Dale Hockel
Robert Hughes

Don't wait until your equipment is on its last legs. A management plan can help your system avoid costly surprises.


At a Glance

A medical equipment management plan can help hospitals save millions by:
 

  • Decreasing repair and maintenance costs  
  • Reducing downtime and lost revenue caused by equipment failure  
  • Managing contracts and training staff to bring service in-house, when appropriate  

Facing squeezed margins, uncertainty due to healthcare reform, investment losses, and reduced census, along with a growing number of patients who require financial assistance or are unable to pay, hospitals are looking for new ways to curtail expenses and boost the bottom line without sacrificing quality of care. With the economy improving but still struggling, hospitals large and small are concerned about capital budgets, softening of demand, and operating performance.

Extending the life of medical equipment is one avenue that can help. In fact, amid these challenges, comprehensive medical equipment management is a remedy currently saving millions of dollars for hospitals across the country. In addition to extending the life of and increasing utilization of vital equipment, a well-designed clinical engineering program can actually decrease costs for repairs and maintenance, helping to avoid or even eliminate downtime and to increase patient throughput.

Holistic, 360-degree equipment management also helps improve clinical staff satisfaction and patient safety. Moreover, having fewer problems caused by dysfunctional equipment provides more time to focus on patients, improving the quality of care.

Critical Control Throughout Five Phases of Equipment Life-Cycle Management

To extend the life of medical equipment, hospitals should exercise careful control of five stages of equipment life-cycle management:

  • Capital equipment planning
  • Selection and procurement
  • Implementation
  • Ongoing management and monitoring
  • End-of-life management

The following are strategies hospitals should consider during each phase of equipment life-cycle management to gain the most value from medical equipment.

Capital Equipment Planning

Purchasing medical equipment is one of the largest expenditures a hospital makes in a year, so the planning phase is absolutely crucial to making smart, strategic decisions. Without a thorough plan, hospitals run the risk of making poor decisions-decisions that may end up costing them thousands or even millions of dollars.

Before a hospital launches into capital planning, its leaders should consider the following.

Find an unbiased partner. Unfortunately, there is a lot of bias wrapped up in capital equipment planning. Original equipment manufacturers (OEMs) want the hospital to choose their products, while new physicians demand new equipment based on the brands they are accustomed to using. To avoid bias, it is advantageous to choose an independent medical equipment consultant that is not a manufacturer or supplier and that can provide an unbiased approach with evidence-based total cost of ownership data that are vendor-neutral across multiple manufacturers to aid in the decision-making process. A partner with knowledge and experience with various manufacturers should know which devices might be problematic and require expensive repairs or replacement parts. Also, a third-party can help a hospital examine the total cost of ownership of equipment-not only the purchase price, but also the cost of factors such as service training, software upgrades, software keys, and extended or reduced warranties. These can add up to thousands of dollars over the life of a piece of equipment.

Align department spending with overall hospital growth goals. When planning for a particular department's equipment needs, department managers should consider the larger organization's overall goals. For example, is it positioning itself to become the area's No. 1 bariatric services provider in the next five years? Is it adding a children's hospital? Department managers should facilitate communication with the hospital's administration, and make sure their equipment purchases match up with the hospital's strategic goals to avoid overspending later.

Selection and Procurement

During the selection and procurement process, it's important not to rush the decision but to pay attention to even the smallest details. Here are a few considerations.

Limit service contracts. Up-front negotiation with manufacturers can save additional dollars in the short run. Hospitals should opt for short-term maintenance and warranty programs of less than two years. If there is a constant flow of repair work, consider training in-house staff to make repairs. This approach can significantly improve response time, reduce downtime, and eliminate exorbitant costs by leveraging on-site expertise of individuals who are more familiar with the device and its business purpose for the hospital. Moreover, in-house technicians and engineers who work flexible shifts often can conduct performance assurance and repairs after-hours to avoid interrupting patient care. By contrast, calling for an OEM after hours will result in substantial overtime charges.

Even if the hospital has committed to a long-term service contract, it should weigh the financial impact of breaking that contract (possibly through an out-clause) and taking a financial hit to save money in the long run by using in-house clinical engineers for maintenance and upkeep.

Prepare the site for implementation. It is important to ensure that new equipment will work alongside the current equipment infrastructure. For example, prior to delivery of a magnetic resonance imaging scanner, staff should evaluate workflow, including how the equipment will integrate with enterprise resource planning systems, patient monitoring, radiology information systems and picture archiving and communication systems (PACS), electronic medical records, and other financial systems.

When beginning the capital equipment purchasing process, hospital leaders should consider what makes sense systemwide, not just department by department. Choosing the right product can save significant time and money in the long run. For example, in the imaging world, will the PACS system interact seamlessly with the computed tomography (CT) scanner and electronic health record (EHR) system? Will it truly capture the information that needs to be stored? Is it certified by the American College of Radiology (ACR), or will staff need to build in manual processes so that it can become certified?

For example, if the CT scanner doesn't communicate with the PACS system to capture ACR-required data such as pitch and dose, manual documentation of this information could be required to maintain ACR certification. Therefore, when evaluating equipment options, it is important to consider the current regulatory standards and stay abreast of potential future requirements.

Payment and certification compliance are not the only concerns. It also is important to analyze total cost of ownership for devices. For example, a CT scanner from one OEM could have a lower list price but have a high total cost of ownership due to the number of repairs and replacement parts, as well as downtime caused by equipment failure. Understanding these costs prior to purchase provides a broader perspective on how the device could perform within the organization's environment. For example, with different OEMs, the total cost of ownership for a 64-slice CT scanner, a high-end medical device, can range from as low as about $25,000 per year to as high as about $73,000 per year, while total cost of ownership for an IV pump, a low-end device, can range from as low as about $72 per unit per year to as much as almost $80 per unit per year.

Implementation

Once the hospital has selected equipment and signed the equipment management contract, the hospital must make sure the equipment is installed and the staff is trained to use it appropriately to avoid abuse, damage, and user error that can result in downtime, as well as unnecessary and exorbitant repairs. Here are a few considerations for this stage of equipment lifestyle management.

Install the equipment. How the equipment is installed may be more important than what is installed. Before new equipment makes its entry into the main hospital stream, environmental factors need to be considered, such as dispersion among departments, adequate staff training, and installation timing. Infusion pumps, for example, are ordered and delivered hundreds or thousands at a time. With respect to these devices, the hospital staff should ask questions such as:

  • How will we change out the existing pumps?
  • How will we dispose of the old ones?
  • Where will we store the new pumps?
  • What are the potential points of failure?
  • What is the impact on nursing staff and patients?
  • How can we ensure patient safety?

Ensure regulatory readiness at the state and federal levels. Remaining in compliance with Food and Drug Administration (FDA) alerts pertaining to equipment issues not only increases patient safety but also ensures the hospital will not be fined. Hospitals must ensure that responses to current equipment recalls and alerts are proactive and timely- the manufacturer may have sent a notice to the hospital, but it could then take weeks to reach the clinical engineering department where it belongs. Hospitals should consider joining a centralized regulatory alert system that relies on a large network of hospitals to report alerts and then notifies the specific department as soon as an alert is issued.

MedSun, for example, is the FDA's medical product safety network, which collects information following sentinel events and pushes it out via e-mail (www.fda.gov/medicaldevices/safety/medsunmedicalproductsafetynetwork/default.htm). Safety managers and regulatory compliance leaders looking for safety information or adverse event reporting information can check the FDA's MedWatch site at www.fda.gov/safety/medwatch/default.htm. As another example, ECRI Institute provides medical device safety reports as well as regular updates on alerts, hazards, and recalls (www.mdsr.ecri.org). Once a recall or alert is issued, the hospital must make sure the problem is fixed quickly-failure to do so puts the hospital at risk of harming or injuring the patient, which could result in malpractice, negligence, a HIPAA violation and fines, medical errors, sentinel events, never events, and other adverse consequences. In addition, the facility could be liable of FDA inspection and resulting fines.

Ensure clinical acceptance. Does the equipment perform as promised? Does it meet certain guidelines and specifications? Answering such questions should be the responsibility of the hospital's clinical engineering department. Clinical engineers ensure the hospital is ordering the proper equipment for its needs to avoid purchasing again too soon. The clinical engineering department should be charged with examining equipment specifics like response time, performance assurance completion, uptime, downtime, and cost to repair.

The clinical engineers should have the skill and experience to understand the equipment, as well as future equipment trends. The hospital should look to them for recommendations based on what will save the hospital the most money in the long run-not bells and whistles or extra features. A clinical engineering department also can save a hospital money by training staff on how to prevent user error, damage, and abuse through proper equipment use.

Management and Monitoring

So once the equipment is installed and staff is trained, the job is done-right? Wrong. A hospital needs to take some additional steps to ensure it gets the most out of its investment. The following steps can help a hospital protect the integrity of its new equipment or prolong the life of its current equipment.

Establish a performance assurance schedule. Creating a consistent performance assurance schedule is a patient safety issue, as it helps ensure that equipment performs within acceptable ranges for accurate patient diagnoses. It is also a regulatory issue, and if a hospital lacks a performance assurance schedule or does not adhere to such as schedule, it could be fined.

Create maintenance policies and procedures. Having a maintenance policies and procedures plan is typically mandated by hospital management, as well as by the FDA, the Healthcare Facilities Accreditation Program, and state and federal agencies. A plan is critical to maintaining consistency and direction when it comes to equipment use, which ultimately ensures reliability and longevity. When creating a policies and procedures plan, hospitals should follow the advice of the Joint Commission: Do, Manage, Adjust, and Control. Staff should be asked the following questions:

  • How will you "do" maintenance?
  • How will you manage the process?
  • When you run into issues, how will you adjust your plan?
  • Over time, how will you control and refine your plan?

Develop proactive equipment downtime, failure, and disaster contingency plans. Equipment downtime, failure, and disasters can set off a chain of events that can lead to a patient transferring to a different hospital for care-and a transferred patient means transferred revenue. Having a contingency plan ensures the patient-and the revenue stream-stays in your hospital. For disaster recovery plans, the hospital should consider the types of adverse events that may happen in the local area (e.g., bombings, earthquakes, oil spills) and determine what and how much equipment and personnel would be needed to respond. The clinical engineering department should be included in the planning process so they can provide input and recommendations.

Monitor and communicate frequently as to equipment status. In a nondisaster situation, knowing equipment status means understanding which rooms can house patients and which cannot-key determinants for knowing how many patients the hospital can accept and being able to project staffing needs based on the nurse-to-equipment ratio and, ultimately, revenue. In a disaster situation, knowing how many functioning rooms the hospital has at any given time can mean the difference between life and death.

End-of-Life Management

Fast-forward 10 years-or maybe five. The time will come when a hospital's current equipment doesn't meet its needs any longer and the hospital needs new equipment. Luckily, there are many ways to extend the life of your equipment.

Refurbish the equipment. Purchasing refurbished, pre-owned equipment could save a hospital a bundle. St. Vincent Health in Indianapolis recently purchased a refurbished CT scanner that allowed the organization to save up to 50 percent over purchasing a brand-new piece of equipment.

Redeploy the equipment or retire it in phases. Just because a hospital no longer requires a piece of equipment doesn't necessarily mean its life is over. A health system may have hospitals within its network, for example, that could benefit from the equipment, improving their quality of care and providing a huge cost savings over buying new. St. Vincent's Medical Center in Jacksonville, Fla., recently decided to share two ventilators between their medical facilities instead of purchasing new ones. Sharing the equipment will save them several thousand dollars in the long run.

If a hospital has decided its equipment cannot be redeployed, there are ways to ease the financial burden of retiring the old equipment and replacing it with new. By slowing the transition-phasing out equipment over several years-a hospital can use the older equipment as replacement parts and spread the capital expenditure across multiple fiscal years. This approach applies to high-quantity devices such as IV pumps and hospital beds as well as multiple devices, such multiple CT scanners in a health system. As new equipment is introduced, the clinical engineering department should simply ensure that users are trained to use every type of device, both new and old.

Donate the equipment. Donating medical equipment to not-for-profit organizations qualifies for a tax write-off as a depreciated asset. In addition, it can sometimes be more advantageous to donate and write off the asset than to continue maintaining a near-obsolete piece of equipment.

Sell the equipment. A hospital may decide it is best to sell medical equipment, and there are several venues where a hospital can easily do so. Large health systems should communicate with their affiliated hospitals and outpatient centers to determine whether the device is needed elsewhere in the network. However, when the device is not needed in-house, DOTmed (www.dotmed.com), MEDmarketplace (www.medmarketplace.com), and eBay are all common online marketplaces for used hospital equipment. When selling, it is important to consider factors that can potentially impact revenue, such as downtime due to de-installation, room preparation, and new equipment reinstallation. A hospital also should consider where it will store the old equipment while it is waiting to make the sale. Many healthcare facilities are not equipped with adequate storage, so you may need to rent additional storage space.

Cost-Saving Measures That Can Extend Equipment Life and Usage

Whether or not a hospital is in the process of purchasing equipment, there are some general practices that all hospitals should follow to get the most out of their investment. Consider the following life-cycle management tips.

Ensure clinical engineering/IT collaboration. The line between clinical engineering and IT continues to blur, as both departments are essential to managing medical equipment. Because so many pieces of equipment are integrated with sensitive patient data, such as EHRs, the clinical engineering and IT departments need to work together on HIPAA compliance, for example. Likewise, software viruses may threaten entire networks of equipment, requiring collaboration between the two groups to ensure the equipment is repaired quickly for patient use. Both departments need adequate training and professional development opportunities to ensure their skills are up-to-date. Ultimately, clear communication is key. Clinical engineering and IT should work together to establish boundaries and set expectations, and then take ownership for what falls within their domain. Encourage participation in networking events and training opportunities, and if possible, provide a stipend to make attendance possible.

Give due attention to contract management. The greatest cost savings can sometimes be achieved through meticulous equipment contract management. By planning years before the service contract expires, a hospital can significantly reduce costs. Possible cost-saving steps include training employees to bring equipment management in-house and finding an alternative source for parts.

Carefully managing the original contract also can realize an overall cost reduction. A hospital may also consider adopting an integrated service plan, which will ensure there is a strategy and service delivery model for the organization's medical equipment. An integrated service plan ultimately reduces reliance on manufacturer service contracts by investing in internal or shared resources to achieve immediate savings.

Obtain leveraged buying power through non-manufacturer experts. Unbiased parts experts utilize secondary sources to achieve the greatest cost savings. They also provide centralized parts sourcing, which allows for major volume discounts through national contracts with manufacturers. Expert consultation ensures HIPAA compliance and enables hospital leaders to select the right equipment to achieve specific clinical objectives.

Consider software updates versus upgrades. One total cost of ownership consideration is that of software updates versus upgrades. It is crucial for both the manufacturer and the hospital to define "update" and "upgrade" prior to a software purchase. Generally, software updates are improvements upon the current program-for example, version 1.1, 1.2, 1.3, and so on. Upgrades are completely new programs. Whether a service contract includes updates or upgrades depends on how the contract was negotiated. The hospital's clinical engineering department can determine what, if any, new software upgrades are in the manufacturer's pipeline and whether the contract should include updates or upgrades. The difference between the two can help the organization plan for future software costs and could help save thousands of dollars.

A Caveat

The ability to extend the life of medical equipment can be in many ways a boon to healthcare providers. Nonetheless, hospital leaders should continue to exercise good judgment as to when replacing an older piece of equipment may be more prudent than seeking to extend its life, particularly if the equipment is vitally important to the delivery of critical or emergency care. The clinical engineering department can be instrumental in helping the organization recognize circumstances in which attempts to extend the life of medical equipment could increase the risk of a critical equipment breakdown.

A healthcare organization should balance its equipment management strategy with other organizational objectives, such as sustaining patient and physician confidence in the organization's commitment to maintain its equipment and facilities at the state of the art. Despite this caveat, however, most hospitals have ample excellent opportunities to save money by improving how they manage existing equipment.


Dale Hockel is vice president, clinical engineering services and supply chain, TriMedx, Indianapolis (dale.hockel@trimedx.com).

Robert Hughes is vice president, clinical technology and R&D, TriMedx, Indianapolis (robert.hughes@trimedx.com).

Publication Date: Tuesday, February 01, 2011

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