ASHE Financial Stewardship 3 — Questions and Answers
Question 1: A healthcare facility has a Facility Condition Index (FCI) of 0.22. How should this be interpreted and what action does it suggest?
- Excellent condition — routine maintenance only needed
- Fair condition — increased capital investment warranted within 3–5 years
- Poor condition — significant capital renewal or replacement planning is urgent (Correct answer)
- Critical failure — immediate closure recommended
Correct answer: Poor condition — significant capital renewal or replacement planning is urgent
An FCI of 0.22 (above 0.10) indicates poor facility condition, signaling that deferred maintenance costs are high relative to asset value and urgent capital planning is needed.
Question 2: Which life-cycle cost component is most frequently underestimated when budgeting for new medical equipment?
- Initial purchase price and shipping
- Installation and commissioning costs
- Ongoing maintenance, service contracts, and end-of-life disposal costs (Correct answer)
- Training costs for clinical staff
Correct answer: Ongoing maintenance, service contracts, and end-of-life disposal costs
Ongoing maintenance, service contracts, and disposal costs accumulate over the equipment's full life and are most often underestimated in initial budget projections.
Question 3: A facilities department wants to benchmark its custodial costs. Which industry standard metric is most appropriate for this comparison?
- Cost per occupied bed per day
- Cost per cleanable square foot per year (Correct answer)
- Cost per full-time equivalent employee
- Cost per patient visit
Correct answer: Cost per cleanable square foot per year
Custodial cost per cleanable square foot per year is the standard industry benchmark for comparing housekeeping and environmental services expenses across facilities.
Question 4: When a hospital negotiates a multi-year service contract for elevator maintenance, what financial risk management strategy does this represent?
- Risk avoidance by eliminating elevator-related expenses
- Risk transfer by shifting maintenance liability to the vendor (Correct answer)
- Risk acceptance by self-insuring elevator failures
- Risk reduction through in-house staff training
Correct answer: Risk transfer by shifting maintenance liability to the vendor
A multi-year service contract transfers the financial risk of unexpected elevator failures and repair costs from the hospital to the maintenance vendor.
Question 5: Which budget type best supports a facilities department that needs flexibility to respond to unpredictable emergency repairs throughout the fiscal year?
- Zero-based budget with fixed line items
- Incremental budget with a dedicated contingency reserve (Correct answer)
- Activity-based budget tied to patient census
- Capital budget with quarterly reforecast cycles
Correct answer: Incremental budget with a dedicated contingency reserve
An incremental budget that includes a dedicated contingency reserve provides the financial flexibility needed to fund unpredictable emergency repair costs.
Question 6: A hospital is deciding between purchasing and leasing a $2 million chiller. Which financial factor most favors leasing in a healthcare environment?
- Leases always have lower total cost than purchasing
- Leasing preserves capital for higher-priority clinical investments and keeps payments off the balance sheet (Correct answer)
- Leased equipment qualifies for higher depreciation deductions
- Leases eliminate all maintenance responsibility for the facility
Correct answer: Leasing preserves capital for higher-priority clinical investments and keeps payments off the balance sheet
Operating leases preserve scarce capital for clinical priorities and, under certain accounting structures, keep the obligation off the balance sheet, improving financial ratios.
Question 7: Which key performance indicator (KPI) most directly measures the financial impact of a facilities department's work order management efficiency?
- Number of work orders opened per month
- Percentage of PM work orders completed on schedule
- Average cost per corrective maintenance work order (Correct answer)
- Total square footage per maintenance worker
Correct answer: Average cost per corrective maintenance work order
Average cost per corrective maintenance work order tracks labor, parts, and overhead efficiency, directly linking work order management to financial outcomes.
ASHE Financial Stewardship 3
A healthcare facility has a Facility Condition Index (FCI) of 0.22.
How should this be interpreted and what action does it suggest?