How to De-Silo Medical Equipment Data for Cost Reduction
If all biomedical equipment service contracts looked alike, HTM decision-making would be so much easier. But service contracts have many moving parts. And, as Becker's Hospital Review puts it, they "come in all shapes and sizes: long, short, portrait, landscape, 12 point type, 3 point type, terms and conditions at the beginning, terms and conditions at the end… ."
That makes trying to pin down the annual cost of servicing medical devices challenging.
Service contracts provided by the OEM specify warranty terms, coverage levels (parts and labor, repair only, etc.), service pricing, preventive maintenance, software upgrades, terms for out-of-warranty parts and repairs, and many other details. Some contracts have laddered timeframes for specific coverages, tied to price increases or warranty termination.
Purchasers can analyze existing contracts and previous costs to help guide decisions when renewing partnerships or buying new biomedical assets. Knowing exactly how much you were charged for which service can reveal the contract's fine print and help identify any coverage gaps or loopholes to keep an eye out for in new contracts.
Understanding the exact annual cost of servicing biomedical assets also allows managers to identify opportunities to cut extraneous service costs, evaluate departmental equipment spending, and more.
Calculating a cost of service ratio
A simple formula, known as the cost of service ratio (COSR), is the gold standard used to determine the actual value of a long-term contract. To obtain the COSR, just divide the annual maintenance cost by the original purchase cost.
In reality, unless 100% of HTM is outsourced, determining precise yearly maintenance costs continues to be a challenge for many hospitals and health systems. The baroque organizational structures of large healthcare providers cause significant barriers to achieving accurate figures.
Without complete data, it's impossible to clearly understand the acquisition cost compared to the cost of parts and services associated with the terms of a particular service contract.
Conducting a multi-departmental cost analysis
Despite the growing focus to de-silo healthcare, many hospital data streams remain segmented. Most hospitals now use some type of computerized maintenance management system (CMMS) to track medical device inventory, utilization, and maintenance. But not all organizations use a centralized asset management data system.
Furthermore, CMMS software doesn't always integrate with data systems used by different departments, such as human resources or capital planning. Unless the health system uses the most advanced CMMS technology, gaps in data standards make it difficult to fully integrate data into a single system.
To generate a meaningful COSR, purchasing teams must connect data streams from multiple departments. Collaboration with the following departments about maintenance and repair expense data is essential to achieving an accurate COSR.
Data from supply chain management shows how capital is spent on device acquisition, distribution, and logistics. This information provides the acquisition benchmark when calculating COSR.
- Data from work orders
- Details on device downtime
- Preventive maintenance
- Hourly labor rates for BMETs and other staff
- Over-time or on-call rates
- Labor hours for BMETs training other staff
- Cost of out-of-house staff trainings
- Out-of-house repair invoices
- Replacement parts invoices
- Routine capital data
- Depreciation information
Non-financial data can also help determine hard numbers for service expenses. For example, some departments may have general labels for transactions. "Service and repair" could refer to all types of devices within an account, even non-clinical equipment. Therefore, its necessary to cross-reference data streams to help identify specific device costs. Matching installation data from facilities or calendar data from clinical engineering helps connect the dots.
De-silo biomedical asset data to reduce costs
When calculated correctly, the COSR is a flexible tool that can be applied in a variety of ways. It works when evaluating a single device, particular model, an entire equipment category, or a specific OEM brand–but only if the numbers are reliable.
By working to de-silo data streams, you’re providing confidence in the COSR for evaluating much more than inventory and partnership decisions. An accurate COSR can be used for:
- Comparing the cost of after warranty servicing options (in-house, using an ISO)
- Identifying unnecessary service expenses
- Assessing whether to repair or replace medical devices
- Calculating the total cost of ownership
- Evaluating device ROI
Determining a comprehensive COSR provides insight into the overall financial performance of the HTM department. Performing a COSR for separate clinical departments allows for a comparison of biomedical equipment spending to identify what works and what doesn't in each department. The COSR is also helpful when comparing equipment spending at different facilities within a health system or even between independent hospitals.
Elite Biomedical Solutions makes replacement parts of OEM level quality or higher. We proudly manufacture our parts in the USA. Contact us to discover how our parts and repair support services keep devices on the floor, patients safe, and costs affordable.