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KSR Publishing, Inc.
Copyright © 2016

         Clinical intelligence for supply chain leadership



November 2013

2013 Endoscope Care Guide

Useful criteria for choosing an ISO, third-party repair company

  • Hospitals would be wise to categorize their surgical instruments into two categories – General (for surgical hand instruments) and ‘Mission Critical’ (for endoscopes, power and video equipment, owing to their classification as Complex Surgical Instruments) when selecting a repair vendor.

  • Based on these categories, the hospital should search for the most qualified vendor for each type of repair.

  • For general surgical hand instruments, because of the large numbers of these and the fact that most hospitals’ inventories consist of multiple OEMs’ products, it is not feasible to ship these back to their respective OEM for general maintenance and repair needs. Most hospitals choose a vendor that services these instruments out of a mobile van. We recommend choosing a qualified vendor who is authorized by at least one well-known manufacturer of the devices (Integra, Teleflex or Aesculap, for example). These companies provide repair and refurbishment for a wide variety of general surgical instruments.

  • For endoscopes, power and video equipment, Karl Storz’s stance is that these devices should be returned to the OEM for repair or exchange to ensure that the original product’s quality is maintained. These are generally the most expensive devices used in surgical procedures and their performance, or lack thereof, will have either a positive or negative effect on patient safety, OR delays, the stress level of the staff and surgeon.

  • When hospitals do not categorize their devices as described above, problems arise. Hospitals often try to choose a single vendor to perform all repairs in an effort to control costs and simplify paperwork. Unfortunately, this often does not work out well because the vendor typically lacks the expertise needed to perform the range of repairs and, therefore, has to rely on subcontractors. Or they may attempt to perform the repairs without the benefits of OEM parts or training. This can result in poor performance of the product and significant expense to correct the issues. Customers inadvertently sacrifice quality in their search for lower prices and ultimately end up spending more money to correct the problems.

  • The typical scenario is that Hospital A is approached by a third-party repair company who offers to handle the entire hospital’s repair needs for surgical instrumentation. Included in their offer is a significantly lower price to repair a mission-critical item, such as a rigid endoscope. Because the third party does not have the OEM parts in most cases, the generic lenses and fiber optics they use do not perform as well as the OEM’s did. As time passes and scopes are repaired multiple times, the surgical staff notices the changes and complains. The solution is to return to the OEM to correct the problem.

  • Unfortunately, this occurs quite frequently. One hospital made available to us their repair and cost records for the 14-month period following their decision to switch to a third party for repair of their rigid endoscopes. We compared this to our four-year history for exchanging the same number of scopes. We found that, although the third party charged almost $400 less for their repairs compared with the cost of our exchange scopes, the frequency of repair doubled, increasing from 5.9 scopes per month when we (the OEM) simply exchanged the scopes to 10.9 repaired scopes per month. The frequency doubled due to surgeon complaints about quality. As a result of the dramatically increased frequency, the hospital actually spent more per month on average with the "cheaper" third-party repairs than they did when the OEM was exchanging the scopes. What this example fails to account for is the staff and surgeon frustrations, O.R. delays and potential harm to patients that these poorly functioning scopes caused.

  • The old saying "penny wise and pound foolish" applies.

– Gregg Agoston, Associate Director, Protection 1,
Karl Storz Endoscopy-America Inc.


Cost-conscious hospitals must avoid third-party repair traps

Price breaks top the list, but can leave quality at the bottom

The old axiom, “you get what you pay for” certainly can ring true when you’re considering repair services for endoscopic devices and equipment.

Should you work with the higher-priced original equipment manufacturer (OEM), justifying the decision based on quality and warranty assurance, or work instead with a typically lower-cost authorized independent service organization (ISO), versus the “bargain-basement” third-party repair service for quick turnaround?

On the surface, the decision may seem obvious. Budgetary and time crunches, however, can blur the lines.

“The biggest criteria is can the repair company repair to the original specs of the manufacturer, using the same parts and same techniques to repair the scope?” asked Sydney Nye, R.N., Senior Product Manager - Customer Education and Reprocessing, Richard Wolf Medical Instruments Corp. “If not, the scope will be altered and cannot be considered validated for the cleaning or sterilization techniques by the OEM.”

Watch for icebergs

Here’s what Ryan Klebba, Vice-President, Endoscopy Sales Division, Integrated Medical Systems International Inc., advised about the not-so-obvious repair traps and trappings.

Photo courtesy of Integrated Medical Systems International, Inc. (IMS).

The objective assembly lens in a small-diameter flexible endoscope is a tiny piece of glass with a great impact on visual quality. Replacement lenses must be engineered to exacting specifications.

Photo courtesy of Integrated Medical Systems International, Inc. (IMS).

Replacement parts for small-diameter flexible scopes, such as this distal tip, must be manufactured to extremely precise specifications.

“A common trap is treating medical device repair like a commodity and selecting a vendor based solely on price,” Klebba said. “This is a trap because the ‘lowest price’ does not necessarily lead to the lowest overall cost over time – and it can end up being more expensive. 

“To understand how choosing the ‘lowest-price’ vendor can cost you more, let’s use the analogy of an iceberg,” he continued. “We learn in school that 85 percent of an iceberg is hidden under water and only 15 percent is visible. The same is true for most medical devices. About 85 percent of the components are located where the eye can’t see. With a flexible endoscope, for example, most of the critical working components are located inside the insertion tube, universal cord, etc., where you can’t see them. This makes it very difficult to evaluate repair quality.

“With little else to go on, facilities will often choose the company that provides the ‘cheapest’ pricing in response to an RFP. If a company has a very cheap price, however, they probably also have cheap costs. They may be using less expensive incompatible parts that cannot withstand reprocessing modalities, or they may employ workarounds by which certain parts that should be replaced are actually bypassed in the device.  In addition, testing the sterile efficacy and durability of repaired medical devices is very expensive. Can the “cheapest” vendor afford to pay the hundreds of thousands of dollars needed to test all the devices they service to ensure patient safety and device longevity? 

Do the math

“Let’s break the cost savings down. If you save 40 percent by using the cheapest company, but the recently-serviced device breaks twice as often due to poor repair work or inferior parts, you have just spent 20 percent more on repairing that device. Rather than simply comparing the price of a single repair, look at the total cost of repair, per device serial number, over a period of time. Make sure you look at all aspects of a vendor, including getting references from other facilities that are similar to yours in size and specialty.

“If at all possible, visit the repair facility and ask tough questions about their processes and the components they use. You wouldn’t buy a house without seeing it first, opening closets and looking in the basement, and you wouldn’t take the seller’s word that everything is as it should be. Can the vendor you are considering handle the repair volume your facility requires? Will their repair quality match that of your current provider and keep your doctors happy and your patients safe?

“There is ‘cheap,’ and then there is ‘cost savings,’ and an ultra-cheap repair provider can cost you more,” Klebba concluded.

Beverly Young, Marketing Manager, Mobile Instrument Service & Repair Inc., raised red flags about parts quality and non-disclosed pricing.

“Ask about parts quality, quality checkpoints, liability insurance, if they have had any claims due to litigation, loaner fill rates and what the charge is for loaners. Also check references as to what educational offerings are available to staff,” she noted.

“Beware of non-disclosed pricing,” Young added. “There will be vendors that will offer a tiered or flat rate. Require a vendor to explain what is covered and not covered. Make sure to monitor spending on all contracts. Beware of vendors that sell equipment as to ensure you aren't replacing equipment prematurely.”

Separating capital acquisition and operational maintenance:
A hidden pitfall under accountable care?

by Rick Wells and Craig Linge

In any healthcare facility, the capital acquisition and operational maintenance budgets are among the most carefully scrutinized and closely monitored lines in departmental budgets.

Capital is typically allocated annually among competing departments in a centrally managed process at the CFO or CEO level. Maintenance and repair of capital equipment is an operational expense, managed on a weekly or monthly basis at the departmental level. While capital acquisition decisions for the Operating Room are driven by clinical management, recent requirements by The Joint Commission reassigned responsibility for the management of all endoscopes to the Clinical Engineering/Biomed department.

Outwardly appealing, this division of responsibility compounds the difficult task of determining what is the total cost of ownership? The total cost of ownership is defined as including all costs associated with the acquisition, use, processing, maintenance and replacement for a specific device. Viewed from the O.R. director’s perspective, maintenance expense is someone else’s responsibility, over which she or he has little or no effective control. Clinical Engineering, typically physically and operationally distant from the O.R., naturally focuses on the nominal cost of repair and quality. Due to the complex nature of endoscopes, without expert-level knowledge about the OEM specifications by a dedicated staff member with the time to perform thorough evaluations, it is virtually impossible for an untrained person in either Biomed or Sterile Processing and Distribution (SPD) to evaluate the quality of third-party repair on complex surgical devices.

A recent case in point: In 2011, the Perioperative Director at a large medical center carefully evaluated rigid endoscope providers, weighing multiple factors bearing on acquisition cost, clinical efficacy, alignment with strategic service offerings and surgical team preferences. The capital allocation was large — $500,000 for more than 130 endoscopes to serve as the optical backbone of the O.R. for a decade. There’s no going back for a second helping in the capital process as it can be a bet-your-career decision. When the new scopes arrived in the O.R., surgical satisfaction and performance increased by an order of magnitude.

The Clinical Engineering Manager had a different perspective. His mandate, consistent with the hospital’s operational budget goals, was to drive down the clinical repair budget by 20 percent, preferably more. A seductive step towards that difficult objective was to bid out service on the new telescopes to a third-party operation, looking only at the nominal cost of an individual repair. Initially, this approach was seemingly successful. Any specific repair, considered alone, looked economical. With time, however, severe issues surfaced: The frequency of repairs increased, scopes increasingly broke down during sterilization, optical quality gradually but inexorably degraded. The cumulative effect of repairing a scope, each successive third party repair reducing performance by up to 10 percent of the original specification, sharply reduced both the performance and the working life of the carefully chosen capital equipment.

The Perioperative Director, facing criticism from surgeons over poor image quality, was compelled to reallocate $500,000 in her 2014 capital budget to replace telescopes she had every reason to expect would serve for many more years. Meanwhile, the Clinical Engineering group won plaudits for beating their expense reduction goal.

This is where the pitfall emerges, or does it? When the capital decision is separated from the service component, who is responsible for ensuring that choices are consistent with delivering the lowest total cost of ownership? In our view, separating the budgeting and ownership responsibility creates a large hidden trap that ultimately requires repeated capital outlays for the same asset. That $500,000 could have been spent on new booms and lights for the operating room, or for a new C-arm.

A better solution is to carefully consider the total cost of ownership at the time the capital decision is made, holding the equipment supplier strictly responsible for their products’ performance and cost over their expected lifetime. Clinical Engineering is, in fact, well-placed to measure and assess how the actual cost of ownership compares to commitments. This promotes a better application of the hospital’s resources which does not create a pitfall for managers, clinicians and patients.

Rick Wells is Area Sales Manager Central, and Craig Lingel is Area Sales Manager West, Protection 1, Karl Storz Endoscopy-America Inc.


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