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Strategic options in capital budgeting and program selection under fee-for-service and managed care
1Department of Accounting and Finance, National University of Diego, CA, USA.
Health Care Management Review
|January 1, 1996
Summary
Many healthcare investments offer value beyond direct cash flows. Incorporating strategic options into capital budgeting helps organizations adapt to managed care and pure capitation models.
Area of Science:
- Health care finance
- Strategic financial management
Background:
- Traditional capital budgeting often overlooks non-cash flow benefits of assets and projects.
- Pure capitation models in healthcare sever the direct link between investment decisions and financial returns.
Purpose of the Study:
- To demonstrate how incorporating strategic options enhances capital budgeting in healthcare.
- To provide a framework for adapting capital budgeting to managed care environments.
Main Methods:
- Conceptual analysis of capital budgeting principles.
- Examination of strategic option valuation in financial decision-making.
Main Results:
- Strategic options represent a significant, often unquantified, value in healthcare assets.
- Valuing these options improves investment decision accuracy under capitation.
Conclusions:
- Integrating strategic option valuation into capital budgeting is crucial for healthcare organizations.
- This approach offers a practical method for navigating the complexities of managed care and capitation.
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