AVERAGE AGE OF PLANT: Hospitals about 11 years (2014 median)

TAKEAWAY: The median value for the accounting metric “average age of plant” for all U.S. hospitals has increased from 2010 to 2014 and is currently just under 11 years.

WHAT IS AVERAGE AGE OF PLANT?  WHAT DOES IT MEAN?

“The Average Age of Plant ratio provides a measure of the average age of the hospital’s fixed assets in years.  This calculation assumes that the hospital uses straight-line depreciation.  This method of estimating age has been found to be reasonable accurate in prior research studies.  Lower values indicate a new fixed asset base and thus less need for near term replacement.” (p. 176).

This source provides data from two different databases – one based on hospitals’ audited financial statements and the other based on Medicare cost reports.  Here are a couple of comparative data points.

DATA FOR ALL U.S. HOSPITALS: Median values: Audited Financial Statements

• 10.1 years  2010
• 10.91 years  2014

DATA FOR ALL U.S. HOSPITALS: Median values: Medicare Cost Report Data

•   9.9 years  2010
• 10.8 years  2014

This data source has much more granular data according to characteristics of hospitals.  These metrics vary by region of the country – with the Northeast having comparatively higher values and the West Coast, lower.  Independent hospitals, as a group, have higher average age of plant values than system-affiliated hospitals do.

Source: Optum. (2015). Almanac of hospital financial & operating indicators: a comprehensive benchmark of the nation’s hospitals (2016 ed., pp. 176-181). Publisher’s website here: https://www.optumcoding.com/Product/43409/  Posted by AHA Resource Center, (312) 422-2050, rc@aha.org