by Sean Ruck
, Contributing Editor | August 01, 2014
From the August 2014 issue of HealthCare Business News magazine
And when it comes to determining what you actually want in a service contract, for the extended warranty Lynch suggests thinking about it as you would an extended warranty from a box store for consumer electronics. “It’s the exact same sales process, and percentage. I’ve asked people at conferences how many have taken the extended warranty at Best Buy and no one ever has. Yet, for hospitals, they purchase differently.”
While it’s a buyer’s market in some ways, there are some components of the service sector that aren’t necessarily end-user friendly. “Part of this depends on what the federal government will require regarding service literature. As equipment gets more advanced on the software side, it’s easier for manufacturers to lock out others (including in-house service),” says Lynch. “The OEMs are well-connected and I mean, the CEO of GE sits down with President Obama, has a relationship there and they’re able to convince people at the highest levels that the same degree of care we’ve been giving for 30 years for all kinds of equipment, that we shouldn’t be allowed to do it for imaging equipment.”
Lynch also points out what he feels is a broken system for incentivizing hospital materials managers. “Unfortunately, materials managers are paid to purchase the equipment as cheaply as they can on the frontend. This actually incentivizes them to sign long-term service agreements. They may get a savings up front of 10 percent and sign a service contract that gives back 20 percent to the manufacturer,” he says.
“I believe that the rewards for GPOs and material managers don’t look at the long term. These agreements are often signed before we in clinical engineering even know the equipment is on the table for purchase.”
History lessons help guide service
Nearly everyone in the service sector agrees that one-size does not fit all when it comes to service contracts. But that still doesn’t prevent some from selling a one-size solution. That’s why Rick Stockton, president of Atlas Medical Technologies, places emphasis on looking at the history of a machine before finalizing a service contract. “If you look at the history of the machine, it may not have had a problem in a particular area,” he says. “So we’d rewrite the contract based on what they need.”
Customers may have a full-service contract, or may opt for a shared-risk contract. “If you’re not being utilized, you’re not paying,” he says. And if you do need service, the contract is set so that the customer will pay up to a certain amount and once the threshold is hit, Atlas covers the additional.