Parts account, on average, for more than 60 percent of radiology and endoscopic equipment repair bills. The remaining costs cover labor, travel, and other expenses, such as taxes. When healthcare organizations have a controlled management program in place, equipment repair costs can decrease dramatically. However, managing the repair process and finding the lower-cost alternatives may not be as simple as you think. The seven tips below will help you to do so.

1. Verify vendor capability upfront

When healthcare facilities look to vendors to repair equipment, they are often overwhelmed by the choices and unsure about which option is best. The Original Equipment Manufacturer (OEM) can charge medical facilities extremely high prices, especially when the service contract is sold at the time of equipment purchase. Most medical manufacturers, in fact, outsource the manufacture of individual parts or subsystems and resell them with a hefty surcharge.

Some service organizations will refuse to install parts they did not sell directly, using the excuse that FDA requirements forbid them. In reality, the FDA has stated that it is the manufacturer’s policy that rules whether the engineer can install or service equipment. The FDA assumes that whoever services the equipment in question is qualified to do so and will maintain the quality of the unit by replacing the non-functioning part with an equal-quality replacement.

When deciding which vendor to use for service, the healthcare facility should require proof of training and experience level of the engineer who performs the service, even if it is the OEM that is providing the service. To assure competent service, it is not uncommon for facilities to interview or screen engineers before they make that decision.

2. Utilize ISOs

Independent service organizations (ISOs) can be a highly cost-effective option for servicing equipment. For example, a Midwestern network needed to replace a CT detector at a cost of $200,000 from one source (an OEM). An ISO was located who could provide a replacement detector having the same performance characteristics as the original for $15,000, resulting in savings of $185,000. ISOs can be extremely knowledgeable and experienced, since most of the time they are former OEM-trained engineers. They take pride in being a choice service provider and strive to repair equipment, not just simply replacing parts. If an ISO cannot repair a specific problem, they are more likely than an OEM to refer an organization to a qualified source, in order to maintain their relationship with the client.

ISOs are more likely to be located closer to the facility they are serving than the OEM might be, which can allow for better availability and faster response time. ISOs may take slightly longer to repair parts than an OEM might because the ISO services the equipment, and does more than simply replace parts or assemblies, usually servicing to the component or circuit board level rather than just switch assemblies. This factor can allow for lower parts costs in the long run and possibly a longer equipment lifespan as well. In addition, ISOs often have access to the same parts suppliers that originally produced the assembly for the OEM. If the ISO does not use the same part as the OEM, the ISO should verify in writing that their recommended part is at least equal quality to that the OEM would use.

3. Document, document, document

Healthcare organizations need to negotiate with vendors on repairs – a surefire way to save on costs and learn more about your rights as a customer. Many department managers have given service providers a "free ticket" when it comes to accountability and pricing. Healthcare organizations no longer can afford to be hands-off in this area.

Before a healthcare organization can begin the negotiation process, it must have documentation on past equipment repairs and costs. This is where the organization has its true power, because it can rely on past charges and repair times to guide it for similar repairs. Occasionally, parts or systems begin to fail while still under warranty, but do not completely fail until the warranty has expired. Tracking repairs on equipment still under warranty makes it significantly easier to negotiate when a repair on a failed part or assembly just out of warranty does occur.

If the organization can clearly explain what was happening in the warranty period, it stands a better chance of receiving a refund or free service. For example, a healthcare organization needed a repair on a gamma camera just after the warranty expired. Because the facility, by employing an asset management company, had been tracking and documenting problems with the camera, they were able to prove to the manufacturer that the malfunction began during the warranty period. The manufacturer then replaced the part at no extra charge to the facility.

It can be extremely difficult and time-consuming for a facility to monitor and track hundreds of pieces of medical equipment, but having a managed time-and-materials system set up at the facility can ease that burden.

4. Agree on service terms
in writing

Before the service vendor comes on-site, the facility should request from the vendor service management a list of references and documented training required for the engineering personnel. This process should take place either before or during the purchasing process or, in the case of considering an alternative service vendor, before a final decision is made. During the interview, the facility and vendor should agree upon specific service terms, in writing. This should be completed before any purchases are made or repairs started.

Common repair terms that should be agreed upon include:

• Timely response from the vendor when repairs are needed regardless of method of payment; i.e., contract, time and material or other method.

• Repairs should require a maximum of two visits and travel charges should be consistent.

• Objective advice will be provided on repair vs. replacement of a defective part.

• Extra charges, such as emergency response fees, minimum upfront charges, and others also should be part of the upfront
negotiations.

5. Stock up selectively

Another option for reducing repair costs is to selectively stock up on repaired or refurbished parts. Most electronic parts, such as circuit boards, are sold on an exchange basis in which the vendor issues a credit or cost reduction in exchange for the part that was replaced. The inoperable part is repaired or refurbished and kept in the OEM’s stock.

If the vendor does not offer an exchange price, the facility should consider keeping its own supply of parts. Appropriate parts for this option could include disk drives, TV monitors, power supplies, motors and generators and others. For example, a healthcare organization purchased a new disk drive from the OEM and no exchange credit was available. The hospital kept the old disk drive and sent it to a depot service organization that repaired it at very low cost and returned it to the hospital. Several years later, the new disk drive failed so the organization’s in-house biomed department replaced it with the refurbished drive, saving at least $23,000 and at least one day of downtime.

It is in the best interest of the healthcare organization to inventory low-cost parts, like potentiometers, switches, relays, valves and lamps, as those parts are replaced on a frequent basis. It is also advantageous to inventory preventive maintenance (PM) kits when discounts are available.

However, stockpiling equipment is not always the best option. High-cost parts, such as ultrasound transducers, X-ray tubes and batteries, should not be kept in stock. It is wise for the facility to locate alternative vendors that can replace these parts when needed.

6. Repair or replace?

When it comes time to make a decision concerning repairing or replacing a piece of equipment, a medical facility would be well advised to have a long-range plan in place to assist the decision-making process. Factors such as useful life expectations, including technological, medical applicability, financial, past reliability, likelihood of continued replacement parts availability, and others should be considered. The manufacturers’ should not be the only input received, since generally they are the most interested in selling new equipment.

7. Know your warranties

If the healthcare organization understands and pays attention to the terms listed in its equipment warranty contract, it could save on repair costs. Depending on how the warranty is structured, labor may be free. For example, if an X-ray tube fails within a specific period of time after the warranty begins, labor is usually free. However, if the tube fails after the specified time, the organization is responsible for paying for labor and travel even when the actual part’s price has been reduced. It also is important to remember that once a part is replaced for free during the warranty period, that period does not refresh. So if a part with a 90-day warranty is replaced after 60 days, the part usually is warranted for only another 30 days.

Many service organizations will charge the full amount for a part even when it needs to be replaced right after the warranty expires. Many healthcare organizations do not realize that this price is negotiable, based on reasonable expectations. As long as the organization keeps detailed records of repairs and maintenance completed on the equipment, it will have an excellent bargaining chip when negotiating with the manufacturer. If the facility can prove that the equipment had reliability problems while under warranty, most manufacturers have no choice but to lower the cost of the repair or provide the repair at no charge.

The key to managing repair costs is management. Healthcare facilities see a decrease in costs when they employ a cohesive management system that addresses repair issues before a problem arises. If an organization accesses a plan that guarantees they are purchasing quality parts at a reasonable price, and effectively manages the servicing of the equipment under the program, they are likely to see their repair costs significantly decline, and at the same time enjoy better uptime and longer equipment life. HPN