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Reducing medical device life cycle costs an effective way to trim healthcare costs around the margins

The cost of ownership and repair of medical equipment, from infusion pumps to MRI machines, can be quite burdensome for the healthcare industry.

Jeff Lagasse, Associate Editor

Anyone who has used a mechanical or technological device knows that devices tend to break down over time, and in few industries is this more manifest -- and more important -- than in healthcare.

Whether you're talking about infusion pumps or MRI machines, the cost of ownership and repair can be quite burdensome for the healthcare industry. There are a lot of components associated with medical device management that contribute to high life cycle costs, which Eitan Group North America CEO Roger Massengale estimates to be about $93 billion annually.

There's capital equipment, installation costs, repair for a capital component, training and maintenance to consider. Devices with a high level of complexity typically have high installation and maintenance costs associated with them, and the more a hospital or health system spends on such things, the more it digs into their margins and potentially impacts the level of care it's prepared to deliver.

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Relaying an anecdote about one facility in particular, Massengale said the facility had a glut of infusion pumps because they didn't have a proper handle on the life cycle costs of the equipment, and spent money it didn't have on pumps it didn't need.

"They had four times as many pumps as they needed," said Massengale. "They were everywhere. They were lost, they were in someone's drawer, etc. They purchased more equipment than they needed."

Tracking the life cycle of medical devices has great potential to reduce healthcare spending around the margins. The bad news is that not a lot of data is readily accessible when it comes to life cycle costs, so placing an estimate on the potential savings is more of an art than a science.

One thing is certain, though: The savings are more than zero. For a health system or hospital that's struggling with thin margins, it can make all the difference.

DESIGN

The design and build quality of a certain piece of equipment goes a long way toward determining its propensity for breakdowns and repair. In that sense, the onus is on device manufacturers to design equipment with a rugged build and with as few parts as possible. It's the hospital's responsibility to know what vendors they're dealing with and what they're getting.

"In the 1980s, U.S. car manufacturers started to get their rear ends handed to them by Japanese manufacturers, who figured out that if you focus on quality and reliability, you can capture consumers' attention," said Massengale. "Hospitals are not gentle places for equipment. Equipment gets banged around and treated kind of poorly sometimes. If the design is deliberately intended to be made with rugged components that last as long as possible, fewer breakdowns occur over time."

But how does a healthcare facility determine whether the design of a piece of equipment is rugged enough to handle that kind of environment? One way is to have a multidisciplinary team sit down with manufacturers of various sorts, and include life cycle costs and durability as part of their criteria for purchase decisions. Asking vendors to provide basic information in a bid is pretty typical, so it's not a huge leap to ask manufacturers to supply reliability data as well.

"Manufacturers who don't have that data will soon be charged to get it, and they'll have something they can use to provide prospective customers with data that's useful," said Massengale.

NEW SERVICE MODELS

Hospitals should consider multiple service partners if possible, and negotiate flat fees based on the level of complexity of the repair. And measuring and negotiating repair turnaround times with partners can minimize excess inventory requirements.

"What people do is find one vendor they like and stick with them, and that can be good, but there are multiple options out there," said Massengale. "What we've chosen to do is engage with several different service partners. We want them to compete for customers' business.

Quick repair turnaround times are paramount when considering vendor partnerships. When devices are sent out for repair or even annual certification, there can be a significant amount of downtime during which the device is unavailable. That prompts healthcare facilities to stock up on certain items, often unnecessarily. If one device is down, a facility may decide it needs two extra devices to keep its utilization rates at an acceptable level -- but if there's a 10-day turnaround time for repair rather than 30 days, there's far less cost outlay for those devices.

"If life cycle costs and total ownership is substantially weighted on the back end of the device, spending more time with the device partners is well worth the effort," said Massengale.

INCREASING IN-HOUSE REPAIRS

There's an entire do-it-yourself industry predicated on the notion that people often find it less expensive to repair things themselves. The same theory applies in healthcare; when possible, annual certification and maintenance should be completed in-house, lowering costs and allowing hospitals to store fewer backup devices.

Some manufacturers, though, won't allow hospitals to repair their devices without extensive training. Having certified technicians on board is a sound investment in cases such as these, as they're generally well-positioned to make basic repairs on certain types of devices.

Infusion pumps are a tidy little microcosm of this idea. What's costly with infusion devices is testing and verifying that it meets specifications. Those costs can be significant, especially when an organization has to send the pumps out to a third party.

In-house technicians already employed by the facility can do the work at a fraction of the cost, provided they've received the requisite training from the manufacturer to perform the repairs.

"For simple repairs and maintenance, it's easy for people to do and they love it," said Massengale. "For those who have gone through more complex training, it's time consuming and complicated. You have to make a cost calculation -- is keeping it in-house better than sending it out? Those who have done it tend to be happy. Medical technicians love it -- there's more for them to do, and it reduces overall costs.

"One thing hospitals don't do very well is monitor these costs to the extentI would expect," he said. "They know it's expensive and they're frustrated by that, but they don't as a general practice measure the costs of their capital assets as a function of time in their facility."

Massengale said it's a good practice to have a plan in place ahead of time. Only in that way can get a handle on total costs and predict when life cycle costs of medical equipment are reaching a burdensome point.

"It's a good thing for patient safety and for the organization," he said.
 

Twitter: @JELagasse

Email the writer: jeff.lagasse@himssmedia.com