Many hospitals lose tens of thousands of dollars every year, appear older and in need of capital improvement by leaving equipment that should be disposed of on their fixed asset ledger. Maintaining clean records of assets being purchased and being disposed of is time consuming, and many hospitals don't have the staff available to focus strictly on this issue. So, many hospitals choose to bring in valuation experts to help organize their records. Michael Staunton, a Director at Principle Valuation discusses five ways having inaccurate records can negatively impact the hospital and its bottom line.
1. Paying to insure non-existent assets. When a hospital purchases a new MRI or CT Scan, the old equipment, if disposed, must be removed from the hospital's books to reflect what the hospital currently maintains, not a cumulative record of the hospital's historical assets. When the records aren't updated, hospitals may be paying insurance on obsolete assets that don't even exist, says Mr. Staunton. A thorough inventory is needed to identify obsolete items and remove them from the hospital's books to ensure they have the proper insurance coverage.
2. Carrying excess accumulated depreciation. When hospital employees fail to remove depreciated equipment from the books after it has been disposed, the hospital appears to be older on paper than it really is. This can be problematic for hospital executives looking to refinance existing debt or raising new capital for expansion. Principle Valuation recently worked on a project with a large medical center that had $31 million in cost and accumulated depreciation on their record that were identified as disposals which, resulted in a 10 year drop in the average age of plant.
3. Asset control. Hospitals should have a good idea where their major-moveable equipment is at any given time, which means the books should reflect when a piece of equipment transfers from one department to another. Much of the equipment at hospitals these days has wheels for easy transportation, says Mr. Staunton, and the staff members need to keep track of the more expensive assets. Accurate records provide hospital management with verified data which will help in the annual budget process. One way to accomplish this is to implement a bar code tagging system which allows hospital staff to easily track equipment between departments in a hospital or between hospitals within a health system.
4. Unrecorded Assets. Hospitals sometimes have equipment that isn't on the books, which is a cause for concern when the hospital is audited, says Mr. Staunton. While staff members at the hospital often have a good cataloging process for acquiring equipment, often they overlook equipment acquired by unusual means. For instance, if the hospital leases an item and then purchases it when the contract is over, that asset may not be recorded properly. Making regular inventory checks is important for catching these types of updates.
5. Lack of available resources and expertise. Hospitals, in the past, often had staff members or departments that were in charge of maintaining the fixed asset ledger. Now, this responsibility is often passed off to department managers as part of their overall job descriptions. Because they lack the time and expertise necessary to go through an asset record, they might not recognize records with vague descriptions or model names. As a result, clinical staff, busy with patient care may not investigate whether certain assets are still in use.
Valuation experts who are focused strictly on healthcare, such as Principle Valuation, are able to work through a hospital's fixed asset ledger, help identify disposals and properly account for the assets that are currently in use. As an example, in one recent project, a hospital started with 15,500 assets and Principle Valuation provided a report with 12,000 disposals, leaving 3,500 assets on the updated list. "Now, the hospital has a much better idea of what assets they are using," says Adam Lynch, Vice President of Principle Valuation.
Learn more about Principle Valuation.
More Expertise From Principle Valuation:
Hospital Inventory Tip: Keep Track of Moveable Asset Inventory
Valuation Tip: Use Surplus Land Wisely
Concerns Facing Hospitals Right Now: Q&A With Dave Felsenthal of Principle Valuation
1. Paying to insure non-existent assets. When a hospital purchases a new MRI or CT Scan, the old equipment, if disposed, must be removed from the hospital's books to reflect what the hospital currently maintains, not a cumulative record of the hospital's historical assets. When the records aren't updated, hospitals may be paying insurance on obsolete assets that don't even exist, says Mr. Staunton. A thorough inventory is needed to identify obsolete items and remove them from the hospital's books to ensure they have the proper insurance coverage.
2. Carrying excess accumulated depreciation. When hospital employees fail to remove depreciated equipment from the books after it has been disposed, the hospital appears to be older on paper than it really is. This can be problematic for hospital executives looking to refinance existing debt or raising new capital for expansion. Principle Valuation recently worked on a project with a large medical center that had $31 million in cost and accumulated depreciation on their record that were identified as disposals which, resulted in a 10 year drop in the average age of plant.
3. Asset control. Hospitals should have a good idea where their major-moveable equipment is at any given time, which means the books should reflect when a piece of equipment transfers from one department to another. Much of the equipment at hospitals these days has wheels for easy transportation, says Mr. Staunton, and the staff members need to keep track of the more expensive assets. Accurate records provide hospital management with verified data which will help in the annual budget process. One way to accomplish this is to implement a bar code tagging system which allows hospital staff to easily track equipment between departments in a hospital or between hospitals within a health system.
4. Unrecorded Assets. Hospitals sometimes have equipment that isn't on the books, which is a cause for concern when the hospital is audited, says Mr. Staunton. While staff members at the hospital often have a good cataloging process for acquiring equipment, often they overlook equipment acquired by unusual means. For instance, if the hospital leases an item and then purchases it when the contract is over, that asset may not be recorded properly. Making regular inventory checks is important for catching these types of updates.
5. Lack of available resources and expertise. Hospitals, in the past, often had staff members or departments that were in charge of maintaining the fixed asset ledger. Now, this responsibility is often passed off to department managers as part of their overall job descriptions. Because they lack the time and expertise necessary to go through an asset record, they might not recognize records with vague descriptions or model names. As a result, clinical staff, busy with patient care may not investigate whether certain assets are still in use.
Valuation experts who are focused strictly on healthcare, such as Principle Valuation, are able to work through a hospital's fixed asset ledger, help identify disposals and properly account for the assets that are currently in use. As an example, in one recent project, a hospital started with 15,500 assets and Principle Valuation provided a report with 12,000 disposals, leaving 3,500 assets on the updated list. "Now, the hospital has a much better idea of what assets they are using," says Adam Lynch, Vice President of Principle Valuation.
Learn more about Principle Valuation.
More Expertise From Principle Valuation:
Hospital Inventory Tip: Keep Track of Moveable Asset Inventory
Valuation Tip: Use Surplus Land Wisely
Concerns Facing Hospitals Right Now: Q&A With Dave Felsenthal of Principle Valuation