Clinical engineering and the science of the capital budget process

May 24, 2019
From the May 2019 issue of HealthCare Business News magazine

By James Laskaris

Clinical engineering has evolved over the years.
In the early 70s, safety and repair were the primary focus, especially when Ralph Nader first brought the risks of medical equipment to the attention of consumers. In today’s world, clinical engineering has progressed to managing the entire lifecycle of a technology — from acquisition to obsolescence. With the help of comprehensive equipment management databases, clinical engineering plays an important role in generating multiple data points to assist in identifying a technology’s potential impact during the capital budget process.

Medical technology is vital to the delivery of leading-edge healthcare. The right mix allows the provider to be competitive in their space. To date the U.S. market for medical devices has reached $156 billion, and it’s projected to grow as the population ages, at least for the next few years. Although this is a fraction of what Americans spend every year on healthcare, technology drives virtually all diagnoses and therapies. It dictates the way medicine is practiced and financed. Before capitated reimbursement, buying equipment was a much simpler process. If something cost more, you just charged more. The challenge now — with limited budgets and improved outcomes driving reimbursement — is acquiring the “right technology in the right box at the right price” (the “3 Rs”). This is how a technology provides “value” to the hospital.

The healthcare budgeting process includes a multidisciplinary team to get the most out of the available capital. Primary stakeholders include the CFO, medical director, service line managers, and the director of material management. But with the concept of the “3 Rs”, the selection process becomes more complicated and must rely on solid outcomes along with financial and historical equipment data to categorize and rank the proposed technologies. These include technologies that generate positive revenue (make money), technologies that lower costs (save money), technologies directed to patient safety concerns, and technologies that replace older or obsolete systems. Clinical engineering input is a key factor in strategic assessment, identifying obsolete systems, safety issues, and calculating service and networking costs for equipment replacement planning.

Strategic assessment
The strategic direction of the provider is typically the responsibility of the C-suite, whose members are tasked with shaping how the healthcare system can best address their patient demographics. Clinical engineering can support this by identifying new and emerging technology trends that may compete with or shorten the life expectancy of a proposed project — a critical factor that can impact the ROI of a proposed technology.

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