Improving Criteria for Allocating Capital Resources

1. Improving Criteria for Allocating Capital Resources Paul B. Hofmann, DrPH, FACHE Hofmann Healthcare Group Moraga, California, USA

2. Myths and Realities of U.S. Healthcare • Extraordinary spending on healthcare does not produce uniformly excellent healthcare • U.S. will spend 17.6% of GDP this year, twice as much as most so-called developed countries • 28th in life expectancy • 29th in infant mortality • Only moderately effective disease care non-system • U.S. learning to do some things better – not perfectly • Creating healthier communities • Improving disease prevention and clinical outcomes • Decreasing medical errors • Reducing racial and cultural disparities • Delivering patient-centered care (timely, convenient, respectful) • Making more judicial use of technologies

3. More Capital Resources Not Always a Panacea • Medical care ≠ health • Ability to develop new technology exceeding wisdom to apply it wisely • Can treat too much and care too little • Must avoid doing too much to patients and too little for patients

4. Classic Issues Affecting Capital Resource Allocation Decisions • Request and urgency almost always exceed funding and implementation capability • Need and justification frequently exaggerated • Acquisition obstacles and problems minimized • Operating costs often under-estimated • Unanticipated and/or unintended consequences of project rarely recognized • Audits to assess validity of original assertions infrequently performed

5. Financial and Non-Financial Criteria Must be Emphasized • Financial criteria properly focus on conventional cost-benefit analysis • Non-financial criteria include: • Relation to organization’s mission • Implications for meeting needs of community, patients, staff and others • Contribution to improved productivity, safety, access, clinical outcomes and health status • Compliance with legal, licensing, regulatory and similar requirements

6. Use of Ethical Principles to Make More Appropriate Resource Allocation Decisions • Competing and equally compelling projects require additional analytical review • Decisions must be not only economically justified but also morally defensible

7. Relevance of Four Ethical Principles • Beneficence • Nonmaleficence • Fidelity • Justice

8. Beneficence • Acting with charity and kindness • Promote actions that benefit others • Take active advocacy role versus passive position • Relevance – be diligent in quantifying value

9. Nonmaleficence • Avoid doing harm • Prevent decisions that compromise organization or staff • Remain sensitive to actual or potential conflicts of interest and refuse to permit them • Relevance – be ethically conscious and courageous in resisting political pressures

10. Fidelity • Meet prior obligations and commitments • Support allocation decisions most aligned with organization’s mission and values • Give appropriate consideration to inelegant but worthy capital requests • Relevance – meet reasonable expectations for funding and explain disapprovals

11. Justice • Act with fairness and impartiality • Establish open and objective decision-making process with clear criteria • Consider legacy of previous inequities • Relevance - demonstrate consistency in following rational process

12. Concluding Observations • Compromises unavoidable • Balancing competing priorities rarely easy • Executive trust and integrity enhanced or diminished by both process and outcome