Economic pressures caused providers to keep a tight watch on capital spending in 2011, and while caution is still the key word, there appears to be some mild relief in sight.
One area hit hard by the recession is spending on capital equipment such as MRI machines and CT scanners.
“It is a fact that the recent economic slump has resulted in weakened sales in capital equipment over the past couple of years,” said Dan Knepper, director, Diagnostic Imaging Contract Services at Irving, Texas-based Novation.
Despite the continued need for conservative spending, many hospitals won’t have much choice but to buy new equipment in the near future.
“The reality is that some facilities will be driven to make purchases due to aging equipment and obsolete technology,” said Knepper. “Other factors that are likely to drive growth include an aging population and technologically advanced products that will improve diagnostic outcomes.”
Richard Peters, senior director of ambulatory surgery services at Irving, Texas-based GPO Provista agrees.
“Capital equipment is so important to the conduct of business, particularly in the rapidly evolving medical field, that investment can be delayed, but only for so long,” said Peters. “Sooner or later, worn out equipment must be replaced.”
Growth is also expected in information technology investments as providers strive to automate medical records and many administrative functions.
According to a November 2011 Provista survey of its ambulatory care markets, about half of the physicians’ groups polled indicated plans to purchase computers and other IT in 2012.
This is “perhaps to augment their implementation of electronic health records and to further automate their back office functions,” said Peters.
In its Fall 2011 Economic Outlook, Premier healthcare alliance also reported an expected uptick in IT spending for 2012.
Of the 743 healthcare executives surveyed, 40 percent said they expect to make the largest capital investments and expansions over the next 12 months in HIT and telecommunications, up from 34.5 percent in March 2011.
Mike Alkire, Premier’s COO, believes growth will be seen in these categories because they are essential to patient safety and quality of care.
“We feel these are areas that promote improved quality and the drive toward accountable care as much as anything,” said Alkire.
“We think this is another example of the impact reform has on healthcare executives who traditionally focus on price points to now consider the impact of technology on the supply chain,” added Alkire.
Provider consolidation and the development of ACOs are also predicted to have a positive impact on spending.
“ACOs will want to provide consumer-friendly access points in their community, which may require new construction or service expansion in existing locations,” said Peters.
“In addition, the larger organizations will be better positioned to obtain the financial resources needed to fund these projects” due to record low interest rates, he added.
“We’re seeing evidence that there will be an increase in capital spending in 2012,” said Peters. “The combination of need for replacement, anticipation of rising demand and continuing low finance rates are key drivers. We’re very optimistic that the capital investment recovery is underway.”