A strategic approach to allocating capital in healthcare organizations
Kleinmuntz, C.E.; Kleinmuntz, D.N.
Healthcare Financial Management Journal of the Healthcare Financial Management Association 53(4): 52-58
1999
ISSN/ISBN: 0735-0732 PMID: 10557980 Document Number: 498147
Using a strategic capital-budgeting method based on principles of decision analysis can help healthcare organizations allocate capital effectively when meeting requests for capital expenditures. This eight-step method requires establishing evaluation criteria, classifying proposals by area of investment, ensuring that proposals are complete and easy to understand, determining costs of proposals, rating proposals with respect to individual criteria, setting priority weights for criteria, calculating weighted value scores for each proposal, and ranking proposals by benefit-cost ratios. The results provide a reliable basis for optimal capital allocation.