Independent service organizations (ISOs) play a vital role in competitive economics and service. In many countries where competition is limited, customers pay 200-300 percent more than we pay in the United States. Even though the savings appear to be superior, most ISOs face the major challenge of overcoming a bad reputation.

A few Original Equipment Manufacturers (OEMs) have condemned an entire industry by using scare tactics and strategic campaigns to enhance revenue by limiting competition. Disinformation that unfairly labels and lumps all third-party endoscope repair companies together is just plain wrong. However unfair their marketing campaigns may be, OEMs have a legitimate interest in individually addressing how ISOs work with their products.

There are more than 100 third-party endoscope repair companies in the U.S. Some are wholesalers who literally work out of their garage, barn or house to perform repairs for dealers. These dealers then broker the repairs to a retail customer. These kinds of dealers rarely have the infrastructure to guarantee patient safety, quality workmanship and long-term savings. However, there are a number of reputable ISOs that deliver various levels of measurable savings and quality workmanship. Unfortunately, there are no standards that regulate the third-party repair industry; therefore the responsibility of determining the capabilities of an ISO falls upon the consumer.

In selecting an ISO it is essential to evaluate key elements to ensure selection of the right partner. Here are a few tips to consider in your selection process:

Determine accountability

Who is actually doing the repairs for each modality and where are these repairs performed? Beware of companies that solicit repairs and send products to a variety of different companies to perform the actual work. Customers who are not familiar with the actual repair facility risk patient safety, inconsistent quality, poor communication and increased repair costs.

Determine where your repairs are going by requiring your prospective vendor to submit in writing each specific facility where each respective repair will be performed. If you opt to work with a broker, you should be notified in writing about any change in facilities. If any items are outsourced to another location without notifying you for authorization, you would not be responsible for the repair costs. This practice will prevent a repair vendor from presenting their flagship or partner facilities and then sending your repairs to whomever they please. In my opinion, you should be concerned if you are presented with a broker program or if repairs are performed under a partner corporation or separate facility name. Working with a vendor that has multiple profit centers, may lead to increased costs and decreased accountability.

Follow the paper trail

Because independent service organizations are not yet regulated, seek a company with ISO (International Organization for Standardization) certification. [See www.iso.org.] A quality company will make the investment in ISO certification to deliver value to its customers. This qualification is granted to companies who maintain meticulous standards. The key component of certification is a closely monitored quality management system that ensures documentation, traceability and a known level of quality. This level of accountability provides consumer confidence in the organization’s services and products.

There are numerous forms of ISO certification. One of the most relevant to the endoscope service industry is ISO 9001:2000. Be certain to ask for a current copy of a vendor’s ISO certification as ISO models and certifications expire or may not apply to your service needs. If negotiating an agreement, include language that requires notification of changes to your vendor’s certification. Also note that if a repair vendor has a broker or dealer-based structure then their flagship or partner facilities may not be ISO-certified. An ISO certificate will list the address of the certified facility.

Ask questions. If an organization advertises that they conform to ISO standards or they are quality assured to ISO standards, this may be a creative way to insinuate ISO certification. Be certain that the ISO certification includes the company’s repair service operations, not another department.

Reporting is a fundamental consideration. It is important to be able to access repair activity on a macro and micro level. Reports should meet departmental budget and forecasting criteria. In order to measure savings and quality, repair activity reports should reflect facility and departmental spend in summary and detail. The best way to measure success is by looking at average spend on a procedural basis. Factors such as unequal equipment utilization, aging equipment and care and handling issues play a role in total spend. For example, if you are spending more than $15 per procedure in the GI Lab you may need to evaluate your overall program.

Make sure you’re covered

What type of insurance and policy limits does the company provide? Do they offer liability and transit insurance? Ask for a copy of their current policy. It is important that your ISO’s policy covers endoscope service. Ask to be listed as additionally insured. Seek a company that has minimum policy limits of $5 million with transit coverage of at least $50,000 per instrument. If they do not have sufficient insurance, keep walking.

Do your homework

If your schedule permits, a thorough and structured site visit is highly recommended. A direct meeting will provide the opportunity to personally view the facility, speak with technicians, validate repair processes and assess quality management. A personal visit may eliminate 90 percent or more of potential service vendors. You should expect to see a facility that is clean and well-organized. You should be able to view repair documentation, manuals, procedures, controls, productivity and warranty tracking, as well as individual parts traceability per repair.

It is important for your service partner to substantiate its level of parts, workmanship and quality control. These are integral components in delivering recognizable savings and reducing long-term costs. By the same token, poor quality parts and workmanship increase long-term costs.

Prior to making a commitment it is important to find a partner that lists the parts and labor that they will charge above and beyond their listed pricing and savings guarantees. If you neglect this seemingly trivial aspect, you may find yourself with exorbitant repair expenses. Your chosen OEM or ISO may charge additional fees due to differentiations in quality standards. In many cases, it is a blank check for your new service vendor to levy charges beyond their original representations.

There are a wide variety of questions to ask in your selection process. Olympus America provides an initial online reference point for your inquiries - CLICK HERE.

Motivate your vendor

Find a repair company that is motivated to do quality work. You may think that initiative comes solely from the vendor, but your actions have a direct result as well. By doing a site visit and meeting the employees, you should be able to get a feeling about their corporate culture and be able to gauge whether they focus on repair quality or simply make it part of their marketing campaign.

OEMs often assert that third-party repair companies are not capable of delivering quality work because they are not subject to FDA audits or FDA Quality System Regulations. While some third-party repair companies have no incentive because they may be out for the short-term buck, the good third-party repair companies strive to deliver better service than the OEM, so they can retain customers and make a long-term living. Supply and demand always correct each other.

Quality double coil-colonoscope
and ISO C-cover

Poor quality single coil-colonoscope
and ISO C-cover

Avoid veiled traps

In my opinion, there are veiled traps that hospitals can fall prey to when evaluating the services of an OEM or ISO. Technical nomenclature and legalese have become increasingly difficult to interpret. Take your time to analyze and interpret proposals, price structures and agreements. Essential points to remember are:

• Identify how technicians servicing your equipment are paid, their training levels and their experience.

• Avoid companies that pay their technicians a percentage of the invoice.

• Identify all exception clauses and fine print.

• Identify how obsolete equipment clauses may affect future capital expenditures.

• Require the inclusion of detailed definitions to "abuse," accidental damage" and "back-up coverage."

• Identify customer obligations and how they realistically impact the agreement.

• Question the ramifications of over or under-utilizing your inventory.

• Understand utilization guidelines and how they may affect costs.

• Analyze your inventory. If a significant portion of your inventory is older technology, physicians may prefer to only utilize newer technology endoscopes.

• Are there adjustment clauses? What is adjusted and when? How are you to be notified?

• Understand utilization guidelines and how they may affect costs.

• What are the penalties associated with termination and expiration of your agreement?

• Look for flat fee agreements with minor and major repair and exclusion language. How are they applicable? Is it truly a flat fee or does it fluctuate?

• Is there a limit to the number of endoscope repairs on a flat fee program? Is the number realistic?

• Define prior workmanship clauses and applicable costs. Include a governor or perhaps exclude the ability for the vendor to charge accordingly.

• Avoid apples-to-oranges proposals. Define line item and level pricing to maximize your service and savings.

• Avoid guaranteed savings programs unless you define "guaranteed."

• Be objective. Try not to let personal relationships with current vendors get in the way of choosing the best service for your facility.

• Compare no-charge line items among the competition. You may find yourself paying for a repair that should be performed at no charge to cover "free" freight costs. A common ploy is to charge for tightening of the light guide prong assembly on flexible endoscopes.

Don’t rely on your representative’s interpretation of definitions within the agreement. Be certain to review the agreement further if you are told: "Don’t worry – just sign it;" "Unless you hit it with a hammer you are covered;" "It’s a flat fee agreement – don’t worry;" or "This is all you will pay." You may find yourself locked into an agreement that could cost you dearly. One hospital I know unfortunately entered into a three-year, "all-inclusive" and "unless you hit it with a hammer" agreement. The quoted price was $350,000. In the first 10 weeks of the agreement, they incurred approximate expenses of $250,000. When they exceed the $350,000 threshold, repairs will be performed at the current time and materials rates throughout the remainder of the agreement. The hospital is on track to spend more than $1.5 million over a three-year period. Expenditures now may increase more than 500 percent.

Meet OEM standards

It is important that ISOs deliver a level of service that is at minimum on par with that of the OEM. Quality parts, workmanship and accountability are what separate the good ISOs from the bad. It may be to your benefit to request that your OEMs work with your third-party repair company as a term of doing business. Remember that you are in control so it is important to do your homework. Although there are quality ISOs in the industry, the responsibility falls on the consumer to ensure the agreement or partnership they are considering actually serves their best interests. HPN