ASHE PDC 2013: Capital Investment Decisions In Healthcare
From a capital markets standpoint, equity markets are in reasonably good shape, according to Frederick A. Hessler, managing director, Health Care Group, Citigroup (New York). The outlook for the not-for-profit healthcare sector is stable, per Standard & Poor’s and Fitch Ratings—although there’s concern that future cost-cutting efforts are limited, and Moody’s rates the outlook as “negative.”
In his ASHE PDC session, “Capital Investment Decisions in Healthcare,” Hessler explained that healthcare capital expenditures went up a bit in 2012, but they’re expected to tighten again in 2013. And it’s the IT budget that’s positioned to get a good portion of the money there is: “Massive amounts are being spent on IT,” he said. “You have to have the money to make these investments.”
To be successful, Hessler continued, hospitals will need to focus on scale and skill. Facilities must be of a sufficient size to control costs, but they must also have competencies—it’s important to be a central player in the specific market. “If you’re not number one or number two,” Hessler said, “you’re going to face challenges.”
Consolidation continues across the sector. Taking a look at mid-level players, those in the $1-$2 billion neighborhood, Hessler noted that even those that are market leaders aren’t sure they can make it alone anymore. Large not-for-profit systems outperform smaller ones consistently, he said.
A construction professional in the audience raised the question: As more and more hospitals join into highly integrated systems, will that affect design and construction, which often works more at the local level on specific elements within that system? Hessler believes that many groups are pulling those decisions in: “If I were a designer or an architect, I’d be talking to the system level at headquarters and not the local hospital.”