The growing demand for more and better healthcare service greatly expands the role of medical equipment in providing health services more effectively. The purpose of introducing clinical engineering programs in hospitals was to improve the effectiveness of healthcare institutions' utilization and management of medical technology. Over the last decade, the role of clinical engineering has grown in importance as a component of hospitals and the healthcare delivery system. Hospital administrators currently put a strong emphasis on cost effectiveness of clinical engineering services, to reduce the cost of acquisition and maintenance of equipment. Unfortunately, the lack of a commonly accepted definition of cost effectiveness has resulted in a certain amount of confusion over how the performance of clinical engineering services can or should be measured. The results presented in this paper should assist hospital administrators and clinical engineering program managers to establish a common understanding of what "cost effectiveness" means and how it can be achieved.