HOSPITALS: Capital issues for hospitals

The NY Times has an article suggesting that hospitals may soon have less ability to invest in capital projects than they have had in the last few years. The blame is put mostly on higher interest rates. I’m a little suspicious about that logic. Hospitals are in much better financial shape now than in the very late 1990s as they are over the worst effects of the Medicare cuts in the BBA, and they now tend to be in bigger systems which have better credit ratings and are able to borrow more cheaply.

Molly Coye from HealthTech said at the conference last week that there are 160 acute care hospitals under construction, with another 223 in planning. This is all based on several forecasts that we’ll need lots more (20-40% more) hospital beds in 10-15 years. (There are around 5,000 hospitals in the US now). Obviously some of the new ones are replacing older ones, but we clearly are going to a world of more beds, and a world of more demand.

The article in the Times says correctly that if money gets tight hospitals will spend on stuff they can bill for (new Cardiac cath labs) and less on stuff they can’t bill for (new CPOE or other IT systems). But my sense is that these long term plans to invest in plant and IT are based on long term strategies as much as on the availability of cheap interest rates. So I’m not as pessimistic as some quoted in that article about the likelihood of these investments drying up.

Of course, exactly how much hospitals are spending and will spend on IT and other capital improvements is a matter for some debate, with several leading analysts out with recent reports that disagree. I’ll comment on that later this week.

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