IT projects that were put on hold
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Hospitals are stopping or postponing facility upgrades and technology investments, which could jeopardize quality of care,
efficiency and coordination of care, according to experts.
"Hospitals' ability to obtain the necessary funds to upgrade their facilities or invest in new clinical and information technologies
is severely restricted due to the capital crunch and the recession," says American Hospital Assn. (AHA) Spokeswoman Elizabeth
Lietz. "Hospitals primarily rely on borrowed money, philanthropy and reserves to fund capital projects to improve their ability
to meet communities' healthcare needs, but many now find it difficult to obtain funds from these sources."
The vast majority of hospitals report that borrowing funds through tax-exempt bonds—the main source of borrowing for most
hospitals—is difficult or impossible, according to AHA.
"In addition, loans from banks or other financial institutions are similarly difficult to obtain," Lietz points out. "Hospitals'
reserves, or savings, also have taken a hit due to falling stock prices. Net income is down, and philanthropic donations have
slowed, leaving hospitals with less of their own funds to rely on to make needed improvements." For executives, business as usual is no longer acceptable, says Tim Olson, senior vice president and CFO of ThedaCare Inc.,
a community health system in Appleton, Wisc.
"We are in an industry which has historically been recession proof. This is not the case in the current recession as the tax-exempt
bond market has slowed, coupled with significant concerns about volumes," Olson says. "With the two main sources of cash slowing
down, we need to manage our capital spending accordingly, making sure we invest in the right projects. Critical management
of capital expenditures is required to successfully make it through the current economic conditions."
LOOK WITHIN
While tight financial markets are external barriers to capital investment, some hospitals are looking internally to find ways
to see and eliminate waste—improving internal processes and ensuring they are investing in projects with the greatest pay-off,
patient care and profitability.
On January 1, ThedaCare implemented a toll gate review process for all new and significant capital projects. This has slowed
the movement on capital requests in the first month of the year, according to Olson.
"We are evaluating our financial position on a regular basis and will adjust the flow of 2009 capital spending as we understand
our volumes and expense levels," he says. "Existing/prior-approved projects have not been affected by this change. Should
our financial situation significantly deteriorate, we would evaluate these projects as an option for management of our business."
ThedaCare is better positioned to manage its business because of its continued focus on lean management, Olson explains. "ThedaCare
continues to work with . . . provider[s] of lean management services to evaluate our processes and take waste and cost out
of our system that do not add value to the patient on a regular basis."
IT projects in 2009 will follow the same toll gate review process as Olson previously describes. "In 2009, ThedaCare will
continue to invest in minor IT projects," he says. "If evaluation tells us at the toll gate that there is a significant benefit
for us to invest in a significant project, we would strongly consider proceeding with this, as well."
—Tracey Walker Commentary is independent of source data
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