Capital expenditure planning: the value of information to hospitals

This article examines some of the costs caused by the uncertainty created by competition among hospitals, especially those costs reflected in capital expenditure planning. A proposal is developed for a computer-based capital budgeting system that would allow hospitals to share enough information about their future capital expenditure plans to reduce the major costs of competition-induced uncertainty without publicly disclosing their future intentions. The benefits of such a system can be measured as the expected value of complete information. An illustrative example is provided.