When I was a hospital CFO, I could tell you the cost of a patient day in the intensive-care unit to the dollar, because the cost report made me. I could not have told you what an empty ICU bed cost us, and I never thought to ask. That is the number that matters when you finance equipment.
Start with what you file
The cost report already allocates capital costs to the ICU: depreciation on the beds, monitors and ventilators, plus a share of the building. Divide the equipment part by the number of beds and by 8,760 hours, and you have the cost of having a bed available for an hour. In the hospitals we work with it usually falls between $2.10 and $3.40.
Now divide by your occupancy. If your unit is occupied 75 percent of the time, every occupied hour carries a third more equipment cost than the available-hour figure suggests, because it is also paying for the empty hours around it. At 60 percent occupancy, it carries two-thirds more.
Why it matters
Under a fixed lease, or a purchase, you pay for available hours. Under Utilization Pricing you pay for occupied hours, at a higher rate per hour, above a minimum. Which is cheaper depends almost entirely on how much your occupancy varies from month to month, not on its average.
A unit that runs at 85 percent every month will usually do better on a fixed lease. A unit that runs at 95 percent in January and 58 percent in August will usually do better on Utilization Pricing, because it stops paying peak prices for trough months.
The variance is the variable. Two units with the same average occupancy can have very different answers.
Doing the arithmetic
We will run the comparison for any hospital using its own monthly census for the last three years, at no cost and with no commitment. Most finance teams can do it themselves in an afternoon with the cost report and the census report. The worksheet we use is in the Client Center for existing clients.