By K. Richard Douglas
Healthcare systems have been tested repeatedly during the past decade with challenges that stretch budgets to their limits. The Affordable Care Act required hospitals to spend a substantial amount on the cost of compliance with regulations, stressing the often-fragile bottom line of hospitals.
Then, the pandemic filled many hospitals beyond capacity, requiring the allocation of additional space to treat COVID-19 patients, and pushing off more profitable surgeries for a later date. Many of these profits never materialized and hospitals found themselves operating in the red.
These challenges have been taxing to members of the C-suite in healthcare and, in particular, the CFOs who must utilize every tool in their tool bag to balance costs with care. Their budgeting efforts often include commitments from department heads to slash budgets and find new efficiencies.
Sitting down with the CFO, HTM leaders can outline their plans to cut costs and make that person’s job easier. With some creative brainstorming and utilizing resources efficiently, HTM leadership can contribute toward the CFO’s goals and win praise and support from the C-suite in the process.
Alan Gresch, vice president of HTM consulting at Phoenix Data Systems in Southfield, Michigan, and Rob Bundick, director of HTM/biomedical engineering at ProHealth Care in Wisconsin, proposed a number of ideas for HTM leadership when they presented “Healthcare Finance 101” at the MD Expo New England in October of 2024. The presentation is available online at tinyurl.com/4msm224b
HTM leaders should have a good relationship with their CFO and finance department. There are approaches to achieve this.
“Talk with them regularly. Learn what their biggest challenges are and how you and your team can help them overcome those challenges. Develop regular reports that show what you are doing to save time, save money, increase productivity and equipment uptime and availability,” Gresch says.
He says to leverage the data in the CMMS to help with effective and objective capital planning. Be aware of other areas related to technology management where there are opportunities to increase efficiency and reduce costs.
“Be willing to take on greater responsibility in those areas. If you develop a reputation as someone who is aligned with their goals and willing to help them achieve them, they will be regularly coming to you for solutions,” Gresch says.
Bundick says that communication is key to establishing a good relationship with finance.
“Having data and numbers that explain and justify your expenses help, as this is the language that finance speaks in,” he says.
THE MOST BANG FOR THE BUCK
Various benchmarks and targeted metrics can provide goals for HTM leadership and allow the focus to be on operating at a level of high efficiency while providing the best return on every dollar spent. Sharing compelling metrics with finance that confirm efficient standards is something that Gresch and Bundick say can align the numbers-crunchers with HTM.
The cost-of-service-ratio (COSR) takes the annual cost of maintenance compared to the original cost of the asset. This provides a number that can be used to compare against a benchmark.
While this metric has been around for several years, it still serves as a valuable benchmark to gauge maintenance costs against an ideal range.
The operating-expense-ratio (OER) is derived from the organization’s overall operating expense divided into the annual cost of maintenance. Zero point seven to zero point nine (0.7% to 0.9%) is considered high performing.
Cutting outside service costs to the HTM department can be one area of focus. Service contracts are an area where HTM can find savings through training and bringing more services in-house. Values that represent a high-performing, efficient HTM department, along with trained staff who can service more equipment in-house, will placate finance.
HTM CAPITAL EXPENDITURE INSIGHTS
If HTM can be at the table at the time of capital expenditures, then HTM’s influence can be the most pronounced with cutting costs. Gresch lists contract costs, parts discounts, T & M labor discounts, as just a few examples. He says that this is the point where HTM has the most leverage to bring about savings. He explains that there is little chance for negotiation once capital purchases have been finalized.
There are assessment factors in capital planning.
“Age, utilization, operating platform, technology level, and market needs are just a few factors to take into consideration when planning for capital,” Bundick says.
“Serviceability factors, including age versus AHA estimated useful life, service costs versus purchase costs, service events that are trending up, support capability (end-of-life factors), equipment functional risks, technology levels (whether leading technology, current, aging, or obsolete), probable clinical or financial impact were the device to fail catastrophically, safety/regulatory risks. I always suggest working with your finance team to develop the scoring and weighting for these factors to avoid debates about the validity of the numbers once you present your report,” Gresch says.
He explains that HTM has the data that is valuable to the capital expenditure decision-making process.
“Capture and report all relevant information that should be contained within your CMMS to ensure the right things are being identified that need to be replaced, whether related to obsolescence, service costs or excessive breakdowns, age, regulatory factors, etc. I have never met a CFO who wouldn’t welcome that kind of objective data to help make good decisions. The tighter capital budgets become, the more critical it is to make the right decisions,” he says.
Bundick says that financial data that HTM tracks can be used to establish future budgets, provide estimates for new projects, and compare costs for service between different vendors when selecting new equipment.
“Bringing together all the requests for medical equipment into a summary with a ranking system for the most important items will put the HTM in a position to be a key decision maker for capital,” he says.
SHOWING MAXIMUM PRODUCTIVITY
Finance would prefer that HTM does more with less or keep its budget flat year-over-year. This ignores increases in inventory that tax the department further. Gresch says to adapt a productivity metric that the organization supports and submit this number to the CFO.
The productivity number shows finance that HTM is at peak capacity servicing the current equipment inventory. He provided finance with a report that showed the current inventory added and the associated device hours.
Gresch says that his illustration was broken out by equipment areas such as general biomed, biomed specialty and imaging, which came up with a total number of devices and device hours and the number of FTEs required to support that inventory.
He says that an inventory increase leaves HTM with two choices: outsource the additional work or increase staff.
He adds that if the additional work created by increased inventory is kept in-house, he will take steps to ascertain that additional staff are well-trained and provide a better response time and that there will be less investment than outsourcing the additional work.
A further illustration on the report would show average device hours per technician. Taking the total amount of hours and dividing it by the available device hours per technician.
He says that the industry average is about 1,000 device hours per technician. He says that everything that occupied a technician’s time was considered and every effort was made to increase the technician’s efficiency and the productivity number.
Everything that does not involve turning a wrench is an incursion on the technician’s productivity. All of these “non-device hours” removed technicians from core work. These included compliance training, vendor training, administrative work or travel. Gresch says that meetings became more “crisp” and every other time-savings initiative was taken. He says that after this effort, the device hours per technician figure had risen all the way to 1,550.
This increase in productivity allows for getting more done with a set number of FTEs that shows that HTM has made a concerted effort at efficiency. This is what a CFO wants to see. Gresch says that those in executive leadership respond well to data.
An actual cost to the organization for every staff member is something that Bundick’s organization utilizes. He says that it considers what the staff member is paid versus what the value to the organization is if that position did not exist. This allows HTM to illustrate to finance, or even outside consultants if staff reductions are considered, the value of the position and the implications of maintaining it in-house versus outsourcing.
Bundick says that while inventory and salaries have increased over the years, a chart containing all of the numbers still clearly shows that the OER has remained constant despite other increases. The COSR was also reduced and then maintained at an ideal level.
He says that it is also important that biomedical engineers spend as much of their time doing what he calls “defined productive time.” They should be doing what they are trained to do; repairing equipment and turning a wrench. Moving equipment or spending excess time with paperwork takes them away from these core tasks and Bundick says it is important to efficiency to ascertain that the engineers are spending as much time as possible in their specialty.
ADDITIONAL COST-CUTTING OPPORTUNITIES
Other opportunities for savings include auto expenses for field engineers who travel. Leasing fleet vehicles might save money. Freight and shipping costs offer another area for savings.
Supplies, X-ray tubes and maintenance and service contracts are all areas for savings.
Bundick also says that added value can be derived from selling equipment instead of trading it in. He redeploys equipment also. He says that data integrity is important and capturing this data is key.
Gresch adds that data integrity can include a defined consistent set of work-order codes that everybody is using the same way. He points to the accumulation of codes that can exist in CMMS as new codes are added.
He says that utilizing a set number of codes that staff are trained on and understand will allow for more accurate reporting and the integrity of the data is more reliable and can be used to measure anything.
“You can’t measure anything if you don’t have clean and consistent data,” Gresch says.
LAUNDRY LIST OF INITIATIVES
Benjamin Scoggin, MBA, MMCi, senior director of clinical engineering at Duke Health Technology Solutions, has recently been working through the many ways that HTM can contribute to the budget with his leadership team.
One area is asset life cycle management and capital avoidance.
“By proactively extending the useful life of medical equipment through strategic maintenance, upgrades, and parts harvesting, HTM can reduce or defer capital purchases. Offering comprehensive, data-driven equipment replacement planning helps finance prioritize investments based on real clinical need rather than vendor pressure or end-of-warranty dates,” Scoggin says.
He says that another area is collaboration on construction and renovation projects.
“HTM can integrate early into construction and renovation planning to optimize device selection, right-size equipment fleets prevent unnecessary duplications and avoid costly retrofits later. They can also advocate for standardized technologies across sites, reducing training, service, and parts variability,” Scoggin says.
He agrees also with HTM’s contribution to data-driven capital planning.
“HTM can leverage CMMS data to provide finance leaders with real-world equipment utilization, uptime, and service cost data. This supports evidence-based budgeting rather than speculative purchasing. Prioritizing high-ROI purchases – those that increase capacity, improve throughput, or lower operating costs – can tie capital expenditures directly to margin improvement,” Scoggin says.
Another category Scoggin considers is what he terms technology assessment and clinical engagement.
“By partnering with clinical and IT stakeholders, HTM can assess new technologies not only for clinical value but also for sustainability, integration costs, cybersecurity risks, and serviceability. This comprehensive view ensures that new technology investments do not create unanticipated cost burdens,” Scoggin adds.
He says that active device cybersecurity management prevents costly downtime, compliance violations, and liability risks. Protecting medical devices also minimizes hidden costs that can arise from unplanned outages or security incidents.
Scoggin agrees that significant savings can be produced by negotiating service contracts, consolidating vendors, moving high-cost contracts in-house, and avoiding unnecessary OEM service agreements.
As finance scrutinizes their bottom line, reviews the budgets forwarded by department heads, and consider areas to cut, how does HTM stand out?
“Being able to share a complete and accurate assessment that allows finance to make the decisions that are best for the organization,” Bundick says.
Gresch agrees and says that a plan with provable benefits is needed.
“For any initiative you are trying to push forward, getting well versed on how to develop a business plan to show the financial and operational benefits using defensible numbers, the language they speak, is key,” he says.
