Finance and economics in health care delivery – discussion 6 (grading

Making the Case for Capital Budget Expenditures


As a nurse, you are probably very aware of and can speak to the emotional reasons behind the need for certain major expenditures such as a new nurse’s lounge or replacing the current patient information system with a new digital system. You would love to see your nurses have a comfortable area where they can rejuvenate from a stressful day with patients. Alternatively, nurses carrying around PDAs would certainly ease the recording and transmission of vital patient information. However, as a nurse manager you need to be able to support those emotional appeals with reliable financial data. Having a place to refresh will help nurses be more efficient, and could reduce sick days and nurse errors. Being able to quickly access doctor’s orders and previous nurse’s comments allows for a more timely response to patients. As your responsibilities expand, you may find yourself at the table when decisions about capital expenditures are being debated. It is therefore to your advantage to understand the workings of a capital budget.

In this Discussion, you consider the impact of both financial and emotional factors in making a capital budget decision,


To prepare:


Review the information on capital budgets in this week’s Learning Resources.

Consider why it is important for nurse managers to understand the capital budget of an organization. How are capital budgets used in your own organization (or one with which you are familiar)?

Reflect on the importance of thinking strategically when developing this type of budget.

Identify a new piece of equipment you would like to see purchased by the organization. Consider how knowledge of capital budgeting could influence your approach to making the request.

Develop strategies for demonstrating the need for this capital expenditure that take into account both financial and emotional considerations.


Post an analysis of why it is important for nurse managers to understand principles of capital budgeting. Describe a costly new piece of equipment you would like your organization (or one with which you are familiar) to purchase. Explain strategies for demonstrating the need for this equipment to decision makers. Briefly outline how you could use financial data and emotional appeals to demonstrate the benefits of this purchase.




Respond to at least two of your colleagues on two different days. Suggest an additional strategy for demonstrating the need for the equipment they described and why you believe it might be successful

(I will send the responses soon)


Required Readings


Baker, J., & Baker, R. W. (2014). Health care finance: Basic tools for nonfinancial managers(4th ed.). Burlington, MA: Jones and Bartlett Learning.

Chapter 16, “Capital Expenditure Budgets” (pp. 187–197)


The focus of this chapter is capital expenditure budgets and how they differ from operational budgets. It discusses how to develop and evaluate capital expenditure proposals.

Zelman, W., McCue, M., & Glick, N. (2009). Financial management of health care organizations: An introduction to fundamental tools, concepts, and applications (3rd ed.). Hoboken, NJ: Jossey-Bass.

Retrieved from the Walden Library databases.

Chapter 8, “Capital Financing for Health Care Providers” (pp. 329–373)


This chapter explores two types of financing—equity financing and debt financing—as well as the bond issuance process that can be used to finance capital expenditures. Additionally, the authors discuss the option of lease financing, a possible alternative to the two other types of financing.

 Danna, D. (2014). Essential business skills for nurse managers. Health Leaders Media. Retrieved from

This article discusses the need for nurses to understand the business skills necessary in healthcare today.

 Himmelstein, D. U., Jun, M., Busse, R., Chevreul, K., Geissler, A., Jeurissen, P., & Woolhandler, S. (2014). A comparison of hospital administrative costs in eight nations: US costs exceed all others by far. Health Affairs, 33(9), 1586-1594.

Copyright 2014 by Project Hope/Health Affairs Journal. Reprinted by permission of Project Hope/Health Affairs Journal via the Copyright Clearance Center


This article compares the hospital administrative costs in several nations.

 Zismer, D., Sterms, J., & Claus, B. (2011). Capital efficiency and integrated health system designs. Healthcare Financial Management, 65(7), 88–90, 92, 94.

Retrieved from the Walden Library databases.



In this article, the author examines how system designs play a crucial role in capital efficiency and return on investment. The author also analyzes how this role may change in the future.


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