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In September 2008, the Health Research & Educational Trust and the Center for Healthcare Governance, along with our partners at Navigant Consulting, surveyed 294 hospital and health system CEOs about the role of each of their boards in the process of capital allocation.
At least 40% of respondents indicated five competencies related to capital allocation that were given at least "some emphasis" when selecting new board members. Financial aptitude and strategic planning abilities were given the most weight in the selection process, with more than 80% of respondents indicating at least "some emphasis."
|At Least Some Emphasis|
|Strategic Planning Abilities||86%|
|General Construction Knowledge||49%|
Other findings included:
Board Committees Dealing with Capital Allocation
The finance committee and the strategic planning committee were the board committees most likely to deal with capital projects.
In general, freestanding, suburban, and rural hospital boards were more likely to assign capital issues to their finance committee than were urban hospital, subsidiaries of systems, and system boards.
Systematic Review of ROI of New Project
A large majority of respondents (86%) indicated that their board performed a systematic review of the projected return on investment (ROI) of at least some new capital projects.
Board Engagement of Administrators/Resources
A majority of respondents identified seven administrators or resources with which their boards at least sometimes actively engaged when the organization is undertaking new capital investments. The most common administrators or resources were the CEO and the CFO, which were always utilized by almost all respondents. A large percentage of respondents with a COO or VP of Facilities also indicated that their board always engages with these individuals.
|VP of Facilities||42%||48%||10%|
|VP of Community Affairs||14%||57%||29%|
Other findings included:
Overall, half of all respondents indicated that within the last two years, their boards had conducted a retreat to review and/or analyze potential future capital projects. Rural hospital boards were more likely to have such board retreats than were non rural hospital boards.
Challenges Boards Face
Overall, respondents indicated several areas where their boards have faced challenges during the last three years in relation to capital allocation for new construction, renovation, and/or IT investment:
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