Example 16A: Description of Capital Expenditure Proposals Scoring System

Worthwhile Hospital has a total capital expenditure budget for next year of five million dollars. Of this amount, three million is already committed as spending for capital assets that have already been acquired and are in place. The remaining two million dollars is available for new assets and for new projects or programs.

Worthwhile Hospital typically divides the available capital expenditure funds into monies available for inpatient purposes and monies available for outpatient purposes. This year the split is proposed to be 50-50.

The hospitals CFO is also proposing that a scoring system be used to evaluate this years proposals. She has set up a scoring system that allows a maximum of five points. Thus the low is a score of one point and the high is a score of five points.

In addition to the points earned by a funding proposal, the CFO will allow one bonus point for upgrading existing equipment and one bonus point for funding expansion of existing programs.

Assignment Exercise 161: Capital Expenditure Proposals

Ted Jones, the Surgery Unit Director, is about to choose his strategy for creating a capital expenditure funding proposal for the coming year. Teds unit needs more room. The Surgery Unit is running at over 90% capacity. In addition, a prominent cardiology surgeon on staff at the hospital wants to create a new cardiac surgery program that would require extensive funding for more space and for new state-of-the-art equipment. The surgeon has been campaigning with the hospital board members. Required

What should Ted decide to ask for? How should he go about crafting a strategy to justify his request, given the hospitals new scoring system?