What the Future Holds

Asked to describe how he currently sees the health care capital projects market, Jon Glaudemans, Senior Vice President, Avalere Health, Washington, DC, an advisory services company focusing on the intersection of business strategy and health policy, lists three reasons, "First, my understanding from my hospital clients is that the capital markets are very thin right now, so accessing capital is very challenging. Second, there's a health reform environment that has created enormous uncertainty with respect to reimbursement levels over the coming months and years. Lastly, the delivery system itself is undergoing rapid transformation in favor of decentralized, non-facility based care because we've got cheaper technology that's allowed smaller physician entrepreneurs to be able to do more in the community that they used to. We can now do a colonoscopy in an office and not a hospital, which creates a third level of uncertainty - the delivery system is transforming in favor of less acute settings of care. For those three reasons my sense is that these are challenging times for hospitals to build new facilities."


The current fiscal environment is forcing hospitals and health care systems to closely examine their capital project strategies. Many of the projects placed on hold over the past year are being reanalyzed to determine if the project is still viable as is, assuming the capital ultimately becomes available, or if they can be accomplished within a different set of parameters that still make practical sense. With the probably continued scarcity of capital, slim operating margins for hospitals and yet to be determined transformations within the health care system itself, it's safe to say that hospitals, and their capital projects, are facing a difficult road in the near future.


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