this year?
Your team must carefully consider your investment priorities to ensure optimal resource allocation. Your investment objectives may include:
- Expansion: Investing in infrastructure and facilities to meet the growing demand for healthcare services
- ~The US healthcare system added 36 new hospitals in just the last year, and the nation’s annual healthcare construction spending is more than $60B.
- Prioritizing Capital Replacement: Upgrading or replacing outdated equipment in alignment with organizational priorities and customized risk scores to enhance patient care and improve efficiency
- ~Healthcare systems have traditionally followed a break/fix approach to equipment replacement, while a more proactive approach with replacement and repair cost forecasting and prioritization would actually improve their bottom line in the long run.
- Strategic Projects: Implementing new initiatives to address community-specific needs and spur growth
- ~Advancing health equity goals, improving administrative costs and efficiency, and strategic partnering and sourcing are expected to be key focus areas in the next year.
- Implementing New Technology: Investing in cutting-edge medical equipment and technologies to enhance diagnostic capabilities and treatment outcomes.
- ~According to a recent Bain & Company report, investing in healthcare IT is a top 3 strategic priority for almost 40% of providers and a top 5 priority for nearly 80%.
- How do we validate our priorities and ensure all stakeholders are aligned?
A structured approach is crucial to validate investment, standardization, and risk priorities and ensure stakeholder alignment.
- Data-Driven Decision Making: Collect and utilize key metrics to assess equipment performance, maintenance costs, and operational impact to prioritize investments.
- Cross-Department Collaboration: Engage stakeholders from various departments, including clinical, finance, and supply chain, in decision-making processes. Empower all teams with access to complete, up-to-date data and ensure alignment on how success is defined for your organization.
- Return on Investment (ROI) Analysis: Perform ROI analysis to evaluate the financial benefits of proposed investments and compare them with the costs. Assess the viability and value of capital purchases by answering the following questions:
- ~How long will it take to realize a positive ROI on this investment?
- ~What are the potential cost savings or revenue increases that can be attributed to this equipment?
- ~How does the projected ROI compare with other potential investments or expenditure options?
- ~What are the associated risks, and how have they been factored into the ROI analysis?
- ~Are there any alternative financing options or lease arrangements available for this equipment purchase that might impact the ROI?
- ~How will this equipment affect operational efficiency, patient outcomes, and overall quality of care?
- ~What are the maintenance and ongoing operational costs of the equipment, and how do they impact the overall ROI calculation?
- ~How do the equipment's expected lifespan and potential obsolescence impact the ROI calculation?
- ~Are there any regulatory or compliance considerations that could affect the ROI of the equipment purchase?
- ~Have the potential intangible benefits, such as improved staff satisfaction or enhanced hospital reputation, been considered in the ROI analysis?
- Standardize and Enforce Processes: Develop a consistent, transparent framework for submitting budget requests. Provide clarity on approval workflows and manage expectations for each stakeholder group.
- What is our process for implementing the budget plan?
A well-defined process is essential for implementing the budget plan effectively. Your health system probably has processes in place, but may face some challenges in key areas making execution less than ideal:
- Budget Creation: Departments submit their capital budget requests detailing the required equipment or projects, and health system leadership analyzes strategic projects and investment focus areas.
- ~Reality: Your health system may rely on inconsistent forms and spreadsheets, forcing them to go through the tedious process of consolidating these requests before they can move forward with budgeting.
- Evaluation and Approval: Capital committees review each request, considering factors like ROI, urgency, and alignment with strategic goals. The requests are also validated to confirm that capital standards, strategic sourcing opportunities, and end-of-life disposition or trade-in opportunities are factored appropriately
- ~Reality: There may not be clear approval flows and evaluation criteria may not be considered or enforced consistently. Bundling opportunities may be missed because there are gaps or mistakes in existing fleet data.
- Procurement: Approved budget requests are appropriately bundled, contracts are negotiated with suppliers, and equipment is acquired, installed, and integrated with existing systems.
- ~Reality: One-off purchases are incredibly common and vendor contracts are not regularly evaluated and renegotiated
- Management and Reporting: Regular tracking and monitoring of budget expenditure and implementation progress ensure adherence to the plan. Risks are regularly assessed, and mitigation strategies are deployed to help minimize unplanned spending
- ~Reality: It is often impossible to find one source of truth to track and monitor assets and anticipated replacement needs. There is no clear prioritization of replacements based on customized risk scores, including up-to-date cybersecurity and recall information.
After you answer these essential questions, you may be asking yourself: can I use one platform for everything? The short answer is YES. Using a single platform for the entire process creates one source of truth and can help significantly improve your health system’s budgeting efficiency and bottom line. CCMⓇ is a powerful, easy-to-use platform that integrates all the features of legacy technologies in one system and adds enriched data and AI-powered insights to help you budget, forecast, and save. By transitioning from disconnected solutions to CCMⓇ, you can realize benefits like these:
- Streamlined Workflows: Integrated systems with standardized request forms reduce manual processes and duplicate data entry, saving time and minimizing errors.
- Real-time Visibility: A unified platform provides real-time visibility into budget utilization, procurement status, and asset management, facilitating informed decision-making.
- Improved Collaboration: All stakeholders have access to the same data and reports, promoting collaboration and ensuring everyone is on the same page.
- Enhanced Analytics: Centralized data enables advanced analytics, helping identify cost-saving opportunities and improving overall financial performance. CCM® also generates insights beyond your own data sets with unified industry data representing $15B in capital spend.
- Cost Savings: On average, a health system with a $100M capital budget can save up to $10M annually after implementing CCM®. Our super-charged sourcing solutions also plug into CCM® to help transition your supply chain team from a procurement approach to a strategic and integrated approach to generate additional cost savings.
Health systems that embrace advanced technology to manage capital equipment budgeting, procurement, and management are better equipped to optimize resource allocation and improve overall efficiency. By utilizing this budgeting playbook, your organization can streamline its budgeting processes and positively impact its bottom line while delivering better patient care.
Are you ready to learn how CCM® can meet all of your organization's budgeting needs in one place? Book a demo today
