How to Squeeze Out Additional Hospital Profit

Apr 4, 2013

Stuart Smith

Stuart Smith


This article will explain why Mintek’s Transcendent® makes a good Enterprise Asset Management (EAM) system to help increase Hospital profitability.

Why Hospital Profitability is Lowest in Years

The hospital industry has struggled over the last few years as regulation, rising administrative costs, competition from lower costs clinics and the need for capital improvements has squeezed profits to their lowest levels in 5 years.

The Hospital Profit Squeeze

The situation may change a little with the enactment of the Patient Protection and Affordable Care Act which will bring more insured (profitable) patients to hospitals and lowering their losses from uninsured patients.

“… its adoption is expected to increase demand for care from newly insured patients and reduce unpaid bills. But fewer write-offs from unpaid bills from the uninsured will not be enough to outweigh the Patient Protection and Affordable Care Act’s scheduled Medicare cuts to hospital payments, which total $150 billion over a decade”

Source: Kaiser Health News

Unfortunately, increased revenue alone will not negate the need for capital investment and rising wages to doctors and professional staff as competition for these scarce resources continues. For a hospital to be profitable all areas of costs must be closely examined.

One area operational expenses that is often overlooked but is in the complete control of hospital administrators is the cost of asset and maintenance management. With improved asset and maintenance management policies and procedures hospitals can see save precious dollars as well as improve their hospital’s image.

Enterprise Asset Management (EAM) to the Rescue

Asset management is important because is refers to non-human fixed items found in or around the actual hospital facility such as operating room equipment, beds, rooftop HVAC, chillers, boilers, laundry services, emergency systems, parking areas, lobby care, elevators, restrooms, plumbing and so on.

With several hundred thousand individual assets, the use of a quality EAM system is imperative. You can see this by understanding that hospitals NOT using an EAM do not know the age, condition, location and maintenance history of their assets. This puts them as a serious competitive disadvantage and hospital administrators will have to deal with issues such as:

  • Reactive (fire-fighting) maintenance issues such as climate control, lighting, equipment malfunctions, etc.
  • Accelerated capital replacements as neglected assets deteriorate faster. This apply to every part of the hospital facility. Well maintained assets last longer and work better.
  • Image issues with the general public as facilities start to look run down. Fixing this with renovations is far more expensive than preventive maintenance.
  • Poor document management leading to higher labor costs and slower reaction times while staff are looking for documents such as vendor contracts, photos, blueprints and schematics.
  • Higher liability when an asset fails especially if someone is injured. One of the best forms of defense is an accurate computerized record of proper maintenance.
  • Higher energy costs because the efficiency of lighting, HVAC, boilers and chillers are not optimized.

No, an EAM cannot help with the salaries for doctors and nurses but is can lower controllable expenses for engineering and maintenance staff including overtime, emergency repairs and capital replacements.

Isn’t it time your hospital got a handle on operational expenses?

Stuart Smith

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