Capital Planning [i.e budgeting or investment appraisal] [1] is the hospital planning process used to determine whether a healthcare organization's long term investments such as new or replacement medical equipment, furniture, medical supplies, employee continuing education, technology, and Research & Development projects are worth pursuing. It is a budget for major capital, or investment expenditures.[2]

Many formal methods are used in capital budgeting, including the techniques such as

  • Accounting rate of return
  • Payback period
  • Net present value
  • Profitability index
  • Internal rate of return
  • Modified internal rate of return
  • Equivalent annuity
  • Real options valuation

These methods use the incremental cash flows from each potential investment, or project. Techniques based on accounting earnings and accounting rules are sometimes used - though economists consider this to be improper - such as the accounting rate of return, and "return on investment." Simplified and hybrid methods are used as well, such as payback period and discounted payback period.

Role of the Clinical Engineer

The Role of the Clinical Engineer is two-fold 1). acts as the hospital technology consultant for medical equipment replacement and makes his or her annual recommendationsfor financial plans (fin plan) to various internal departments and to the Environment of Care board in the delivery of continued patient care. 2) budgets his or her own departments needs and requirements to include but not limited to: staff training, parts and supplies, certifications, annual conferences, space, technology and phone support, contract services, salaries, vehicle maintenance, and more.

Clinical engineers plan, review, and execute budgets on an annual basis.


  1. ACCE. CE Study Guide. Version 2. 2007.
  2. Business Dictionary.Com "What is Capital Planning." Accessdate 1/12/14.