A comparison of Navy and private hospitals' capital budgeting justifications

Abstract

This study provides an in-depth analysis of the capital budgeting justifications currently being used in Navy hospitals and the civilian health care industry. In a hospital setting where the primary objective is often stated to be that of providing quality health care services and saving lives, the tendency is to evaluate capital budgeting justifications in terms of its ability to help reach that primary objective, and not to evaluate it in strictly financial terms. However, in an environment of increasing competition and regulation, hospitals are now entering a period wherein complacency in capital budgeting has given way to anxiety, and astute management of the budgetary process is emerging as one of the acid tests of financial fitness. Most of the information necessary for effective strategic planning is external in nature. Upper management must monitor and assess such things as health care industry growth rates, regulatory environment, financing trends, compensation policy and others. Capital equipment items obtained through proper justification, will establish an equipment infrastructure that will assist the organization in providing optimal health care services.