Imaging equipment service contracts: When is ‘end of life’ a death sentence?

August 14, 2015
by Gus Iversen, Editor in Chief
Manufacturers are required to maintain parts and offer service for their medical equipment for many years after the machine is produced. Frequently those agreements can run upwards of a decade, but all good things must pass, and eventually the manufacturer stops offering service contracts. When that happens it’s end of life (EOL) for that piece of equipment. But when OEMs phase out service contracts for older modalities it is not necessarily “lights out” for that system.

While teaching facilities and Level I trauma hospitals may depend on the latest and greatest equipment, a smaller facility can sometimes care for the vast majority of its patient population using moderately outdated technology. In fact, with the right ISO, it could be the beginning of a whole new chapter in cost efficiency. Using older equipment comes with certain risks and venturing away from OEM contracting can be a scary prospect for hospitals that are unfamiliar with their options. In the EOL market uninformed decisions can be extremely costly.

For Tomas Gonzalez, president of Homestead Diagnostic Center, finding the right ISO required a certain learning curve. “Over the last 15 years I’ve had people here who had no idea what they were doing, charging me a whole bunch of money and not getting anything accomplished,” he says. Gonzalez owns an imaging center in south Florida, which runs largely on older imaging equipment. His equipment includes a Siemens 1.5T Vision MR, a Philips MX8000 CT scanner, and an X-ray unit he says has been working flawlessly since 1999.

“I am ACR accredited and they come check everything out, and I don’t have any issues,” says Gonzalez. “Everything works fine, and image quality is great Gonzalez attributes the success of his company to his frugality in the face of diminished reimbursement. “A small center like mine cannot afford a new MRI, it’s ridiculous. I simply cannot afford it.” Without dependable ISO servicing, he would be out of luck.

Why do OEMs stop supporting older equipment?
The relationship between ISO and OEM has evolved in recent years as facilities like Homestead Diagnostic Center forgo newer equipment in the interest of smarter budgeting. Finding ways to keep that equipment running is good business for whoever can do it. For the OEMs, however, sometimes it’s out of their hands. Matthew McCallum, a strategic business partner with Siemens Service, points to evolving computer technology as a factor that drives EOL, (or as they call it “end of service”). A medical imaging device will typically have components from commercial technology — a monitor or computer from manufacturers such as Hewlett Packard or Dell, for example.

Those companies will frequently roll out new equipment and stop supporting the older stuff long before a radiologist would be ready to trade in their CT scanner, for example. “Another challenge is the operating system. For example, Windows XP is no longer supported by Microsoft. If they end support of XP then we have to end it as well,” says McCallum. Siemens worked with Microsoft to ensure their customers had an upgrade path to Windows 7 when that happened. From the OEM perspective, taking responsibility for computer technology that has become outdated is one of the bigger risks an ISO takes in their EOL servicing agreements.

“A lot of times you’ll find third-party organizations will get a refurbished computer but don’t know what kind of software is installed or what kind of inherent holes are in the security of the system,” says McCallum. The vulnerability of medical devices to hackers and other security threats have been well documented in recent years, but rarely — if ever — do those stories indicate whether or not the systems being taken over are outdated.

For Siemens Service, OEM certified and tested spare parts make a world of difference, and if they can’t certify those parts anymore they won’t service the equipment. But nor are they oblivious to the fact that end users are holding on to their systems longer. “They just don’t feel like they have to replace it — maybe it isn’t their primary emergency department CT or MR, but they are still using these older systems in the therapeutic department for patient planning and things like that,” says McCallum.

As a response, Siemens has rolled out an End of Service Extended Use Service Agreement through which McCallum says, “we don’t provide a 100 percent guarantee that we will be able to fix it, but we do keep parts in stock and engineers available to support it.” Those special agreements are only available on systems where there are enough parts warehoused to make it work, but the company currently ramps up its parts buying cycles before end of support, so it can keep its customers’ equipment running past the end of the standard service agreement.

Keeping an eye on the bottom line
In Gonzalez’s experience, a service contract from an OEM for older model advanced imaging equipment can cost roughly $5,000 per month. For equipment that is still being paid for, he adds an additional $5,000 per month on top of that for those payment plans.

“How will you get that money back? You have to be frugal and careful about how you spend money,” he says. For anyone who contracts with an ISO to service EOL equipment, expenses are clearly a driving influence. Fortunately, as the ISO segment evolves, there are some increasingly credible options to choose from — but they are by no means all created equal.

According to Rich Greb, manager at Image Technology Consulting (ITC), the parts and service ISO that Gonzalez is using, “OEMs typically own the systems for the first five years, then you have five or seven years where they can still support it.”

All told, he says a system that has been declared EOL could remain in the market for another five, or even 10 years with the right ISO parts and service. For ISOs and health care facilities alike, those years between the OEM contracts and the scrap yard can be the difference between survival and foreclosure.

“If they can help me over the phone, they will,” says Gonzalez of his contract with ITC. “That’s what I need from service guys — it can’t feel like they’re just trying to get me for all I’m worth.”

For BC Technical, a large ISO specializing in CT, MR, and nuclear medicine, keeping those older systems in business is credited largely to a massive warehouse of older parts and equipment. Josh Trueblood, its director of parts, says that adding more of that legacy equipment to their warehouse is one of the advantages they get from undergoing acquisitions and expanding their footprint.

Over time, the install base for certain models can become so small that it’s difficult to service them cost-efficiently. Sometimes a model can become so rare that the spare parts become more expensive than they were when the machine was new. Greb says that although ITC has never had to stop servicing a particular modality, the diminished volume and return on parts for older systems ultimately has to be addressed by either servicer or end user.

In some cases they protect their customers through contracts specifying that if the value of the system becomes less than the cost of repair, they will buy it from them. According to Greb, some manufacturers allow their imaging units to evolve over time in a way that components can be upgraded incrementally. A particular system can receive improvements to speed or image quality without being completely overhauled.

“Philips sometimes runs out of the EOL parts because, in reality, they continue to maintain some of them for favored clients, and when they need those parts we’re a good source for them,” says Greb. He cites some of the early Philips Intera MR systems, as well as the Picker Eclipse MR systems, as ones beginning to hit the 20-year threshold. His company is seeing fewer of those at their facilities, but Greb notes that in certain international markets older systems are dramatically more abundant.

Medical imaging Darwinism
Facilities with older systems have to continually weigh the pros and cons of their equipment in a paradigm of diminishing returns, says Trueblood. “At some point if you’ve had that system that long, you may not care about accreditation or reimbursement but most people with a facility care about those things.”

Image quality and technological capabilities aside, once a system gets to be a certain age, Trueblood says all of the spare parts available have been repaired so many times they themselves can hardly be compared with the original product. “Take something like a GE ProSpeed CT scanner,” says Trueblood. “There are still a few out there, but in order to get a new tube now you practically have to buy a new tube, which will run you about as much as the machine itself is worth.”

In that way, facilities with older modalities will ultimately always be incentivized to make an upgrade. “The service engineers get older, too,” he says, “but even the servicing knowledge is less of an issue when you simply don’t have the parts to fix it.” For those very old modalities, end of life takes on a more literal meaning and Trueblood says the best thing BC Technical can do is help to uninstall the equipment. For ITC, Greb notes a modest silver lining. “We could always scrap something for money,” he says. “Separate the boards from the other metals and the cabinets and that type of thing — just send it off to recycling.”

What’s under the hood?
Reimbursement-altering legislation like XR- 29 will factor into a facility’s decision-making process, but so will the cost of contracts available for equipment. Is it ever worthwhile to service an older system in spite of lower reimbursement? Not for everyone, but probably for some.

If so, can the ISO you’re working with make any guarantees about the availability of parts, engineer experience, and a track record of dependability? The medical imaging industry loves its car analogies, and the difference between a lemon and a “classic” MR or CT scanner has less to do with the miles on it than the quality and consistency of its maintenance.

For Gonzalez, good decision-making starts with learning what to look for and building up the in-house education. “One thing I’ve learned in all my years in this business is that you’ve got to get down and learn as much as you can,” says Gonzalez. “You’ve got to try to resolve as much as possible in-house before you start calling on outside help, and that’s what I’ve done.”