Hospitals can save millions of dollars with MES contracts

by Lauren Dubinsky, Senior Reporter | August 29, 2016
Parts And Service
Innovation Summit with
Mackenzie Health executives
and Philips solutions leaders
From the August 2016 issue of HealthCare Business News magazine

A question on most hospital executives’ minds is how to best manage the growing inventory of medical devices. A relatively new approach called managed equipment services (MES) may be the answer.

As part of MES deals, hospitals and health systems sign a long-term contract with an equipment manufacturer for a set amount. The manufacturer takes responsibility for the procurement, installation, maintenance and repair of the medical technology as well as consulting, asset management and training.

“The idea is that it shifts operational responsibility to people who have subject matter expertise,” says Matt Bierbaum, vice president of managed service and enterprise partnerships at Philips Healthcare. “They can do a better job at managing risk, but can also bring a one-stop shop to the hospital.”

One of the major motivations for entering these contracts is hospitals and health systems are motivated by the bottom line. Over the course of two years, Philips helped one health system save $7 million.

Another motivation is to be on the cutting edge of technology on a continuous basis. Siemens Healthineers offers “technology evergreening," in which they refresh the hospital’s technology on a pre-agreed timeline.

“This is a very attractive value proposition for a lot of health systems, especially in a competitive environment where they have to attract physicians and patients by the fact that they have the latest medical technology to offer,” says Sourabh Pagaria, senior vice president and global head of enterprise services at Siemens.

In addition to looking at aging medical equipment, hospitals are also realizing that the capital strategy in the past has been a bit ad hoc, says Bierbaum. The hospitals made bundle purchases on an annual basis, and many times ended up with many different vendors and models.

“They needed to work with their vendors and suppliers in very different ways in order to address a number of these challenges,” says Bierbaum.

Mackenzie Health partners with Philips
In November 2015, Philips announced a $300 million, 18-year MES contract with Mackenzie Health in Ontario, Canada. The health system’s goal was to bring the concept of a “smart hospital” to life.

“We were less worried about the specific MR displayed at RSNA and more concerned about the longer-term partnership with a vendor that could help us equip the brand-new hospital, but also make sure that we can maintain our existing, older hospital at a current state,” says Altaf Stationwala, president and CEO of Mackenzie Health.

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