By Jim Fedele
I am almost reluctant to state that health care is in a state of change, because it always seems like it is changing. However, there is a lot of activity today around mergers and acquisitions. Hospitals in my region have not been left out. This activity has increased the number of hospitals that I am responsible for now. As we bring these hospitals into our program, their service contracts are more expensive than I expected. I feel like these small hospitals are being taken advantage of by OEM service contract salespeople.
In the past year, I have added three small hospitals to my program. None of them had their own biomed guy, so the duties of medical equipment management were shared by various people. These hospitals were using an ISO for general equipment checks and PMs, along with OEM contracts for mission critical equipment. The service model did not surprise me. These hospitals do not have the resources to have their own biomedical engineering technician. Although the ISOs providing service provided a bit of medical equipment management, it was at a low level of involvement. In most cases, the oversight of the program was left to the maintenance manager, the support services executive and director of nursing.
Converting hospitals to a new program isn’t too complicated; we get the inventory and service histories uploaded into our system. We verify the inventory. We gather all service contracts for review and renegotiation if possible. For me, the gathering of service contracts has been the most challenging part of the process. The hospitals we converted did not have any contract management. The departments using the equipment negotiated and executed service contracts. I am not criticizing the use of service contracts by these hospitals; a service contract provides a fixed fee for repairs that can be budgeted easily. What surprised me was the cost of some of the service contracts.
Being part of a large health system, I experience firsthand the service contract savings that are negotiated with OEMs. There is nothing like volume to entice an OEM to work with you. A small hospital doesn’t have too much horsepower to negotiate like a big system. It makes me sad to think that the small hospital is being taken advantage of by the OEM. They do not have a lot of leverage to negotiate a contract when you are only managing one device. However, I do feel they could have some leverage if they look at utilization.
I feel this way because the equipment is not used as hard as it is in larger and busier facilities. The four small hospitals I manage have less repairs per piece of equipment than my large hospitals. Our small hospitals don’t do every service every day. If the equipment isn’t being used it is less likely to break. This is also illustrated by looking at the average age of equipment. I know that the average age of the equipment in these small facilities is high and the repairs are still less. Which is contradictory to the statement that older equipment needs to be repaired more. This is certainly true in my larger and busier facilities but not in the smaller ones. Finally, there are the users in these facilities. They take care of the equipment like they purchased it with their own money. They know if they are lucky enough to get a new piece of equipment that it is going to be a long time before they can get another one. I wish I could get all my users to take care of equipment like they do.
So, knowing that the utilization is going to be less, why would an OEM price a service contract more for a small hospital? I wonder if anyone has ever tried to get a service contract priced by utilization? I think a contract based on utilization would at least be fair for these small facilities. As I think about service contracts for my smaller facilities, I will be trying to at least get them reduced to preventative maintenance only contracts so we aren’t paying for parts coverage for under-utilized systems.
In closing, I feel like many small hospitals are overpaying for service contracts. It is the perfect situation for OEMs. They are likely dealing with a person who has little knowledge about service contracts. The utilization is less than a larger facility and the equipment is cared for properly. The service contract is never written with an adjustment for utilization. This means big profits for the OEM as the user pays to protect a device that isn’t used all that much.
© 2018, TechNation Magazine. Site designed by MD Publishing, Inc.