Making the case for OEMs
vs. ISOs for device repairs
organizations generally face two options when they’re looking to repair
their endoscopic devices: Original equipment manufacturers (OEMs) and
independent service organizations (ISOs), which commonly are called
third-party repair services. The third, and more rare, option is that some
organizations may be fortunate enough to rely on a skilled and well-trained
internal biomedical engineering group to handle these needs.
Outside of biomed, choosing the OEM over an
ISO and vice versa comes with its own set of advantages and challenges.
To assist in the decision process,
Healthcare Purchasing News reached out to four different companies for their
expert opinions. Here’s what executives at Integrated Medical Systems
International Inc., Karl Storz Endoscopy Inc., Lighthouse Imaging Corp. and
SterilMed Inc. had to say about when and why either the OEM or the ISO makes
more sense than the other, as well as specific criteria to look for when
choosing a third-party repair company and traps to watch for along the way.
OEMs vs. ISOs
makes sense to have the manufacturer repair equipment that has just been
released in the marketplace. It takes most independent service organizations
about a year to reverse-engineer the components for a new product.
Additionally, new equipment typically comes with a one-year warranty, and
during that period, it’s a good idea to seek warranty coverage. Of course,
most manufacturers’ warranties do not cover user damage. If your repair
involves such uncovered damage, you should send it to an independent service
organization for a competitive bid.
When there is no possibility of warranty
coverage, turn to a reliable independent service organization. This option
can offer shorter turnaround times, lower costs, and a higher level of
service. The main goal of an independent service organization is to keep the
equipment you already have in good working condition for as long as
possible, while most manufacturers are focused on selling new equipment.
Jack Hower is president for
Integrated Medical Systems International Inc.
Storz’s stance is that all devices should be returned to the OEM for repair
or exchange to ensure that original product quality is maintained. For
general surgical instruments (open instruments), because hospitals often
have multiple OEMs’ products in their inventory, we recommend choosing a
qualified vendor who is authorized by at least one of the manufacturers of
the devices. These companies provide repair and refurburishment for a wide
variety of general surgical instruments.
Customers often try to choose one vendor to
perform all repairs. Unfortunately, this does not work out well in most
cases as the vendor typically lacks the expertise to perform all repairs and
therefore has to rely on subcontractors. As a result, quality controls often
are substandard and lead to premature product failure. We have several
customers who sacrificed quality in search of lower prices and ultimately
ended up spending more money because of replacement expenses.
Gregg Agoston, M.B.A.,
Protection 1 Services, Karl Storz Endoscopy Inc.
There has been a great deal of controversy
surrounding the topic of OEM vs ISO endoscope repair. A scope repaired by
the OEM is typically repaired to near- or at-original image quality, but may
be more expensive under contract than the ISO.
the OEM will get blamed for a low-quality repair if the repair is done by an
ISO with low-quality assurance procedures. There are also instances where an
ISO may get blamed for a poor-quality repair, when in fact it was not their
In defense of their work, the ISO must then
provide quantitative evidence of the repair. This is why it is important to
qualify an ISO under consideration to be sure that they are using
quantitative inspection methods and have the lens inventory to support a
wide range of scope types. High-quality scope repair methods and practices
can certainly lead to enhanced patient safety and cost savings to the
Mark Waite is CEO, Lighthouse
Using the OEM for all your repair needs has
the benefit of leveraging the original parts and specifications as a new
scope. For warranty repairs, using the OEM is a "no-brainer." Similarly,
using the OEM for highly advanced equipment like ultrasound scopes is also a
The downside to using the OEM for common,
non-warranty OEM repairs (which most repairs are since the warranty doesn’t
cover many common causes of damage like water infusion, improper storage,
cleaning or handling, etc.) is that it is typically cost prohibitive. Given
that reducing expenses allows healthcare providers to deliver care to more
patients without compromising service levels, it’s logical to have qualified
ISOs (those who use high-quality parts and refurbish equipment to like-new
condition using effective quality systems) perform as many repairs as
For the cost conscious healthcare provider,
it’s best to check with your ISO for every repair to see if they can repair
Greg Wenthe, national sales
director, SterilMed Inc.
Editor’s Note: At press time, Ethicon
Endo-Surgery Inc. acquired SterilMed Inc.
1. Does the third-party repair company
perform sterility and durability testing to make sure that seals and
materials utilized in the repair process will perform to the same standard
as the manufacturer’s original design?
2. How many engineers does the third-party
company employ, and do these include qualified optical, mechanical,
manufacturing, electrical and material engineers? What engineering software
do they use when engineering specific components and assemblies?
3. Are you able to go tour their facility?
Will they allow you to interact with the engineers and technicians?
4. What is the typical repair turn time? Do
they have an on-site van to perform repairs at your facility?
5. Can the repair company prove they do not
use inferior parts and materials? Do they reuse parts or try to repair parts
that should be replaced?
6. Is there transparency in pricing? For
example, if you are offered a $595 flat rate for rigid endoscopes, will you
be charged more for more extensive repairs? When comparing flat rates,
ensure you are comparing apples to apples by looking for clauses that allow
Jack Hower, president for
surgical devices, IMS
When considering the use of an
ISO/third-party repair company for endoscope repair as an alternative to
repair-exchange services provided by OEMs it’s essential to have a clear
understanding of the ISO’s quality standards. All too often, a hospital will
contract with an ISO based on price without scrutinizing the repair quality
methods, procedures and practices. Here are some important criteria to
consider, when considering an ISO:
1. Scope components inventory – if a scope
repair is performed using lenses that are a close approximation, but not the
exact replacement of the original, then the scope’s image characteristics
can be adversely altered. An ISO who has the capability to competently
perform a repair to or near OEM quality, will have an extensive inventory of
replacement lenses. The majority of the lenses used in endoscopes are
sourced primarily from manufacturers in Germany, and secondarily from
suppliers in China. Ask the ISO about the extent of their optical and
mechanical components inventory, which should be at least six figures in
2. Technician knowledge and training – ask
the ISO how repair technicians are trained and how they maintain their
skills to be able to repair rigid scopes as well as flexible (fiber or
video) scopes. Have they been trained on how to repair specific, e.g.,
Olympus "chip-on-tip" scopes and some of more rare, German-made "rod lens"
scopes from Olympus, Karl Storz, Wolf, Smith & Nephew, or Stryker? Compare
this to your hospital’s inventory of scopes.
3. Repair turn-around time – some ISOs
offer a standard repair cycle time for "all" or "most" types of scopes
relative to the type of repair needed. The typical range is overnight to
upwards of one week, for a difficult repair. Be sure to ask the ISO about
their fee structure, relative to response time and repair difficulty.
4. Scope loaner inventory – a
well-established full service endoscope repair company will have available
an extensive offering of loaner scopes, in the event that a particular
repair might take longer than expected. The ISO should be able to offer
various laparoscopes, arthroscopes, cystoscopes, flexible scopes from most
major OEMs, as potential temporary loaners.
5. Quality inspection – ask the ISO if they
use quantitative methods of measuring important scope characteristics before
and after repairs are performed. Examples of essential quantitative
measurements are field of view, modulation transfer function (image
sharpness), coloration, distortion, and vignetting. If the ISO is able to
measure scope quality using a quantitative test instrument, such as the
Endobench endoscope image quality tester, then a high quality repair is more
likely. These type of measurements are important to make because they are
clinically relevant and if used, reduce the potential for a surgeon to begin
a procedure with a defective scope.
6. Quantitative performance data – assuming
the ISO is measuring optical or image characteristics before and after
repair, be sure to ask about the source of scope measurement data. How are
they measuring field of view (FOV) and/or any of the other parameters?
7. Scope tracking – the Joint Commission
recently imposed a requirement on member hospitals to track all endoscopes
in medical equipment inventory. Therefore, when a scope is sent out for
repair and returns, the tracking of the scope to and from the ISO, must be
seamless. Ask the ISO how they track scopes and if they are tracked by
serial number and quality data.
8. Costly unnecessary repairs – it is
estimated that at least 10 percent of scopes that are tagged for repair at
the hospital, do not need repair. Ask the ISO how much or if they charge for
unnecessary repairs and seek clues as to whether the ISO might be inclined
to "invent" reasons to repair an otherwise known good scope. An efficient
hospital and partner ISO will have quantitative inspection procedures in
place to reduce the likelihood of scopes being sent out for repair, when not
Mark Waite, CEO, Lighthouse
It can be difficult to compare ISOs,
however, there are a few key things to look for:
1. Quality. Find out how they will ensure
that the repair will be similar to that of the original equipment
manufacturer. What engineering capabilities do they have? What OEM testing
equipment is used to verify repairs are at OEM specs? Selection of
replacement parts, repair processes, ISO certification and thorough quality
assurance tests are critical to repairing an endoscope. The ISO should have
all necessary equipment to both disassemble a device without causing further
damage and the ability to reassemble a device using the same equipment used
in the manufacturing process. Ask for copies of the test results and to
visit their facilities to see for yourself how repairs are done. Also asking
for referrals is also a good idea.
2. Capabilities. Many ISOs may outsource
repairs because they don’t have the capabilities to do them themselves. This
can increase costs, lead times and may defer their responsibility for the
quality of the repair. Ask questions about the details of their in house
capabilities and what repairs are outsourced.
3. Cost. How will the ISO work with you to
reduce repair costs? Don’t be fooled into thinking the cheapest repairs will
save you money. Using high quality parts last longer than inexpensive ones
which ultimately reduce your costs. Ask questions about their approach to
cost containment and the resources they’ll provide to drive down total costs
by helping address the things which cause repairs in the first place.
4. Support. Find out how the ISO will help
you manage the logistics of equipment repair. Who prepares equipment for
shipment? How large is the loaner inventory and who coordinates getting one?
What type of reports are available to you to identify repair status, history
or trends? You should look for an ISO that takes work of your plate rather
than adds to it. Do they use ISO-controlled processes for addressing
warranties and customer complaints?
Greg Wenthe, national sales
director, SterilMed Inc.
When considering a repair vendor there is
one trap that hospitals seem to fall victim to most often: They get hung up
on line-item pricing.
Many repair companies that offer the lowest
line-item prices do not include labor charges, which can be well over $100
per hour. Additionally, within an endoscope there are many intertwined
systems. Even the most basic repairs usually require replacing more than one
part. A repair company may look cheaper on paper when you compare baseline
costs for individual repairs, but add up every repair item plus labor
charges and the total easily becomes more costly.
other pitfall of choosing the lowest bidder as your repair vendor is
compromising quality. Some companies can offer unbelievably low prices on
their repairs because they use generic "one-size-fits-all" parts available
on the open market. Endoscopes require model-specific parts. Using
substandard parts compromises performance standards. High-definition
equipment is often downgraded to standard definition because the HD parts
are not readily available on the open market. Attempts to save money in
repairs can cost hospitals the premium dollars they invested in having the
best and latest equipment.
When choosing a repair vendor, look for the
total package. Cost-effective repairs that don’t compromise quality are
available. A 90- to 120-day trial should give a snapshot of their service,
quality, and overall cost. Taking this short amount of time could prevent
signing away hundreds of thousands of dollars.
Leticia Zirkle is product
The most common trap is trying to get to a
one-stop shop. Many customers want to streamline their vendors by
consolidating. The ultimate purpose for this is to gain greater
control/leverage in negotiations/pricing.
Unfortunately, there is not any one vendor
who is authorized by all OEMs or can perform OEM-quality repairs for the
vast and variable inventory of instruments and equipment that hospitals own.
When one-stop shopping is the goal, the result is a vendor who is forced to
subcontract for devices that they do not have the skill set or components to
make the repairs.
Many components are proprietary and, thus,
are not available to anyone other than the OEM. Due to this, repair vendors
resort to reverse engineering to create the component or they try to
substitute a similar component for the damaged one. This results in the
eventual degradation of the original OEM quality, leading to product failure
and possible patient harm. In addition, substituting non-OEM parts can also
affect sterilization, as stated by ASP.
Gregg Agoston, M.B.A.,
Protection 1 Services, Karl Storz Endoscopy Inc.
It’s common for cost-conscious hospitals to
think that capitated "all-inclusive" agreements are the safest way to reduce
expenses. However, the old saying "there is no free lunch" is certainly
true. If you don’t have a program which addresses the behaviors that cause
repairs, you’ll need more repairs. If you need more repairs, the amount you
pay will increase since no company, an ISO or OEM, can do repairs for
free. Ultimately, if you consume more repairs, your annual capitated fee
will go up.
Don’t be fooled by offers that give you
"unlimited" repairs. If you really want repair costs to go down, find a
company that will partner with you on identifying and reducing avoidable
Greg Wenthe, national sales director, SterilMed Inc.