PART TWO – By Tom O’Brien
In my first blog on service costs I advocated for a holistic view and approach to managing service cost. In this blog, I share some thoughts and experiences about hospital cost accounting systems and practices.
This may be a surprise, but not all hospital cost accounting systems and practices accurately measure service costs. I make this statement based on having reviewed hundreds of service cost assessments, performed at all kinds of hospitals across the nation over the last 15 years. I have seen that service costs are often misclassified, misplaced or simply not recorded in an easily identifiable way in traditional cost accounting systems. This results in a generally poor understanding of the true cost to maintain and service clinical assets at the hospital or system level. Does this sound “too familiar” to you? Do you want to get the most value from every service dollar spent on servicing clinical assets? Let’s take a look at the story of service cost accounting at hospitals today.
The Beginning. Clinical assets are acquired based on identifiable needs from departments throughout the hospital. Decision making about the service plans is made one at a time or deferred to the department level. The service function becomes fragmented. Variability in service cost and the cost accounting of it is introduced.
The Middle. Departments account for service in a variety of ways. Inconsistent application of accounting codes for service of clinical assets introduces more variability. This goes on for years with little or no notice.
The End. Accurately identifying service cost for the system is now a problem, everyone’s problem, but no one is responsible. Problematic goals like; reducing service cost by 10% gets established from the top.
Consider that a 300-bed hospital may have 4,000 devices covered by 100 different service contracts with 50 vendors. Collecting and interpreting all the clinical asset-related service contracts for every department requires substantial time and effort. For many hospitals the decentralization of clinical asset ownership and service means that it is virtually impossible to use existing information systems to roll up service costs across departments and functions into a single cost measure that reflects the true cost of servicing clinical assets. For example, including clinical and non-clinical service costs in the same sub account (repairs and maintenance) would obviously overstate the actual clinical service costs. On the other hand, service costs that are recorded either in a line item that appears to be non-service related, such as miscellaneous expense, or even coded into an unrelated budget category would result in service costs being understated.
In this blog, I have shared that most hospital cost accounting systems at many hospitals in the United States are not accurately collecting and reporting service costs.
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Posted by Ohio Clinical Engineering Association 
