Operating cost analyses of long‐term care facilities

Abstract

PurposeAfter salary and wages, facility and real estate expenditure are the largest cost items in the semi‐public sector. Especially, for long‐term care facilities, there is high‐saving potential from more efficient and effective use of property. The main purpose of this paper is an exploratory research study in order to analyse the operating costs of long‐term care facilities.Design/methodology/approachThe survey is based on empirical data questionnaires, data generation and semi‐structured interviews at 18 long‐term care facilities in Tyrol, Austria carried out during Summer 2007. In order to determine the volume and to prioritize the cost drivers computer‐aided real‐estate benchmarking software was used, which was developed by the Institute of Real Estate Benchmarking at the University of Applied Sciences KufsteinTirol, Austria. Statistic analyses were conducted to investigate saving potential, determine the best case of the sample and submit recommendations to the decision makers.FindingsThe main findings are the investigation and visualization of saving potential of long‐term care facilities and identification of the volume and structure of the cost drivers and illuminated current best practices in effective building upkeep and operating costs of long‐term care facilities in Tyrol. Furthermore, the study reveals the immense saving potential in the costs of various services.Research limitations/implicationsThis survey is based on the operating costs of long‐term care facilities. Other running costs such as costs for healthcare personnel as well as quality indicators are not considered in this survey. Further research activities will be necessary regarding the identification of these cost drivers by the application of regression models.Practical implicationsProfessional property management of long‐term care facilities will be shown to decrease the cost share in the healthcare sector. The results should help to establish cost benchmarking increasingly and develop it as a strategic planning tool in order to support management in the healthcare sector in the decision‐making process.Originality/valueThe paper presents a new measuring method, which allows an holistic view of three influencing factors, namely the amount of beds, occupancy and the space consumption, to investigate weak points in cost efficiency on one chart.