The medical device industry in Europe employs 575,000 people in the EU and its total sales amount to €100 billion ($109 billion), according to the European Commission. The industry includes about 25,000 companies and 95 percent of them are small and medium-sized. The European medical device industry is continually growing and changing. The managed equipment services model is becoming more popular and customers are searching for more dedicated and unbiased partners that can assist them with both acquiring and servicing equipment.

While there are a few roadblocks that are preventing change from happening faster, companies and providers can use the changes to their advantage by harnessing the competition in productive ways. Edward Sloan, president and CEO of Ed Sloan & Associates Inc., an independent equipment and parts company, and Stephen Hodgson, U.K. manager director of Asteral, a managed service company, took some time to speak with HealthCare Business News about the latest trends in the European market.

HCB News: How do you see the market in Europe changing?
ES: In Europe, the original equipment manufacturers (OEMs) have historically controlled the service of imaging equipment, mainly due to the lack of affordable spare parts. This mirrors the U.S. market. In the ‘70s and ‘80s there were only a few independent service providers, but then in the late ‘80s a reliable supply chain of spare parts was available. As a result the independent service market grew from a handful of companies to over 200 companies in just 10 years. Since the European market is more advanced, I predict that the independent service model and managed equipment services model will be adopted because of the cost savings it will create for health care providers.

SH:The European market is waking up to the prospect of multi-vendor service (MVS) in radiology. Whilst it is established in the biomedical market, Europe has been a late adopter of MVS for imaging equipment. The managed equipment model is becoming more popular due to a positive shift toward value-added services and a smoothing of capital expenditure. Both rich and poor countries that want to hold onto scarce capital are forming strategic partnerships with vendor neutral experts. The governments are looking to partner with companies in order to reduce the lumpy capital payment model and make it a more predictable revenue payment. The partner organizations are able to assist the clinicians in buying and integrating technologies.

HCB News: What factors have contributed to this change?
ES: While the U.S. domestic imaging market has been shifting from full-service contracts to more T&M (time and material) service, and in some cases in-house service, I do not think that the European market is comfortable with taking on this level of risk. In my opinion, over time the European market will adjust, adapt and accept taking on additional risk for the maintenance of equipment. This will be driven by higher costs to the provider and reduced revenue from reimbursement. Capital equipment owners will look for neutral partners that can assist with parts acquisitions and service, regardless of which OEM they choose.

SH:We have seen a focus shift from the OEMs toward service-type contracts, as a way to sell more capital equipment. This helps governments spend their capital more wisely. We have seen a shift toward service contracts that include capital equipment management, finance, replacement and maintenance that is being provided by companies. There is currently a large outsourcing strategy in the biomedical industry in the U.K. and Italy, and the markets are moving away from the traditional in-house model. More private companies are starting to want lower costs with comparable quality.

HCB News: What are the roadblocks preventing the change from happening faster?
ES: There is a lack of a reliable supply channel that includes the availability of trained engineers, quality-assured parts, technical support and training.

SH:The roadblocks that are preventing change from occurring faster are the cultures, and safety of dealing with OEMs in a particular way. It’s known in the industry that no one gets fired from buying from Philips, Siemens, GE and Toshiba. There are also large barriers to entry due to the need to be as credible as the largest brands in the world. In addition, users want to buy assets themselves and it’s difficult to gain trust with new companies.

HCB News: What kind of companies will benefit as the European market changes?
ES: As each of the OEMs in the European market have plans or have already started offering the multivendor service model, it further validates the existence of the model in the market. The independents that approach this market with the right processes including funding, people and structure will thrive and prosper.

SH:Service-led and service-focused companies will benefit, which is why all the larger OEMs have a focus on change toward this model. Managed Equipment Service (MES) companies will benefit where service and lifelong support to assets, processes and technology integration are key. Other companies that will benefit are larger companies that can raise finance as well as funding, companies that really understand the equipment chain and the effect it has on the patient pathway. Others that will benefit include those that can optimize facilities, equipment and the pathway for the patient, have leaner processes and that focus on the patient, and those with a corporate policy with good governance, ISO procedures and compliance.

HCB News: How can providers use this change to their advantage?
ES: If the provider uses competition in the market to lower the cost of service and raises the quality of services, then the advantage to the entire market is evident. We have to remember that a rising tide raises all boats and we all are made better by fair competition.


SH:Providers can use this change to their advantage by buying solutions and product combinations that develop long-term contracts that provide stability. Sometimes this means changing from the OEMs to ISOs, which offer more asset management, data analysis and the most innovative technology.

HCB News: How do you think the European market will change in the next five to ten years?
ES: I think there will be a steady migration away from the OEM service model to a combination of the in-house service, independent service and OEM service models all in the same account. The OEM will continue to maintain the newer equipment while in-house and independent service will handle the more mature pieces of radiology equipment. This migration will be driven by the development of the supply channels that will include repair parts, available engineer talent and technical support that is reliable. How quickly this will happen is dependent on this structure being in place and completely operational.

SH:There will be a healthy MVS alternative to the OEM. This will be supported by successful parts companies, akin to the North American market. We will also see more governments using Public Private Partnerships (PPP) / managed equipment service contracts. This market today is balanced with vendor-independent service models being provided by all companies involved.

Ed Sloan & Associates was founded in 2008 and has been a leading provider of diagnostic imaging replacement parts, part sourcing, equipment services, equipment installation, tube replacement, MR magnet services and MR trailer storage. The company has over 7,000 parts in stock including CT and MR parts that are difficult to find. Its customers include hospitals, diagnostic imaging centers, clinics, multivendor service organizations and independent service organizations. Asteral procures and maintains medical equipment solutions for the United Kingdom’s National Health Service (NHS) and private health care providers. Over 45 percent of its staff previously worked for the NHS. Its growing portfolio includes 1,250 pieces of diagnostic imaging equipment that span 50 NHS and private hospitals. The company maintains more than 16,500 medical assets across diagnostic imaging, radiotherapy, theaters and electro-biomedical engineering equipment.