AHF members are in healthcare organizations, which in essence means we are in business to provide meals and services to our patients and residents! It is true that ultimately that is the reason our departments exist. However, it is certainly not the only thing we do nor is that the only service driving our expenses. As there are nuances to every facility in our AHF benchmarking group, almost all have some component of patient meals, CASH revenue and transfers. What the cost net of cash per patient/resident day metric shows is the total of all facility expenses MINUS any cash revenue generated in the facility divided by patient/resident days. As facilities are different, some of the most common components of CASH revenue come from retail/cafeteria sales, catering cash, and other cash.
As foodservice leaders we put time and effort into creating cafeteria and catering menus and certainly we have expenses related to creating those cafeteria and catered meals. When you look at your total cost per patient day that usually does not tell the whole story. If you are providing cafeteria and catering meals and charging for those meals, your department is generating cash revenue. What the cost net of cash metric shows is basically the total amount of your spend that is offset by the cash revenue you generate.
This data can be a key metric in meeting with your C-suite. Many times, expenses are isolated as target especially when looking at reducing costs. You may be asked why your labor or food, and supply costs are high and subsequently be asked to reduce those costs. The cost net of cash metric is a good metric to focus on if those questions are asked. You can then point to the fact that, yes, expenses in both labor and supplies may be high but how much of those increases are going toward cash revenue producing services? If your facility is bringing in cash at a rate that more than offsets the expenses, then simply reducing those expenses may NOT be the best idea as you may also lose the corresponding revenue that comes with those expenses. Sometimes you need to “spend money to make money.”
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Article by AHF Benchmarking Committee Member Steve Cerullo, Geisinger Health