The costs associated with medical equipment services are rising, drawing heightened attention from hospital administrators and leaders. Over the past three to four years, hospitals have faced numerous challenges: the COVID-19 pandemic led to unprecedented hospitalizations, stretching critical care capabilities, staffing, technology, and supply chains to their limits. Consequently, capital equipment purchases were restricted to absolute necessities, with funding redirected to personal protective equipment and infection control solutions. This situation led to significant staff shortages, particularly among nurses, resulting in increased fatigue and burnout that took a toll on healthcare organizations.
Vendors were also affected by the pandemic through reduced capital revenue and the inability to implement usual price increases on services. While the worst of those challenging days are behind us, the repercussions continue to resonate. Medical equipment service support has, in many cases, increased as efforts were made to keep equipment operational for longer durations.
Vendor revenue trends and service cost dynamics Estimates indicate that typical profit margins for medical technology vendors range from 20% to 30%. According to the Bureau of Labor and Statistics, the Consumer Price Index (CPI) for healthcare was projected to increase by 3.3% in 2023, signaling a return to pre-pandemic economic trends. The costs of both medical technology and the services associated with it are on the rise. Vendors are introducing new pricing structures and revenue opportunities, including both price hikes and the offering of additional coverage options that can enhance revenue streams.
Years ago, service and service revenue were a cost center for medical vendors. However, they’ve evolved into significant revenue centers complete with their own profit and loss statements and accounting systems with expectations to generate substantial income for the vendor. Vendors now offer six to eight levels of service solutions, each providing multiple optional services within each level. This evolution presents customers with a wider array of choices tailored to their clinical needs. It also grants vendors the opportunity to implement diverse pricing strategies, resulting in larger margins on services rendered. Service costs within healthcare organizations have traditionally remained sizable and largely unmonitored, lacking a centralized strategy to ensure the correct level of service is being procured. Equally important is assessing which technologies can be supported in-house without incurring unnecessary risk in terms of service repairs.
