By James Laskaris

Traditional Bio-Med/Clinical Engineering departments have had to evolve to address the changing demands of healthcare. Reflecting their increased responsibilities, departments have transitioned to Healthcare Technology Management (HTM) programs. The Bio-Med discipline first gained the spotlight in the early 1970s when Ralph Nader reported that hospitalized patients faced an increased risk from electrocution and operating room fires. Technology has since rapidly evolved with computers, networking, and patient safety playing an increasing role in medical device design. This has led to IT and safety concerns playing a much bigger role in direct patient care than even a few years ago, as directed by “Pay for Performance” initiatives.

HTM departments will always have a primary focus on equipment maintenance, but now they have a larger role in cost control, networking, life cycle planning, cybersecurity, and recall management and safety committee coordination. Devices and departments such as X-ray equipment, CT, lab technology, or even medical records — previously stand-alone systems — are now networked to save costs and improve efficiencies and safety. It is an evolving process that brings technology, physicians, and patients together and is commonly referred to as “Medical Home”. The downside: it’s a complicated practice in which technology has evolved beyond the “box”. The result is a new dimension in the service market by adding software, wireless, internet, and networking concerns.

With varying needs and markets, few industries have the luxury of access to one-size-fits-all technologies. Unique markets have motivated hospitals to develop their own technological environment designed to provide care relative to their patient mix. This requires a combination of multiple technologies and vendors, thus making the goal of “plug and play” difficult at best.

To address this, Bio-Med and IT departments have begun to work closely with each other and with vendors to manage the network. When individual service contracts are required, clearly defined services, rights, and responsibilities of each party should be indicated. Still, the bottom line is the network and its ability to assist in delivering healthcare, which remains the responsibility of the hospital. To facilitate this, a manager within the facility should be identified to take responsibility for the hospital’s network functions and upkeep.

Service is still an important issue when technology is involved. Along with the initial expense of acquiring technology, service can be a significant factor in its overall cost of ownership. Each year the U.S. healthcare industry will spend over $18 billion to provide service on medical technology. This accounts for 3 – 6% of what the original technology costs per year (IT accounts for up to 20% per year). Still, it’s a small amount compared to a facility’s overall costs for labor (50%) or consumables (15–20%).

Service can also be an important revenue stream for vendors, accounting for up to 40% of total revenue. This is especially true with high-end technology providers (robotics, imaging, lab, IT) or systems with a long life cycle (sterilizers, beds, lights). Profit margins on vendor service plans can reach 50%. This has become especially evident for new IT-focused technologies where software licenses and upgrades have become the norm, thus adding to the cost of ownership.

Hospital profit margins over the last 10 years hover in the 4–6% range, but as many as a quarter of facilities operate in the red. This has led to a focus on service as a way to lower costs. A hospital must generate $20 in revenue for every dollar in costs. Fortunately, multiple service options are available to control costs without compromising outcomes. These include multiple vendors, hospital-wide, third-party, and in-house service options. Each has its own benefits and drawbacks; risks must be balanced with savings.

One key method of controlling costs is to “think ahead before the purchase”. A comprehensive HTM program includes evaluation of new technology and its service options. Part of the capital budget process should involve sign-off by the department director and Bio-Med staff on their recommendations for maintaining the technology. This allows department and material managers to have clear goals when negotiating service on the technology.

Considering service over the life of a technology in addition to capital costs allows negotiators to get a true picture for cost comparison of vendors and models. It is at this point that the vendor is most flexible with pricing and service options. After the sale, the vendor has all the leverage. The key is to have a plan well before the warranty expires. Among the multiple tools available are FDA recalls and the FDA MAUDE database. These will give potential buyers an indication of a technology’s general service history.

About the author: James Laskaris, EE, BME is a clinical expert at TractManager, now a part of symplr.