Managing Capital Projects Risk

Hospitals and health systems need to ensure that they are appropriately focused on capital spending and associated risks

As healthcare leaders strive to help their organizations remain competitive — while they expand, modernize, and integrate the facilities with the latest in technology — leadership has less time to focus on the total amount of risk the organization is taking on as it endeavors to achieve its targeted strategic position. However, the bottom line is clear: The increased risk associated with construction and technology spending puts added pressure on the hospital’s financial position.

The Development Continuum

The development continuum (see graphic below) identifies activities that occur from the beginning to the end of a capital project. The continuum can help the board of directors and hospital leadership organize, visualize, and oversee these activities. Although presented in a linear format, many of the activities occur simultaneously, to both accelerate the project to market and reduce risks.

Healthcare organizations that do not completely understand capital project risks and how to manage them will reduce their flexibility to overcome uncertainty and succeed in their respective markets. Organizations that decide to manage risk by abandoning or delaying essential capital projects may find themselves in an uncompetitive position. Organizations need to plan for tomorrow’s success.

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