ASHE Financial Stewardship 2 — Questions and Answers
Question 1: A healthcare facility's total maintenance budget is $4.2 million and the replacement asset value (RAV) is $140 million. What is the maintenance spending ratio, and is it within the ASHE-recommended range?
- 2% — below the recommended 3–4% range
- 3% — within the recommended 2–4% range (Correct answer)
- 3% — within the recommended 3–5% range
- 4% — above the recommended 2–3% range
Correct answer: 3% — within the recommended 2–4% range
The ratio is $4.2M/$140M = 3%, which falls within ASHE's recommended maintenance spending range of 2–4% of replacement asset value.
Question 2: Which financial metric best measures the actual cost-effectiveness of a preventive maintenance program over a 12-month period?
- Gross square footage per maintenance technician
- Ratio of corrective to preventive maintenance labor hours (Correct answer)
- Total deferred maintenance backlog value
- Energy use intensity (EUI) compared to prior year
Correct answer: Ratio of corrective to preventive maintenance labor hours
The ratio of corrective to preventive maintenance labor hours directly measures whether the PM program is reducing reactive failures and associated costs.
Question 3: When preparing a five-year capital equipment replacement plan, which data source is most critical for prioritizing purchases?
- Vendor sales catalogs and list pricing
- Facility condition assessment (FCA) scores and equipment age (Correct answer)
- Staff preference surveys and department wish lists
- Prior-year budget actuals only
Correct answer: Facility condition assessment (FCA) scores and equipment age
Facility condition assessment scores combined with equipment age provide objective, risk-based data for prioritizing capital equipment replacement decisions.
Question 4: A health care facility is evaluating whether to outsource biomedical equipment maintenance. Which financial analysis should be conducted first?
- Net present value (NPV) of buying new equipment
- Total cost of ownership comparison between in-house and contracted services (Correct answer)
- Depreciation schedule for existing biomedical assets
- Calculation of the facility's debt-to-equity ratio
Correct answer: Total cost of ownership comparison between in-house and contracted services
A total cost of ownership comparison captures all direct and indirect costs of both options, providing the most complete financial basis for the outsourcing decision.
Question 5: Under GAAP, how should a major HVAC system replacement that extends the useful life of a building be recorded on financial statements?
- Operating expense in the period incurred
- Capitalized as a fixed asset and depreciated over its useful life (Correct answer)
- Recorded as a contra-liability against long-term debt
- Expensed immediately as a maintenance cost
Correct answer: Capitalized as a fixed asset and depreciated over its useful life
Capital improvements that extend asset useful life are capitalized under GAAP and depreciated over the remaining useful life of the improvement.
Question 6: Which approach most effectively reduces a facility's deferred maintenance backlog without requiring a single large capital outlay?
- Eliminating preventive maintenance tasks to free up labor for backlog repairs
- Implementing a phased multi-year funding model tied to facility condition index (FCI) targets (Correct answer)
- Transferring deferred items to the operating budget each quarter
- Outsourcing all maintenance to reduce internal labor costs
Correct answer: Implementing a phased multi-year funding model tied to facility condition index (FCI) targets
A phased multi-year funding model tied to FCI targets allows systematic backlog reduction with predictable annual investments aligned to measurable condition goals.
Question 7: A hospital CFO asks the facilities director to justify a $500,000 investment in building automation system (BAS) upgrades. Which financial justification metric is most persuasive?
- Increase in gross square footage managed per FTE
- Simple payback period based on projected annual energy savings (Correct answer)
- Reduction in staff overtime hours
- Improvement in Joint Commission survey scores
Correct answer: Simple payback period based on projected annual energy savings
Simple payback period calculated from projected annual energy savings directly links the capital investment to quantifiable financial returns that CFOs can evaluate.
ASHE Financial Stewardship 2
A healthcare facility's total maintenance budget is $4.2 million and the replacement asset value (RAV) is $140 million.
What is the maintenance spending ratio, and is it within the ASHE-recommended range?