"Capital crunch" forces hospitals to delay IT upgrades

By Richard Pizzi
02:30 PM

The "capital crunch" and the recession are severely restricting U.S. hospitals in obtaining funds to upgrade their facilities and invest in new clinical and information technologies, according to the American Hospital Association.

In a conference call with reporters, AHA President and CEO Richard Umbdenstock said hospitals rely on borrowed money, philanthropy and reserves to fund capital projects, but many now find it difficult to obtain funds from these sources.

The vast majority of hospitals surveyed report that borrowing funds through tax-exempt bonds - the main source of borrowing for most hospitals - is difficult or impossible. Loans from banks or other financial institutions are similarly difficult to obtain.

Umbdenstock said hospitals' reserves have also taken a hit due to falling stock prices, while net income is down and philanthropic donations have slowed, leaving hospitals with less of their own funds to rely on to make needed improvements.

Nearly half of the hospitals surveyed by the AHA have postponed projects that were to begin within the next six months and many have stopped projects that were already in progress.

For example, Umbdenstock said, Women's Hospital in Baton Rouge, La., has delayed and may have to stop construction of a new facility that would help the hospital fulfill its state-appointed responsibilities to evacuate and care for infants during catastrophes, which they had done during Hurricanes Katrina, Rita and Gustav.

"From cancer centers to expanded emergency departments to electronic health records systems, hospitals are postponing or delaying projects that could greatly benefit healthcare in communities across the country," said Umbdenstock. "Stopping these projects also means new jobs are not created within the healthcare field or for construction workers, contractors, IT specialists and others. The ripple effects of the capital crunch on employment are cause for great concern."

According to the survey, the planned hospital projects now put on hold would have responded to a variety of healthcare needs:

  • 43 percent of hospitals planned to expand and improve their emergency or urgent care departments.
  • 65 percent intended that their projects increase their ability to provide inpatient medical and surgical care.
  • 13 percent of hospitals reported they postponed projects related to inpatient behavioral health.

The vast majority of hospitals that have postponed projects have delayed updating their facilities, while more than six out of 10 hospitals have put clinical and information technology projects on hold.

More than 8 out of 10 hospitals said they have delayed projects to update or replace aging clinical equipment or use IT to automate clinical processes.

  • More than six out of 10 hospitals reported that facility upgrades and clinical and information technology projects would have increased patient care efficiency and improved quality of care.
  • Nearly 60 percent of hospitals said the IT projects that have been put on hold would have improved care coordination.
  • About half of all hospitals are trying to meet growing demand for existing services through either facilities projects or purchases of clinical equipment.

The AHA survey, "Report on the Capital Crisis: Impact on Hospitals," provides data from 639 hospitals collected from late December 2008 to January 6, 2009.