Aurora Health Care, Milwaukee, Wis., developed a plan that analyzes the use, maintenance, and condition of diagnostic imaging equipment to assist the health system in making day-to-day asset management decisions, as well as setting longer-term capital allocation priorities. As a result, Aurora has achieved $12.5 million in capital avoidance costs and saved $4.4 million in operating and equipment service costs since early 2012. (See the following exhibit.)
In late 2011, Aurora’s corporate finance team questioned whether the organization could allocate costs for maintaining and acquiring diagnostic imaging equipment more strategically and efficiently across the health system. Aurora is comprised of 15 hospitals, 1,500 employed physicians, 159 clinics, 70 retail pharmacies, and the largest home care service in Wisconsin. It was spending roughly $30 million each year to replace, repair, and upgrade diagnostic imaging equipment.
At the time, each individual hospital and clinic submitted its annual capital requests for equipment upgrades and replacements to Aurora’s executive leadership. Decisions often were made without sufficient information on the state of existing equipment and without consideration of whether device use rates or market needs warranted total replacement at a specific site.
To ensure that Aurora was investing in the right equipment in the right places, the health system assembled a team to develop greater insight into how medical staff at each facility were using imaging equipment and to maximize equipment investments systemwide. The goal was to establish a methodology to determine which diagnostic imaging assets needed optimization, upgrading, or total replacement as part of annual and five-year capital planning.
The team, comprised of Aurora clinicians and a group of asset management and healthcare finance consultants, began by examining CT, nuclear medicine, mammography, X-ray, and ultrasound equipment. Team members logged the age, repair history, and utilization of each piece of equipment by department. Aurora then shared that data with a group of physicians and department heads to align clinical needs and to jumpstart discussions about equipment priorities for the following year, including replacements, upgrades, and, redeployments of underused equipment.
One example of a discovery and key process change that resulted from Aurora’s approach involves CT scanners. On studying its 56 scanners, Aurora found that CT use was different at each site. As a result, the health system chose to concentrate machines in the most high-demand, high-volume locations to better align use with patient needs and to eliminate duplicate services offered at sites in close proximity to each other.
The technology planning process also allowed Aurora to align technology investments with each clinical department’s unique need. For example, Aurora’s radiology departments relies most heavily on ultrasound equipment for the largest variety of patient cases. Yet other departments with a limited need for ultrasounds had the same number of ultrasound machines, with the same level of technology, as radiology. That knowledge led Aurora to make targeted investments in the newest ultrasound technology for radiology during the capital planning process.
In another example, after analyzing the ultrasound equipment in Aurora’s obstetrics and gynecology (OB-GYN) department and speaking directly to the OB-GYN physicians, Aurora was able to reduce equipment expenditures for this department. The process revealed that the OB-GYN department was using multiple systems, including handheld ultrasound equipment and more costly, advanced ultrasound systems. As the OB-GYN physicians evaluated how they used this equipment, they concluded that the handheld systems met clinical quality thresholds for their patients. By standardizing their ultrasound use to this modality, the physicians were able to give patients the care they needed, while limiting the need to invest in advanced ultrasound equipment.
Aurora has also used its imaging equipment analyses to infuse more rigor into its preventive maintenance protocols. Having detailed data on each piece of equipment has helped biomedical managers predict and address service events before they occur.
By asking the difficult questions about equipment assets and designing and implementing solutions, Aurora has introduced a higher level of rigor, discipline, and informed decision-making into its asset management and long-term capital allocation process. By learning to look at equipment needs through a deeper lens, Aurora has undergone a cultural transformation. At a time when payments are declining for healthcare services, it is invaluable that Aurora executives are confident the organization is spending money where it matters most.
Brad Hahn is executive vice president of finance, Aurora Health Care, Milwaukee, Wis., and is a member of HFMA’s Wisconsin Chapter.
Richard Neff is vice president and general manager, United States and Canada Service, GE Healthcare, Milwaukee, Wis.
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