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Strategies for the New Economic Season

by Kathy Mahdoubi, Senior Correspondent | December 23, 2009
Money Health
This report originally appeared in the December 2009 issue of DOTmed Business News

American businesses are adjusting their priorities in the current economic climate. Broad trends are emerging, as companies increase productivity, reduce capital investments, undergo major restructuring and workforce changes, and consolidate through mergers and acquisitions. The U.S. health care industry is reportedly one-sixth of the economy and a $2.4 trillion business. Although it's one of the strongest industries (partly due to necessity of provided services) it still does not shield the segment from the challenges of today's economy. According to a recent American Hospital Association survey, 34 percent of hospitals expect to report losses in the first half of 2009, which indicates just how broad an impact current financial pressures will have on hospital and IDN budgets in the coming months, and possibly even years. Demands in the market are forcing health care organizations to look for alternative strategies for reducing expenditures, including those on capital equipment parts and service.

OEMs haven't escaped the financial fallout either. November 2008 AHA statistics showed a grim picture for manufacturers. "Pretty much all of [OEMs] were reporting, across the board, anywhere from a 10 to 25 percent reduction in their capital equipment sales," says Tom Spees, U.S. sales director for Dunlee, a major manufacturer of imaging parts and a division of Philips Healthcare. "It varies by modality, and it certainly varies geographically, but there is a significant impact."

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In a recent webinar discussing the medical equipment service industry, DOTmed conducted live surveys asking a variety of professionals within the health care industry how their business was being affected by the economy. Of the 100 some attendees, 43 percent said their operating expenditures were being reduced as a result of the recession; 39 percent said there was a significant impact on their capital spending, and 28 percent said there were reductions in their workforce. Mike Kintner, TriMedx director of supply chain, says reduced operating expenditures is "present at all levels," with broad changes occurring in the areas of consumables, technical training and equipment service. "This is a really attractive option for health care systems," he says. "When you do the math at a five percent margin, a $100,000 expense reduction has an equivalent impact to the bottom line as $2 million in new revenue."