Don’t Forget the Extras

By Matt Skoufalos

From the perspective of the clinical engineering department, one of the most challenging aspects of capital equipment purchases is getting everything necessary for maintaining and servicing the technology throughout its useful life in the institution. But as proprietary licensing policies become more closely intertwined with total cost of ownership calculations, purchasing decisions are increasingly influenced by how much control the customer will have over the equipment and its use after the sale is completed. What once were considered “givens” in a sale – service manuals, technical training, software keys – for the upkeep of a device are now regarded as extra features for which clients are expected to pay a premium price. Getting all that’s needed for the useful life of a device at the time it’s bought is more an issue of bargaining than anything else.

"We can ask for whatever we want but there's some companies that, if you want their product, they're only going to give you what they're going to give you." said Doug Dreps, Regional Director of Clinical Engineering for Mercy Hospital of St. Louis, Missouri.

“We can put down [that] we need service manuals or software, and they can say, ‘The only way you get that is if your guy goes to training,’ ” Dreps said. “You can choose not to buy the product, but when [staff] want that equipment because they think clinically it’s what they want, you’re out of luck.”

The conversations that happen at the highest levels of equipment procurement often outline negotiation among a variety of competing interests, from clinical desires to service to total cost of ownership. Dreps can speak for the biomedical technicians he oversees, but his is only one voice at the table. Although he may prefer a manufacturer who provides service manuals, device-specific training, and the opportunity to purchase replacement parts, sometimes there’s no such option – particularly when dealing with the makers of specialty technologies like laparoscopic robots, surgical ultrasound units, and catheterization lab planning systems.

“There’s nothing we can do about it if we want that technology,” Dreps said. “We just have to pay them for all the preventive maintenance. Sometimes it’s part of trying to keep up with the Joneses.”

Device-specific training is another component of the purchasing process that can get complicated in the capital process. Although Dreps may have staffers who have been trained through independent service organizations (ISOs), some original equipment manufacturers (OEMs) may regard that schooling as insufficient for performing warrantied device repairs or regularly scheduled preventive maintenance. In circumstances like those, Dreps said he relies on the size of his organization, its extensive equipment inventory, and the depth of technology research already in the books.

“A lot of the stuff hospitals buy, we already own, so we don’t have to keep doing the homework on it,” he said. “We have to spend time researching every single thing we buy, and there’s some things we just can’t service.”

Dreps’ budget includes a line item for technical training, which he said gives him an advantage over facilities whose staffers might be granted the same technical instruction but aren’t reimbursed for travel or expenses to attend. The cost savings that emerges from training, including reduced or eliminated service contract costs, greater device uptime and reliability, and ultimately, greater revenue, all flow from the improved patient satisfaction that comes from a working device serviced by trained staffers.

In other cases, Dreps said the argument for buying a competing piece of equipment might be undercut by the fact that the biomed department is already trained on an existing brand or device family.

“When you look at purchasing strategies, if we mostly have brand A of MRI, I want Brand A because I have two people, soon to be three, trained on it versus going with Brand B,” Dreps said. “For the user, you have all the radiology techs who can rotate around; it’s better for them if they have one particular brand. It doesn’t mean that we still don’t look at a couple price options.”

Dreps also said the size of his organization means that pricing is “pretty similar” among vendors, which informs decision-making in its own way. When a competitor attempts to woo him away from the in-house brand, they often can’t offer enough of a discount to make the switchover worth the cost and time investment; furthermore, the incumbent vendor frequently takes the opportunity to match an undercutting bid or offer some other perk for renegotiation. In regular meetings with his service vendors, the value of the contracts is a frequent subject of discussion, and can often be adjusted down if the margins are still profitable.

“Every vendor, you’re paying for what you get,” Dreps said. “They’re hitting competition and realizing they need to match it, which is a benefit to us.”

Robert Bundick, biomed engineering manager for ProHealth Care Inc. at Waukesha Memorial Hospital in Waukesha, Wisconsin, said the best way for his team to get everything it needs at the point of sale is by organizing a universal checklist for each equipment purchase. Bundick, who participates ina capital equipment analysis committee, said its biggest benefit is a direct line to the purchasing department while vendor discussions are in process.

“That’s how we get all the pertinent information and all the items we need, whether it’s updates, user manuals, demoing the equipment before we buy it, an evaluation of the equipment; [it’s] all part of a capital equipment checklist,” he said. “The fact that I report up through purchasing as purchasing is doing the negotiations [means] we can have all the requirements we need when negotiating with the manufacturers.”

Bundick said that working for an organization in which the biomedical engineering department enjoys a strong presence “from cradle to grave” is very refreshing.

“I’ve come from organizations where a biomed wasn’t a part of that,” he said. “We have a say in the purchase, the selection, and the disposition. We have full engagement [in the buying process].”

Involving clinical engineering staff in the selection process is “key for us,” Bundick said, because his team of in-house technicians will be servicing whatever equipment is purchased. Participating in equipment selection from the earliest stages enables him to advocate for his staff and their future needs with advance knowledge of the terms and conditions of replacement parts and preventive maintenance costs prior to the moment of purchase. Furthermore, because his in-house engineering team is tasked with the bulk of the repairs, Bundick also has the operational budget to maintain their knowledge base.

“We negotiate the training during the purchasing of the asset we need,” Bundick said. “Then, we look to develop partnerships with the manufacturer where we can get service keys, manuals, etc. There’s an investment on our part to get the technician certified to service that equipment; [vendors] will sometimes lower the cost of acquisition to help us get our engineers trained and up to speed on the equipment.”

Like Dreps, Bundick said working for an institution of some size has been a plus for similar reasons: Waukesha Memorial has a breadth of equipment and the negotiating power to drive the best deal possible for its needs – two key points of leverage in the capital purchasing process. The value of being a significant market player also lets his client have the upper hand when vendors are looking to generate new business.

“We have had success in using that to our benefit, especially if we’re looking at newer technologies,” Bundick said. “We will use the desire to maintain the equipment in-house to reduce the cost of acquisition. If we’re looking to replace an incumbent vendor and we’re out looking at other manufacturers, those manufacturers know that we want to try to keep that cost down. By keeping the incumbent in, we can sometimes keep the cost of ownership down.”

Bundick said that maintaining a close relationship with the OEMs with which his hospital contracts has been a long-term purchasing benefit. The companies understand his program and the abilities of his engineers, and have worked closely with them for years. Their knowledge of the institution and its aims can win a deal “because it helps their case from a cost of ownership standpoint,” Bundick said. The length of that relationship generates historical evidence for the costs of a device, its maintenance needs, upkeep issues, and so on, enhancing the vendor’s value to the organization.
“They have realized it’s beneficial to help us maintain that equipment in-house because it shows as a lower cost of ownership and will sway a purchase their way,” Bundick said. “If we don’t have our own historical data, we’re going out and gathering that data. We use companies like ECRI to gain information about the equipment and then feed it back to the manufacturer. We ask those questions that will help us determine what our budget should be for maintaining that equipment and then come up with cybersecurity [needs] to come up with a total cost of ownership of the device.”

Bundick also knows what it’s like to not have that institutional clout; although he’s been in his current role for a decade, in the earlier days of his career working for third-party servicers, he wasn’t always as involved in equipment acquisition, and the work was more challenging. There were more channels to go through, and success was far from guaranteed for his efforts.

“I was always trying to get involved in the actual purchase and letting my customer know what they were buying and what it would take to maintain it,” Bundick said. “I would raise the concern up through the chain through my company, and work with them to go to the manufacturer on the hospital’s behalf. It would drive down our cost to maintain it and save the hospital money at the acquisition cost.”

“You will never be able to negotiate any type of discounting like you have when you are doing it at the point of purchase,” he said. “There may be an opportunity when a contract comes up for renewal, or upgrading a system. By far your biggest opportunity to save an organization money is all at the point of purchase.”

Having served on a capital asset committee for nearly 20 years, Jim Fedele, director of biomedical engineering at UPMC Susquehanna in Williamsport, Pennsylvania, said the depth of a purchasing checklist shouldn’t just be confined to questions of service, interoperability and training. Fedele believes that much of the purchasing conversation involves other lateral components – considerations about the intended location of the installation, its IT needs, power requirements and more. Some of the least expected elements of capital acquisitions involve their integration into the physical infrastructure of the health system itself.

“We’ve gotten burned with that before,” Fedele said. “We buy anesthesia machines and outfit them with an integration system to pull the data off the machine and enter it into our EMR. You have to make sure that your quote contains all the mounting hardware that goes along with that – which isn’t inexpensive at $1,500 a unit – and you have to go with something that’s approved by the vendor,” he said.

“I’ve been on an asset committee with the same people for 10 years,” Fedele said. “We all know what we’ve been burnt by, we all know what we’ve missed, and we try to get better at it. If one person forgets something, the other person knows to ask that probing question that gets you thinking again.”

Finally, when all else fails, there’s nothing so helpful as the leverage of fine print. Christopher Nowak, corporate director of healthcare technology management at the King of Prussia, Pennsylvania-based UHS of Delaware, offers a boilerplate clause that he attaches to every capital purchase agreement. It makes the deal contingent upon the provision of:

“ … service documentation, “as built” diagrams, assembly instructions, installation instructions, adjustment procedures, calibration procedures, preventive maintenance schedule, preventive maintenance procedures, and any specialized software and/or software keys to access electronic diagnostic data which is used for the installation, troubleshooting, repair, calibration and/or adjustments of the medical device and/or devices in this order… ”

It looks good enough on paper – but that’s why they say, “Get it in writing.”