Healthcare does not have a capital problem. Health systems are frankly excellent at raising money and even better at spending it. What breaks is the middle — the long, quiet stretch between a board saying yes and an asset finally appearing on the balance sheet with a cost, a life and an in-service date you would be happy to defend out loud.

That stretch is Construction in Progress, and in healthcare it is longer, wider and considerably more crowded than almost anywhere else I work. I have a genuine soft spot for it. Most people find CIP tedious. I find it the most honest room in the building, because it is where every good intention about capital either survives or quietly doesn't.

Why healthcare CIP is structurally harder

A retailer building forty stores is running forty versions of one project. A health system is running an ED expansion, a surgical robot install, an EHR rollout, a parking deck, three clinic build-outs and a chiller replacement — all at once, under different project managers, funded from different pools, on entirely different timelines. Nobody designed that. It is simply what caring for a region looks like once it reaches a general ledger.

  • Multi-year duration. A tower takes four years. The people who opened the project code are usually not the people who close it, and the institutional memory of what that code was for walks out with them.
  • Mixed asset classes in one project. One renovation produces building improvements, fixed equipment, moveable equipment and software. Different lives, wildly different tax treatment. Booked as a single lump, that distinction is gone forever — and forever is a very long time to live with a shortcut.
  • Distributed decision-making. Facilities, biomed, IT and supply chain all commission capital. Finance sees the invoices, not the decisions behind them.
  • Regulatory and reimbursement pressure. Cost reporting, grant compliance and tax-exempt bond covenants all reach back into how capital was classified. That reach-back is getting longer, not shorter.

None of this is exotic. It is an enormous amount of surface area, and CIP is the one place all of it lands at the same time.

The three failures I see most

1. Projects that never actually close

The first thing I find in almost every healthcare fixed asset review is a CIP balance still carrying projects that finished years ago. The building is open. Patients are in it. Somebody has probably gotten engaged in the atrium. The costs are still sitting in suspense, depreciating nothing, telling auditors a story nobody wants to narrate.

This is almost never negligence, and I will defend the team on that every single time. It happens because nobody owns the trigger. Construction knows the work is finished. Finance knows how to capitalize. Neither has a standing obligation to tell the other, so the handoff runs entirely on someone remembering.

2. Placed-in-service dates set by convenience

Under GAAP, an asset is placed in service when it is ready and available for its intended use. Not when the last invoice clears, not at month end, and not when the project manager finally replies to the third email. What I usually find instead is an in-service date chosen because it made the close easier — which I understand entirely, and which still costs you.

The error compounds politely and permanently. Depreciation starts in the wrong period, tax lives start in the wrong year, and every later disposal, impairment or transfer inherits it.

3. One line item where there should be forty

An imaging suite capitalized as a single $6M asset on a 40-year building life is wrong in three directions at once. The equipment inside will be replaced in seven years, the tax treatment is understated today, and when that equipment is replaced there is no cost basis to retire. So the write-off never happens, and the register slowly fills up with assets that do not physically exist. I have met registers that were more ghost than machine.

What actually fixes it

Not a better spreadsheet. A short list of controls that make the right behaviour the easy option:

  • Define project lifecycle stages and make them mandatory. Approved, active, substantially complete, closed. Substantial completion is the state that triggers capitalization, and it belongs to the people who can physically see the work — not to accounting, guessing from an invoice.
  • Write a placed-in-service policy and put a human name next to it. One page, with worked examples for the things that genuinely recur: phased occupancy, equipment delivered before the room is ready, software going live in waves.
  • Make the componentization decision at project setup, not project close. An hour at the beginning, or weeks of invoice archaeology four years later. That reconstruction problem earns its own article on componentization, because it is that expensive.
  • Put CIP aging in front of leadership monthly. One report, every open project by age, an owner's name attached to each. Nothing I have ever written has cleared stale CIP faster than a list with names on it.
  • Reconcile CIP to the general ledger monthly. Not quarterly, and not in a heroic scramble at year end. Heroics are wonderful, and they are also a symptom.

The part worth saying plainly

Clean CIP is not an accounting nicety. In a health system the fixed asset register drives depreciation in the cost report, supports the bond covenant calculations, and forms the base for the replacement planning that decides which unit gets renovated in three years. When the register is wrong, real decisions get made on wrong numbers by people who have no way of knowing they are wrong. That is the part that still gets me out of bed after twenty-seven years.

The work itself is unglamorous: stages, dates, ownership, a monthly rhythm. And it turns a capital program from something finance reacts to into something the organization can see coming.