Most hospitals have to be run like businesses with a constant eye on the numbers and that has become more critical in the past few years. Budgets are impacted by new constraints and subjected to penalties that can be substantial. CMS is on the lookout for any healthcare provider that takes Medicare and misses their metrics. Those penalties, or even the threat of a potential penalty, is enough to take slim budgets and make them into tight budgets. Medicare reimbursement penalties are a game changer.
Hospitals across the country, especially in poorer areas, are facing penalties based on the readmission of Medicare patients. Medicare cuts reimbursements based on the number of patients who have to make a return visit to the hospital for everything from complications after knee replacement surgery to heart failure. In New York state alone, 80 percent of hospitals face these penalties.
Medicare considers these readmissions as avoidable and the profits made by hospitals from these returning patients is something the feds want to stop. These penalties have doubled in the past year. In combating the impact of these penalties, many hospitals and health systems have instituted other services, like home care and telemedicine, to help reduce the numbers of readmissions. These additional services also impact the bottom line.
For these reasons, and because hospitals are businesses, the reality of measured patient safety, medical equipment buying strategies, maintenance considerations and budget must all coalesce. They cannot be mutually exclusive and all have to recognize the realities of a changing healthcare environment. This impacts every capital purchase decision, every equipment retirement decision and replacement assessments.
Determining what to buy, when to buy it and what to remove from service is a huge issue. It is a task taken on by HTM professionals in every corner of the country alongside those tasked with scrutinizing their facility’s budget. When the capital dollars aren’t there, or are sparse, what are the options?
When to Pull the Trigger
Doug Dreps, MBA, director of Eastern Regional Operations for Mercy Clinical Engineering Services in St. Louis, Mo., characterizes the environment that these decisions are made in as “difficult times.”
“We concentrate on $150K and above. With limited capital these days, end of life items we still support, until we no longer can,” he says. “We have even had local machine shops build mechanical parts for imaging units to extend their life. We have a capital replacement matrix we use that scores equipment and then we make recommendations to our departments and capital review committees.”
Dreps points out that hospital leadership still depends on the HTM professionals to provide accurate data to help with these decisions when funding is squeezed.
“I stopped doing projection past one year several years ago as our capital dollars have shrank. Some of our end of life items, we end up maintaining until we have to replace it due to failure and the unit can no longer be repaired. Of course, we do take into effect a failed unit that is end of life could shut down a service line, so those instances are looked at differently. Patient safety, technology obsolesce and reliability are all very important factors.”
Dreps says that it is a red flag when service costs reach 50 percent of purchase price.
“With capital reduction in pricing from manufacturers, and increased costs from manufacturers in supporting equipment, high-end capital can often equal purchase cost within seven years, a big change from the past, where it could take 15 years or more to reach this,” he says.
“Doing proformas on replacement is a must for high-dollar items,” he adds. “Times continue to change and we continue to change with them. It is still more cost effective in many cases to spend $100K-$200K on a high-end imaging device that’s technology is not obsolete yet, than replacing it for $700K.”
As Dreps points out, budgets dictate that decision making criteria are more important than ever today. Those criteria don’t always lead in the same direction as in the past. The biomed department must use well-defined guidelines to provide leadership in these decisions.
“My belief has always been that the role of HTM is not so much to tell the hospital what to buy, but rather what not to buy,” says Pat Lynch, CCE, CBET, fACCE, CHTS-PW, CPHIMS, chief do-gooder for Global Medical Imaging (GMI). “Obviously, the final decision has to be based upon the ability to treat the patient. Financial concerns include the hospital’s ability to pay, the strategic value to the institution and reimbursement issues.”
Lynch says that HTM’s concern should be the ability to address reliability issues, total cost of ownership, service options and compatibility with existing systems.
“By knowing the technology, and having access to other HTM professionals who may already have the new technology, we are able to give advice about service, failure rates, company response, and overall cost to maintain and operate,” he says.
As an example, Lynch points out that if a hospital were considering five different manufacturers for medical telemetry, it would be HTM’s role to evaluate “the solidity of the technology, interfaces with existing systems, upgradeability, life cycle costs, and manufacturer support.” HTM has an important role to guide the decision makers away from any problematic brands. He adds that HTM might want to leave them with a choice of approximately three acceptable candidates.
“I have performed hospital-wide technology assessment, and developed a long-term — 5-year — equipment replacement plan,” Lynch says. “It requires dusting off the old crystal ball. I solicited the input of clinical managers and physicians in an attempt to assess the healthcare delivery structure in coming years. Only then can you begin to build a technology system that will meet the needs of the future.” When the trigger is pulled on new technology, the strategy in place must be sound.
“The clinical engineering replacement strategy is to focus on those technologies that helps us meet emerging standards of care, technologies that are no longer being supported by the vendor, and/or pose a HIPAA security risk for lost or stolen ePHI, and equipment with the highest recent service costs,” says Eddie Acosta, CBET, CLRT, clinical systems engineer.
“In general, the equipment that the technology committee manages is being planned to be used longer than the industry average,” he adds.
One large healthcare system takes a methodical approach to this process. The Technology Management Department at Banner Health has a division within that department that is tasked with optimizing technology acquisitions cost and reducing the operational expense and total cost of ownership. The decision when to make a purchase follows very well-delineated protocols.
“New book of business technologies are evaluated through the Technology Assessment Process. This process enables us to field new technology requests centrally and make judgments either to investigate them further or that they are not ready for adoption at this time,” says Perry Kirwan, MSE, CCE, senior director of Clinical Technology Assessment and Planning for Banner Health System.
“The team is constructed of strategic planners, finance, physicians, care management, and operations leaders. Decisions are made through impact analyses that evaluate the clinical, market, and financial implications of the technology. Sometimes a clinical trial will be required to vet the technology as well,” he says.
Kirwan says that the net result of the process is to provide an up or down vote on the technology. If they decide to go with the purchase, then the determination must be made how the technology is adopted — whether for use in one facility, a regional deployment or an enterprise deployment.
“Technology refresh purchases are made based on specific metrics that are scored and maintained in a master document by clinical modality. The metrics includes – regulatory status, equipment age, projected end of life, clinical utilization, clinical criticality to the facility, service costs to acquisition value ratio, and severity of service events over the last three calendar years,” he says.
“Certain scores then correlate to specific capital cycles that the equipment should be replaced within. In Banner, those scoring thresholds are as follows: capital cycle within one year, 2-3 years, 3-4 years and greater than five years,” Kirwan adds.
“Although the process itself is quite detailed – it functions via two core constituencies – a corporate based oversight group and ad-hoc working committees with subject matter experts on the given technology at hand.”
Kirwin explains that the oversight group is appraised of purchasing requests that come in several different forms; new book of business technologies, technology refresh, and technology standardization.
“The oversight group’s main functions are to ensure requests fit with organizational strategy, prioritize the ones requiring deeper review, and hearing recommendations from the working groups relative to technology selection and adoption,” he says.
“The ad-hoc working groups are chartered by the oversight group to do the detailed work around making technology recommendations. This process starts with detailed development of the clinical, technical, and business requirements that the technology has to possess. This phase of the process consumes about 60-70 percent of the overall process time, as the objective is to get a thorough understanding of the needs and the problems the technology is expected to solve,” Kirwan explains.
These collective requirements are then recorded on a master document and given relative weighting based on importance, so that they can ultimately be scored against any given potential supplier’s product, Kirwin adds.
Cutting Costs the HTM Way
The HTM professional, through their clinical engineering, biomedical engineering or healthcare technology management department offers special insights into the process.
“HTM is concerned with, and able to address, reliability issues, total cost of ownership, service options, and compatibility with existing systems,” Lynch says. “By knowing the technology, and having access to other HTM professionals who may already have the new technology, we are able to give advice about service, failure rates, company response, and overall cost to maintain and operate.”
In addition to the purchase decision-making process, there is the timing factor. This can be a critical element within the process.
“Annual budget recommendations are based on technology assessment submissions that were presented, reviewed, and prioritized by clinical engineering, hospital input and by the technology committees,” Acosta explains. “Medical equipment with articulated operational, strategic, and/or financial priority are approved.”
Dreps says that there are ways to cut costs.
“Get involved with the quote process on equipment that is high end, mainly imaging equipment. Compare several vendor’s costs for capital, technical training and contract costs. Compare full contract cost for 5-10 years versus in-house costs for training and reduced shared contract or no contract,” he says. “Having trained technicians on site will improve uptime. In most cases in-house models will save significant dollars. Depending on the facility or system size, this will transform into tens of thousands to millions (of dollars) annually. Sometimes you can negotiate technical training to be included at no charge.”
As Kirwan pointed out, Banner Health is able to leverage economies of scale. Dreps says that this is an advantage some healthcare systems have to save on costs.
“For larger departments, you should try and negotiate agreements between your department and the vendor for reduced pricing on parts, labor and contracts. You can do this with ISOs too,” Dreps says.
“If you know that a contract will be needed for imaging, a POS (Point of Sale) contract can be signed with most manufacturers that will not take effect until the warranty expires, however by doing this there is usually an opportunity for additional savings,” he continues.
Additionally, Dreps suggests having contracts under the HTM department, which will allow for the leveraging of additional savings by bundling them together. This also assures you have control of saving money for your organization, he says.
“Track these efforts and compare year by year the cost savings you have provided for your organization, so you can show leadership all the good works your team has accomplished,” Dreps adds. “Try not to look at one year at a time. By taking risks, sometimes you could spend more in one year by not having a contact on high-end equipment, but over five years the risks usually pay off with savings overall.”
When the whole hospital has to be focused on the most efficient use of funds, the HTM department can step up to the plate and deliver.
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