Executive Insights

Planning for the upcoming ACE Summit has me reflecting on how important it is for different departments and roles to work together to effectively operate an IDN’s capital management process.

Generally, capital management in IDNs refers to how healthcare organizations plan, allocate, finance, govern, and monitor major investments — such as new buildings, medical equipment, IT infrastructure, and facility infrastructure. Capital tends to get categorized into strategic, infrastructure, IT, and contingency.

Planning: Effectively managing capital aligns investments with the organization’s strategic goals. Most IDNs have felt capital constraints for many years. Contributors to financial constraints over the years have included significant investment requirements for IT systems (electronic health records, enterprise resource planning systems, and customer facing IT platforms), the pandemic delaying investments, and overall financial performance limiting access to capital funding.

Allocating: I have not seen an example of an organization being able to fund all requests; therefore, it is important to establish criteria for how decisions will be made and how requests will be prioritized. Examples of criteria include financial return, contribution to patient safety, regulatory requirements, support for strategic growth, and infrastructure needs.

Governing: A final component required for success is to have a strong capital oversight committee populated with key finance, operations, facility, IT, supply chain, and strategy leaders.

Financing: Continuing with the theme that there are many departments involved in the capital process, it takes success from operations, finance, and foundations to fund the capital pools. Operational revenue in excess of expenses is used to reinvest in the organizations through capital. Finance’s success with investments and decisions about accessing debt also fill the capital funds. And donors make funds available for capital investments.

Monitoring investments: The entire capital management process is a bit circular. Planning is always underway even as the money is spent and future requests are anticipated. Operational leaders need to ensure that the investments succeed in delivering the results projected as part of the planning process. Finance leaders need to guide requesters on managing the approved dollars, and planners need to ensure they are thinking through future needs beyond the current year. Facility and Clinical Engineering need to conduct preventative maintenance and predict when equipment will need replacing.

Education: Most requesters of capital projects don’t do this kind of work every day making it important to have well-defined processes and people in roles who can guide the requesters through the process.

By sharing my experiences and observations about capital management, I hope that it will help you think through your own situation to ensure you are engaging and learning from all the critical stakeholders who are supporting this work in your organization.

As always, I welcome your feedback, questions and suggestions for educational topics for these Executive Insights or for upcoming Summits.