CHICAGO, November 15, 2005 - Almost one in three hospital CEOs believe their organizations could fail financially in the next five years. Yet despite the increasing financial pressure to upgrade their services and cut costs, many are failing to implement capital allocation and financial planning strategies that would help them remain viable and achieve the right balance of quality, investment and cost. In fact, 27 percent of hospitals and health system boards do not routinely require the integration of strategic and financial plans, according to data from a Governance Institute survey included in a new report.

The report, the third in the Financing the Future II series issued by Healthcare Financial Management Association (HFMA) in partnership with two healthcare industry leaders - GE Healthcare Financial Services and Kaufman, Hall & Associates, Inc. - outlines effective capital allocation tips and cites several healthcare organizations that have successfully overcome these financial challenges.

"Hospitals face a scarcity of funding, making integrating strategic financial planning and capital allocation critically important," said Richard Clarke, president and CEO of HFMA. "The key is to follow a clear process for evaluating and prioritizing investments."

The report urges healthcare organizations of all sizes to more rigorously apply proven corporate finance best practice principles, including:

• More carefully evaluating and scrutinizing potential risks/rewards

• Involving executive leaders in the decision-making process

• Identifying investments that will strengthen market position and competitive differentiation

• Actively monitoring the performance of capital investments against an organization's strategic plan and making necessary adjustments deliberately but quickly

• Institutionalizing the integrated planning process and committing to an annual plan for capital allocation

"The finance team must be at the planning table from beginning to end and serve as a true partner in setting strategic direction," said Jeffrey A. Malehorn, president and CEO of GE Healthcare Financial Services. "Hospitals that follow solid financial principles will remain financially viable in this climate of razor-slim margins."

Several healthcare organizations are referenced as examples of best practices in integrating strategic financial planning and capital allocation.

• University of Kansas Hospital, a Kansas City-based academic medical center, was projected to lose more than $20 million by the year 2000 after spinning off from the state-run university in 1998. The hospital's turnaround was accomplished, in part, by implementing a strategic five-year planning process.

• Swedish Covenant Hospital, an independent, non-profit hospital in Chicago, aims to allocate 70 percent of net available capital for strategic initiatives and 30 percent for ordinary maintenance and information technology.

• Catholic Health East, a large health system based in Newton Square, Pa., evaluates risk for each strategic project by estimating high and low ranges of projections.

"Few healthcare organizations have sufficient capital to meet their comprehensive funding requirements," said Kenneth Kaufman, managing partner, Kaufman Hall. "Health organizations must make extremely intelligent investment decisions that maximize their mission-based benefits at effective costs to finance upgrades and improve patient care."

The second Financing the Future series, created by HFMA in partnership with GE Healthcare Financial Services and Kaufman Hall, continues this process by defining, providing examples of, and encouraging the implementation of best practice, corporate finance-based approach to financial management in healthcare organizations.

Financing the Future II includes six reports published over 18 months, for healthcare financial leaders, their staffs and healthcare executive board members. Each report illustrates how actual hospitals and health systems have applied corporate finance principles to achieve successful financial performance and capital access. The first report published in May 2005 covered key principles of better practice financial management, while the second report focused on the "right" capital structure. This latest report, Essentials of Integrated Strategic Financial Planning and Capital Allocation, discusses strategic financial planning and capital allocation. Future reports will address: joint ventures with physicians and other partners (Report 4); strategies for financially struggling hospitals (Report 5); and the outlook for capital access (Report 6).

The next report in the series will be issued in February 2006.

To order this report, or previous reports, contact HFMA at (800) 252-4362, and select option 2, or visit www.financingthefuture.org.

Press inquiries should be directed to:

HFMA
Bridget Vrba
312.596.3479
bridget_vrba@chi.bm.com

Deia Campanelli
GE Healthcare Financial Services
312-441-6169

Kaufman, Hall & Associates, Inc.
Kenneth Kaufman
847-441-8780
Kkaufman@kaufmanhall.com

HFMA is the nation's leading membership organization for nearly 34,000 healthcare financial management professionals employed by hospitals, integrated delivery systems, managed care organizations, ambulatory and long-term care facilities, physician practices, accounting and consulting firms, and insurance companies. Members' positions include chief executive officer, chief financial officer, controller, patient accounts manager, accountant, and consultant. HFMA offers educational and professional development opportunities, information on key issues, technical data and networking opportunities, with the ultimate goal being to create a more supportive environment in which members do their business.

For more information, visit the Association's Web site at www.hfma.org.

GE Healthcare Financial Services is a provider of capital, financial solutions, and related services for the global healthcare market. With over $15 billion of capital committed to the healthcare industry, GE Healthcare Financial Services offers a full range of capabilities from equipment financing and real estate financing to working capital lending, vendor programs, and practice acquisition financing. With its knowledge of all aspects of healthcare from hospitals and long-term care facilities to physicians' practices and life sciences, GE Healthcare Financial Services works with customers to create tailored financial solutions that help them improve their productivity and profitability. For more information, visit .

About Kaufman, Hall & Associates, Inc.

Founded in 1985, Kaufman, Hall & Associates, Inc. is counted among the country's most respected independent financial and capital consultants, working with healthcare organizations of all types and sizes. Kaufman Hall provides financial advisory services to debt transactions; prepares and implements integrated strategic, financial and capital plans; designs comprehensive capital allocation processes; and assists in the evaluation, structuring and negotiation of merger, acquisition and divestiture transactions. In addition, Kaufman Hall developed and markets the ENUFF Advisor Suite of financial management software products. Kaufman Hall serves its clients from offices in Chicago, Los Angeles, San Francisco, Boston and Atlanta.

For more information, visit www.kaufmanhall.com.