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When to repair, and when to replace medical equipment, a hospital's guide

Hospitals leave money on the table because they don't get independent counsel, experts say.

For hospitals, the question of whether it is cheaper in the long run to repair a device or replace it continues to be hard to answer, according to experts, though many facilities are trying to come up with standards.

One barometer hospitals use to help decide whether to replace an item is the carrying cost of older equipment, said Peter Vincer, who has consulted hospitals on equipment service and cost reductions for more than 30 years. "If you're spending a couple of thousand dollars maintaining it, you might be better off replacing it. At some point, it gets too expensive to maintain."

The decision to repair or replace also can turn on obsolescence -- especially for major devices, like MRIs, he said. Manufacturers might discontinue parts for some older equipment, lending to the scarcity of those items on the open market, he said. But there's a catch.

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"Say you own a five-year-old Moosehead brand CT scanner and get a memo from Moosehead (announcing) they stopped making parts for that machine." A hospital's only recourse is the market, where it must find out whether there are enough replacement parts despite the fact they're no longer made.

"That doesn't mean you have to buy a new one next year, but you'd better start paying attention to who your alternative parts sources are and whether (parts are) readily available," Vincer said.

He also suggested making sure you total up the annual cost of repair. "For some devices, costs go down every year, for others, they go up because of the scarcity of parts. You're always going to have a tug-of-war between the manufacturers, who'd like you to buy a new one sooner than later, and the financial people within a hospital who, as long as the technology hasn't changed, want you to maintain that device as long as possible." That way, "you're not foolishly spending money."

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Hospitals should find a variety of resources that yield opinions on what needs to be replaced or not, Vincer said. "Often, if they have a really good equipment maintenance partner, they can get honest counsel to determine whether it's feasible to keep something longer or their replacement options. And when they decide to replace an item, what do you do with the old one?"

He said that most hospitals leave so much money on the table because they don't take the initiative to get independent counsel and accept the word of the seller of a new piece of equipment.

For his part, Tom Cantiello said repairs occur only in light of an event. "Most of our equipment is on service contracts that usually run for a year. After that, you're obligated, so it would be good sense to buy a service contract since the cost associated with repair are astronomical."

Along with the service contract, hospitals usually also buy into at least one preventive maintenance service agreement, said Cantiello, who is senior contract administrator of corporate purchasing at the Einstein Healthcare Network in Philadelphia. During that time, the supplier of the equipment ensures it's in good working order. "The only time you'd call for a repair is if there's a critical event and the system stops."

Meantime, while actuarial databases that show, among other things, an item's history of breakdowns, and service reports can signal when a piece of equipment's shelf life is up, "the real way (that takes place), believe it or not, is advancements in technology," said Cantiello. "They happen so quickly that buying a piece of capital today is like buying a computer. You might buy something for $1,000 today that, within 17 to 18 months, if you're a real geek, will be obsolete."

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Kevin Shrake, executive vice president and chief operating officer of MD Resources, believes the question of whether to repair or replace is largely an educated decision based on historical repair data. "Let's say an EKG machine costs $10,000 and that it will cost $4,000 to repair it. I look at the historical table of the expected lifespan and repair experience of that unit and see it's about eight years old. I might choose to spend the $10,000 instead of $4,000 to repair because it's at the end of its life cycle with a high repair rate. If you're three years into that cycle, you probably repair it."

He also values expert advice -- especially from those who don't work for an equipment company. "They don't care what equipment you buy or from whom." They can objectively build a customized approach of maintenance and repair options that can result in significant savings.

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