In a Modern Healthcare analysis of cost reports for hospitals filing from 2018 through 2022, median net capital costs for critical-access hospitals increased almost 17%, while those for acute-care hospitals rose only 1% over the same period.
Net capital costs are defined as the total costs of buildings, fixtures and movable equipment.
For more on capital spending, see the Construction and Design survey results.
Eric Lucas, managing director of healthcare consulting for accounting and consulting firm Moss Adams, said capital costs were likely affected by increased interest rates, supply chain issues and inflationary pressures—the same factors driving up operating costs. Indeed, overall operating expenses for critical-access hospitals and acute-care hospitals increased at a faster rate than capital costs over the same period.
But capital costs may have risen even without those influences.
Capital spending is less volatile in the short term because the depreciation of assets, such as buildings, is spread out over many years, said David Hall, partner at accounting and professional services firm Forvis.
“So a large part of capital costs on recent cost reports reflects spending decisions made prior to the pandemic,” he said.