Depreciation accounting in the uniform chart of accounts.
George, Charles Lee
Liao, Shu S.
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This paper examines depreciation's contribution to the total cost of providing health care. In particular it analyzes the depreciation method used to measure the consumption of health care resources, the validity of the depreciation process and the subsequent allocation procedures. As defined by the Uniform Chart of Accounts, the usefulness of depreciation in determining the total cost of providing health care is attenuated by the fact that a major portion of a facility's capital assets are excluded from the depreciation process, the rate of depreciation understates the estimated useful service life of the assets, double counts certain expenses, and makes no provisions to periodically evaluate and adjust the composite rate of depreciation. Comparisons are made between depreciation accounting in the military health service system and the civilian health care sector. Issues raised with the implementation of depreciation accounting within the Uniform Chart of Accounts are addressed and recommendations are made that may enhance the usefulness of the depreciation methodology.
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