What is Asset Relifing?

Asset relifing is a study that assigns a realistic and accurate life for an asset. Our implementation results include increased operating margin, enhanced bond ratings and lower insurance costs.

Why Relife Assets?

Hospitals and Health systems have utilized the lives assigned to assets by the American Hospital Association (“AHA”), which tried to maximize the rate of depreciation expense due to the old Medicare cost reimbursement methodology.

Those guidelines use shorter lives which accelerate depreciation expense and reduce a hospital’s operating income.

Asset relifing decreases depreciation expense and increases operating income. Downstream benefits can include, but are not limited to, better bond ratings, lower insurance costs and more accurate capital planning.

Our Process

Our process follows the traditional performance improvement methodology of assessment, implementation, and results. Unlike other performance improvement projects, our results are delivered and implemented in a matter of months, with minimal time involvement from key stakeholders. To learn more about the stages of our process please see below.

1. Complimentary Assessment

No Cost, No Commitment
We offer a complimentary assessment to determine the overall benefit to our potential clients.

Resources Required
We only require an Excel version of your fixed asset records to complete the assessment. Once the assessment is completed, we will review the results with your finance leadership team. Findings from the assessment are typically delivered in 5-7 business days within receiving your fixed asset record.

Findings include

Estimated Annual Change in Depreciation Expense
Estimated Impact on Operating Margin
Estimated Professional Fee
Estimated Length of Implementation
Estimated Unrecorded Disposals

2. Implementation

Our implementation process takes weeks to a few months dependent on size and scope of agreed upon project. Each project, regardless of its scope follows our standard process:

Project Kickoff
Essential meeting where we align our Subject Matter Experts (SME’s) with client stakeholders to outline project objectives and timeframe.

On-Site Due Diligence
Our SME’s are on-site verifying existence and remaining useful live of assets that meet our required thresholds for the project.

Production
Our SME’s take results from on-site due diligence and verification process to calculate and actualize process of Relifing of assets.

Quality & Assurance
Our internal quality and assurance team reviews and verifies results from SME’s findings.

Issuance of Draft Reports
Draft reports will be issued, reviewed and discussed for purposes of approval by Client Finance leadership, Client auditor and Principle Valuation leadership.

Final Reporting
Final reports will be issued along with updated Excel schedules to be uploaded into your fixed asset accounting system.

3. Review, Results and Sustainability

Review

Our results have been reviewed and approved by the Big Four, regional and community audit firms across the United States.

Our results do not require a restatement of financial statements, as it is a change in estimates, and can be taken retroactively as a full year adjustment.

Results

On average our clients realize a 20-30% reduction in annual depreciation expense, which results in an increase of 20% to 25% in operating margin. Through due diligence we identify 5-15% of gross PP&E in unrecorded disposals which potentially lowers insurance costs and the average age of plant.

Sustainability

After the completion of every project we provide a 5 year replacement cost analysis providing our clients with the most accurate strategic capital plan.

What are the Benefits of Asset Relifing?

Decrease in Depreciation Expense

On average our clients recognize a 20 to 30% reduction in annual depreciation expense

Improved Margins

On average our clients recognize an increase of 20 to 25% in operating margin

Lower Insurance Costs and Average of Plant

On average our clients recognize a 5 to 15% reduction in Gross PP&E as unrecorded disposals which lowers the average age of plant and insurance costs

Full Year of Benefit

Our results can be taken retroactively as a full year benefit in the current fiscal year

Increased Borrowing Power

Depreciating assets too quickly can negatively impact the fair market value of a hospital and also make it more difficult for a hospital to borrow

Standardized Methodology

Our results generate a standardized methodology of depreciating assets across a system

Accurate Capital Planning

Through our five year replacement cost analysis operators are able to more accurately plan for capital purchases

Our Industry Experts

Paul W. Shade

Managing Partner

Robert O. Polk

Managing Partner

Michael E. Staunton

Director

Principle is ready to serve you

Principle Valuation is the leading national healthcare fixed asset valuation firm. For over 20 years we have become the experts in Valuation and Relifing of assets serving hundreds of hospitals and healthcare systems across the United States.

Our Address

311 S. Wacker Drive
Suite 3350
Chicago, IL 60606

Phone & Email

312-422-1010
info@principlevaluation.com