Few healthcare organizations have sufficient capital capacity to meet their comprehensive, strategic capital requirements. Their leaders must make often-difficult choices. The decision-making process that determines how much capital to spend and the projects on which capital will be spent is vital to achieving optimal strategic and financial results. In far too many healthcare organizations, capital funds are allocated to initiatives in a sequential, history-based or political manner with insufficient planning, analysis and comprehensive review of projects' strategic or financial effects. Effective allocation of capital requires coordination between the strategic, financial and capital planning processes and the capital management and budgeting processes. The allocation methodology should create incentives that maximize dollars allocated to each operating unit based on its successful performance. Performance at a survival-only level may not actually ensure future survival and will not achieve competitive performance. Every small step taken toward reaching such performance helps the organization improve its competitive financial position and positions it to pursue aggressive and effective strategies.