Capital Budgeting: Copley Hospital
This Module’s SLP is intended to allow you to apply the workings of capital budgeting in an experiential way. Using the assigned background readings, as well as some independent peer-reviewed research of your own, apply the basic principles of capital budgeting to a real life, practical case. Be sure to use subheadings to show where you’re responding to each of the following required items. Include the organization’s capital budget data as an Appendix at the end of your assignment.
Identify a healthcare organization (inpatient or outpatient, real or fictitious), and explain the various components of their capital budget. Many examples of capital budgets can be located online with a quick search (search for “healthcare capital budget example”). You may also use one of the example budgets in Dr. Nowicki’s textbook (2018); choose one that is presented within the chapters, or one that is included at the very end of the textbook (see required background reading). Once you identify a capital budget to evaluate, be as detailed as you can in your descriptions of the lines and trends.
Evaluate their cash flow. What critical elements (positive or negative) do you see there? What will be the likely net effect on future of that organization?
What recommendations do you have for the organization, after seeing their capital budget? Be as specific as you can, backing up your recommendations with peer-reviewed research.
SLP Assignment Expectations
Conduct additional research to gather sufficient information to support your analysis.
Provide a response of 3-5 pages, not including title page and references
As we have multiple required items to be addressed herein, please use subheadings to show where you’re responding to each required item and to ensure that none are omitted.
Support your responses with peer-reviewed articles, with 2 to 3 references.
Capital Budgeting: Copley Hospital
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Capital Budgeting: Copley Hospital
Capital budgeting is integral in helping healthcare organizations make sound decisions regarding investments. According to Nowicki (2018), while capital costs make up 6-10% of total healthcare organization costs, they can contribute significantly to rising healthcare costs. Copley Hospital is an independent and nonprofit healthcare organization located in Morristown, Vermont, serving an area population of 30,000-50,000 patients (Copley Hospital, 2022). This paper analyzes the hospital’s capital budget and offers key recommendations for improvement.
Components of Copley’s Capital Budget
Although Copley’s capital budget is brief, it contains key elements that can elevate the understanding of capital budgeting. The major components of the hospital’s capital budget include building, building improvements, equipment, land, land improvements, and lease improvements (Copley Hospital, 2022). Other components, as shown in Appendix 1, include renovation of facilities, X-ray room improvement, upgrade and maintenance of information technology equipment, purchase of a breast biopsy machine, and the purchase of an MRI breast coil (Copley Hospital, 2022). These components of Copley’s capital budget are consistent with the categories elaborated by Nowicki (2018), which include land, land improvements, buildings, and fixed equipment. Lease improvement is not covered by Nowicki (2018) but is included in Copley's capital budget. However, it can be deduced that lease improvements make up capital expenditure in the sense that they raise the value of the leased