By K. Richard Douglas
Luckily, there are resources for determining the right part, finding it, and maintaining costs. Many providers exist who offer ways to cut costs in light of shrinking health care budgets. Many of these businesses can also offer insights into trends, the supply chain and the growth of the parts market. The OEMs are also aware of the changes wrought by an evolving health care environment that seeks efficiencies from every participant.
The theme of budgets, and more accurately, tightened budgets, seems to find its way into every story about health care and HTM departments. It has become an unavoidable fact of life that weighs on every decision. It is a symptom of changes made to modern day health care, pitting the smooth operation of important medical devices against the challenges the C-suite faces from CMS and other considerations.
The challenge cuts both ways though, as suppliers seek ways to reduce costs, operate more efficiently, remain competitive and satisfy stockholders or profit margins.
For purchasers, it’s about finding quality parts that are tested and reliable and affordable; that makes pinching pennies either a cost-conscious exercise or a corner-cutting one. In an effort to avoid the latter, there has been a necessary evolution in finding creative solutions to acquiring parts that fit the need, while keeping an eye on the bottom line. As with so much else in this connected world, the Internet has changed the parts search horizon significantly, making the nearest computer much like the proverbial card catalog at the local library.
And then, there are the logistical concerns; getting that part in a timely manner or finding something in the first place. How do you solve these problems? Does the supplier test their parts and assure accountability that the part won’t be DOA? The suppliers lend their perspective and insights on meeting these issues and on the market as a whole. Experienced parts buyers also lend insights, tips and cost-lowering ideas that will prove useful.
There is also helpful information about Device Support- ability with the help of AAMI’s Supportability Task Force.
The task force’s checklist can help HTM departments make wise choices.
Ken Maddock, an HTM consultant with a long history of involvement with AAMI, points out that the checklist is not only a good read for every HTM professional for tips on acquiring parts, but also for tips about saving money and considering the total cost over that parts entire life cycle.
He also points out that this is a living document; HTM professionals, who have good suggestions from experience, should submit their ideas to AAMI Director of Healthcare Technology Management Patrick Bernat for possible inclusion.
The checklist also offers pointers for manufacturers regarding notifications, more in-depth information and tampering.
As Close As The Nearest Computer
“The parts market is more competitive since Google. Everyone can hop on Google and type in their part number and it will show vendors who have stock,” says Nicole Hemphill, business development director at PartsSource in Aurora, Ohio.
Tim Smith Sr., vice president of sales at First Call Parts in Salem, Virginia, agrees that the Internet and software have changed the parts procurement landscape.
“From the third-party parts supplier perspective, we have seen an increased interest in technology-based solutions,” Smith says. “Companies are leaning more toward exploring avenues like computerized maintenance management system (CMMS) integration to help with time management. Engineers, HTM departments, purchasing departments, and customers in general are more interested in online shopping for parts now as well.”
Luckily for those in need of parts, the market continues to grow and access is just a keyboard away.
At the same time, more obsolete equipment parts may be more of a challenge.
“We are starting to see some of the older equipment parts fade out. Older single slice CT parts are getting harder to find. This is understandable,” says Sarah Lee, vice president of sales and marketing at Medical Imaging Technologies in Thomson, Georgia.
“I guess it happens with all technology. We have definitely seen the parts market grow. There are more parts companies than there have ever been before. With that being said, you have to be careful and use a parts company you trust that actually tests the parts and makes sure they work correctly. We have gotten many parts over the years that were bad when we received them,” Lee adds.
Supportability includes the availability of the right parts, at a cost that is within the device user’s practical budget, and the ability to use that part in a repair. This is only one ingredient in a recipe that includes many; a part’s quality, price and the frequency of use of a part and it’s environment during use.
With many hospitals feeling a budget crunch that makes capital expenditures more difficult, equipment is kept in service longer.
“The overall trend in this business sector seems to be related to health care facilities keeping equipment in service much longer today than in previous years,” says Greg W. Johnson, CBET, CHFM, co-founder of Southeastern Biomedical Associates Inc. “As a result, manufacturers tend to discontinue support on older equipment as an attempt to drive new equipment sales. This requires biomedical technicians in the field to seek alternative sources for acquiring parts and it has become an ever-increasing challenge for them to keep older equipment operational.”
“The parts trend that we’ve been noticing lately has to do with compact portable systems. Over the past weeks/months, we have been receiving more and more requests for transducers and parts for these portable systems,” says Norma Robles, customer support specialist at Exclusive Medical Solutions in Schaumburg, Illinois.
Along with these changes in the market is the challenge of comparing prices accurately. As Maddock stated, the cost of a part is not just about the price being charged on the invoice.
Perry Kirwan, vice president technology management at Banner Health, agrees about the importance of a part’s total cost over its life cycle.
“Clinical technology standardization – as we remove clinical variation in our care delivery processes – this has necessitated standardizing equipment decisions to realize those goals. Standardization by itself will most save you money over the life cycle,” Kirwan says. “Life cycle has to be thoroughly researched and incorporated into the purchasing process so that this plays a major role in the selection process. When you get it right, then you can negotiate everything from that point on from a volume perspective. OEMs and third-party parts suppliers are both integral in determining the market and then you negotiate from there.”
Some of parts buying is just common sense. Stay focused on what you really require.
“One of the most common mistakes in purchasing medical equipment replacement parts, or capital equipment, is to buy impulsively without fully considering the effects of your decision,” says Andrew Geidel, national sales manager for MW Imaging in St. Charles, Missouri.
“Take the time to analyze your requirements carefully and be true to heart. To avoid the bear trap of buying more than you need or can use, ask yourself if you really need all the bells and whistles. In other words, make sure the ‘ways fit the means.’ Consider the warranty and the supplier’s track record as well as your own customers’ needs.”
Changes In The Marketplace
“The third-party or alternative to OEM parts market is always moving and changing. You have seen a lot of M&A activities in the space over the past five years as a continuing trend of consolidation. I believe you will see more of this activity as health care continues to be where investors and service organizations are focusing on,” says Jeremy R. Probst, chief operating officer at Technical Prospects LLC in Appleton, Wisconsin.
Probst says that companies that operate in this space are finding the need to differentiate and continually innovate to remain relevant. He says that competition is becoming more apparent however all companies are not equal. Many are simply “parts/harvest” companies that have very few processes or quality standards and feel they too shall play in the parts space.
There is a big parts market out there and there are ways to benefit in your transactions from both suppliers and OEMs, according to Nicole Serwetnyk, parts procurement specialist at Advocate Health Care in Downers Grove, Illinois. Serwetnyk has 22 years in the business, including 11 with a major OEM.
“Knowledge of where to source from is important to help contain service costs. What we feel HTM programs need to remember is that repair and PM kit parts are not really a ‘fixed’ price item, be it from an OEM or an after-market supplier. It is not unusual for OEMs or suppliers to drop pricing, or up warranty offerings, – or both – once they realize you can buy a part from somewhere else,” she says.
“Because of this, it is rarely advantageous to lock in any sole-source parts buying agreements as visibility to current market pricing is effectively ‘lost’ unless you have some type of annual market comparisons done, with the contract stating discounts will adjust accordingly. In many cases, it is not unusual for an OEM to not have a certain part readily available, but the supplier market can ship you a warranted part the same day – at a significantly reduced cost,” Serwetnyk adds.
Buying parts doesn’t allow for kicking the tires, but it does allow for a review of the historical data and a review of condition upon receipt.
“Always consider the most common influence on resale value. The closer a part or product is to its recommended time between overhauls/refurb/reconditioning, also considered as end of life (EOL), the less its value,” Geidel says. “Equally important is a ledger of consistent record keeping/historical data from the seller, coupled with a good historical maintenance program that can be reviewed by the purchaser. This is also known as a quality assurance (QA) validation.”
He suggests that upon receipt of goods, visually inspect/test the item(s) prior to taking possession or acceptance to assure yourself that no damage has occurred since the pre-purchase inspection and/or the shipping process and that all conditions have been fulfilled. He says that following these guidelines will create a systematic process of good hygiene in acquiring your inventory and everyday maintenance needs. It will make your customers very pleased and make your job a lot easier and manageable at every juncture.
“We’re seeing a shift towards a circular economy model, often referred to as ‘closed loop manufacturing.’ It’s a supply chain approach wherein raw materials, parts, and components are kept in the system for as long as possible, providing higher value and utility over time,” says Jim Salmons vice president of Philips Multi-Vendor Services and AllParts Medical in Nashville, Tennessee.
“It’s an alternative to the linear ‘planned obsolescence’ model that still drives a large portion of parts purchasing. But this familiar ‘take, make, dispose’ economic model relies on large quantities of cheap, easily accessible materials, and energy,” he says. “Today, contemporary notions ranging from environmental stewardship to total cost of ownership have made clear that this consumption-based economic model is reaching its physical limits.”
“Another less obvious factor is the impact on your organization’s patient flow and bottom line,” Maddock says. “Saving a lot of money on a part but keeping a unit down for a longer period of time as you look for an alternative to the manufacturer may not be the best decision. I’m sure many readers would say ‘thank you Captain Obvious, we already know that’ for those comments. But with considerable budget pressures it can be easy to make decisions that are better for your budget than the organization’s budget, and/or decisions better for the short-term than the long-term. A reminder never hurts,” he adds.
The new replacement parts market has come a long way and offers good quality, cost savings, same-day shipping and extended warranties, according to Nate Smith, co-owner/vice president of Elite Biomedical Solutions.
“If looking at purchasing new replacement parts, hospitals should look at the vendor to ensure a few items: ISO certified, FDA registered, In house R&D, 2D scanning, 3D printing, design reviews, risk analysis, strong development team, and USA manufacturing partners to ensure an OEM equivalent part,” he suggests.
Imaging Parts; A Breed Apart
“There has been tremendous growth in the marketplace for imaging parts solutions. Both OEM and third-party providers offer competitive alternatives to typical parts replacement models,” says Joseph A. Haduch, MBA, MS, senior director of Clinical Engineering at Pensiamo, a UPMC/IBM collaboration.
“The growth in this market has brought with it more competition and an opportunity for biomeds to leverage this competitive environment to their advantage. The major OEMs now offer multi-modality, multi-vendor parts options that directly compete with third-party companies,” Haduch says.
He says that OEMs have been very aggressive in marketing these services. Haduch says that this presents a great opportunity for HTM departments to compare parts discounts between vendors, but also to negotiate new or higher parts discounts with their OEMs.
“In order to gain either parts provider exclusivity or first-stop consideration, companies are willing to lower their OEM parts costs, which already have considerable margins, in order to gain a bigger piece of the pie,” he says. “Some OEMs may even consider service labor discounts as a means of increasing their parts revenues. The market has become so competitive that we recently converted our TEE probe repair agreement to an OEM replacement agreement. Seldom have I ever seen OEM replacement be a more cost-effective solution than third-party repair. OEMs like the thought of booking guaranteed revenue. Use this to your advantage when negotiating any parts agreement.”
Resourceful thinking can result in lower costs through negotiation and pooling.
“As for imaging parts, we were able to lower service contract costs by pooling tubes and probes in the agreement. Rather than having one-to-one coverage, we looked at the average replacement of tubes and probes per year and created a pool,” says Sharon Wray, program manager, Clinical Engineering Services and Medical Device Monitoring Office for the University of Virginia Health System.
“As for other parts, if I know that a certain battery or part is needed for PMs and the cost is high, I try to negotiate a lower price for that item in the service agreement,” she says. “As for the parts market, we are continuing to look for opportunities to streamline parts management.”
David Sulak, national sales director at PartSource, agrees that competition has increased in the market at a time when hospitals are budget focused while still needing quality parts and that this is a trend.
“OEMs are more competitive than ever with not only secondary parts suppliers, but also with secondary service companies. Service companies are getting more aggressive in sourcing their own parts, and keeping stock of high dollar/exposure items,” Sulak says.
“Hospitals are caught in the middle, looking for value without sacrificing quality and increasing exposure to risk and increased downtime. There is an increased awareness around savings realized beyond the parts themselves, enabling departments to become more efficient in the procurement process, through the use of technology and partnership,” he adds.
“It’s more important than ever for providers to navigate the delicate balance between delivering quality health care and controlling costs,” Salmons says. “Managing equipment maintenance and parts replacement – with an eye to optimizing resource utilization – is an essential part of every HTM’s solution.”
He says that maximizing the material spend efficiency to include a range of repair options may help in reducing costs for hospitals. He also points out that the circular economy approach can lengthen the interim between wholesale replacements of equipment while assuring the latest technology is in the hand of practitioners and at the service of patients.
Managing Availability
An optimized supply chain, and supply chain management, results in lower costs and a faster production cycle. Planning and coordination impact parts availability, pricing and logistical considerations. Technology, once again, plays a crucial role.
“Supply chains are narrowing down their preferred vendor lists by seeking supplier qualification. They are taking into consideration issues like quality, cost savings, part availability, fill rates, and support capabilities to help them thin out the suppliers they purchase from,” Smith says.
“Supply chains are also asking for customized solutions. It is important that they be able to purchase from vendors who can save them time and money without sacrificing quality. They are looking for suppliers who will work with them to come up with solutions that fit them specifically,” he adds.
The importance of parts availability cannot be overstated. While pricing often takes priority, the ability to supply the part needed is what should be at the top of the buyer’s priority list, according to Haduch.
“Though everyone wants to lower their parts spend, the cost of a part is meaningless if your parts provider can’t find your part. Before entering in to any agreement with a parts provider make sure they can fulfill the overwhelming majority of your parts needs,” he says.
“Do an analysis of your parts orders over the past 2-3 years. Ask your prospective parts vendor what percentage of those orders they can fill. You’ll have additional leverage, and additional convenience, if you can minimize the number of vendors you utilize. Only consider vendors that can fill at least 85 percent of your parts orders. This will minimize the amount of time your staff spends researching parts and allow them to do what they want to do … work on equipment,” Haduch adds.
He also emphasizes that technology is key in getting the most out of available resources, when adding staff is not always a reasonable option.
“Price and availability are key metrics when evaluating parts solutions. What is often overlooked is the chance to increase workplace efficiency,” Haduch says. “It’s been more than five years since we’ve integrated our CMMS with a parts supplier. Doing this streamlined our ordering process, increased oversight of our parts orders, and completely eliminated the need for our engineers to research parts, allowing them to spend more time on PMs and repairs.”
Kirwin agrees that CMMS offers capabilities that help get the most from a supplier network.
“Establish a broad network of parts and labor suppliers and build that intelligence into the CMMS,” he says. “You need primary, secondary, tertiary suppliers for each modaility cataloged so that you can query the broader market quickly. Spend time vetting your parts suppliers – quality, reliability, ability to deliver as expected can be offsets to some degree for price. In other words – shop smart.”
“We continue to see trends in supply chain consolidation to create a more lean purchasing process with higher levels of quality controls,” Probst says. “In the end, the customer wins if they can correctly align their organizational goals with a vendor that can support them. This, however, is not always relevant in health care facilities that do not have centralized or process-related purchasing. The general shift, though, is moving to reduce the vendor base.”
It Works At The Grocery Store
Consumers are also in need of saving money as the costs of many daily essentials climbs. Household budgets are often impacted when a major appliance goes on the fritz. Some consumer strategies extend to the parts buying scenario as well.
“Price-matching is a strategy we employ as well. An HTM department can negotiate price-matching as something done ‘on the fly’ on a transaction level, and introduce it as a term into service agreements with OEMs,” Serwetnyk says. “For example, through aggressive sourcing and price-matching written into our contract terms with one OEM, we were able to reduce overall parts spend on one OEM’s entire product line by a net 35 percent, which was beyond the 40-50 percent off we were already paying under our mix of OEM and market sourcing.”
“We are not required to buy all parts through the OEM, which was a key strategy to keep the price-matching function viable. An example of this was a deal where two defective $125,000 imaging components – not covered under the contract for the particular systems – were quoted to us for $80,000 each under our OEM agreement. The same OEM ended up providing them to us brand new for under $35,000 each due to a competitive sourcing situation we invoked, as per the terms of our contract with them,” Serwetnyk adds. “One can see that if you actively look at sourcing, you can really impact costs fairly quickly.”
AAMI Resource
The link to AAMI’s Replacement Parts Checklist can be found at www.aami.org/productspublications/articledetail.aspx?ItemNumber=2784. The checklist, developed by AAMI’s Supportability Task Force, includes pointers for both HTM professionals and manufacturers. It supplements the suggestions contained here and provides guidance.
In closing, the message is clear; technology, combined with strategic thinking and planning, can make the parts buying challenge less so.
“Growth of the parts market, done through strategic partnerships – both OEM and secondary market – and ability to identify the next group of parts that will be most likely to be needed for replacements (tubes/detectors, etcetera),” Sulak says. “Also, the use of electronic procurement will promote growth at the most cost-efficient manner, setting the direction of the new standard for procurement to be used by OEMs, vendors, and end users.”
“I think the HTM industry needs to support the quality vendors in the parts market so it can continue to grow, as it is really a key component in helping lower support costs for the organizations we serve,” Serwetnyk says. “This is especially important in light of the continued trend in reductions for reimbursements many organizations have been seeing the last several years.“
Unless budgets begin to expand, an unlikely scenario, the ability to procure high-quality parts, with the most favorable entire life cycle cost, is a reality into the foreseeable future.
