Riding the wave of changes in equipment planning, purchasing

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Amid the economic pressures of a reforming market, reimbursement challenges and increased performance improvement stakes based on heightened patient demands for higher-quality service, skilled and talented hospital equipment planners and purchasers know how to navigate the tide.

These folks know what they’re doing, and they do it right. Like what? Six healthcare equipment planning and contracting experts share their insights about what makes for savvy equipment planners and purchasers within Supply Chain.

1. They know how to collaborate and with whom.

“Perhaps one of the most invaluable skills that Supply Chain leaders bring to table is our ability to bring together a variety of diverse stakeholders and accomplish a goal,” said Allen Archer, CMRP, Director, System Supply Chain Management, Houston Healthcare, Warner Robins, GA.  “Whether this is evaluating products, converting suppliers or negotiating agreements, our ability to bring teams this is a skill that is essential to what we do every day.  In Capital Management, collaboration is key as it takes input from a variety of disciplines to insure that a project is successful.”

Archer cites the replacement of imaging equipment, specifically a diagnostic X-ray room, requires input from the following professionals:

  • Radiologist — Concerned with Image quality and the ability to diagnose as appropriate.
  • X-Ray Technologist — Concerned with Ergonomics, Automation, Dose Reduction and throughput.
  • Information Technology — Can the images flow into existing documentation and storage systems, is it compatible with existing environment?
  • Facilities Management/Engineering — Will the equipment Fit into the existing room, is the shielding appropriate, are the HVAC and electrical requirements compatible?
  • Supply Chain — Is the supplier on contract, do we have group buy opportunities locally and nationally?
  • Billing — Is the equipment located in the hospital or in a free standing clinic as reimbursement is changing dramatically?

“Without input from these and many more individuals you cannot be successful,” Archer added.

Supply chain professionals understand how critical it is to get input and buy-in from key stakeholders,” said Chad Rodine, Service Line Vice President, Capital & Construction Services, Premier Inc. “Collaboration across teams including clinicians, clinical engineering, supply chain and finance provides crucial insights in purchasing capital equipment beyond just price. Keeping open communications between these stakeholders helps identify key challenges and needs early in the process, creating an overall positive experience for everyone involved.”

Ric Goodhue, Equipment Planner/Capital Coordinator, CaroMont Health, Gastonia, NC, believes Supply Chain professionals serve as “the biggest advocates of their healthcare organization and defenders of the organizational coffers.

“We’ve been challenged time after time to reduce supply expense, and as a profession, we’ve done an outstanding job,” Goodhue continued. “However, the challenges are changing and demand that supply expense reductions are a collaborative effort. Not only are we tasked with reducing supply expense — the low hanging fruit method — but we’re also being challenged to address the process of how clinical outcomes are being achieved and what we can do to help reduce the time our clinicians spend away from the bedside providing patient care. But we can’t do it in a silo. It has to be a collaborated team effort where the team speaks with a single voice. That’s powerful.”

2. They understand total cost of ownership.

“Many times supply chain professionals do try to understand all of the costs involved when purchasing equipment and work hard to get those other costs negotiated, too,” said Cindy Juhas, Chief Strategy Officer, CME, a national equipment distributor, Warwick, RI. “A very expensive part of the contracts can be extended warrantees. A customer I know did an analysis of their direct service contracts with manufacturers. Many of them were necessary, and he did renegotiate many of those contracts down based on volume, etc. But he also sat down with his own biomed department, and they were able to handle quite a bit of the less technical warrantee work at a reduced fee. He saved millions of dollars by sitting down and analyzing those dollars.”

Seasoned supply chain pros promote “good financial sense by sorting through financial options offered by the vendor, including capital lease, operational lease, short-term rental and buy-out terms,” said Jeffrey Dunkle, Sourcing Manager, Capital, BJC HealthCare, St. Louis.

Rodine sees a similar trend. “There is more than just the price paid for a piece of equipment,” he noted. “Seasoned supply chain leaders know to look holistically at the total cost of ownership. Understanding and processing the additional costs of ownership allows a shift in focus from just the purchase price to full lifecycle value. These factors include costs associated with operations, maintenance, training and supplies. For example, being aware of the cost of a CT replacement tube upfront allows one to anticipate these expenses and more accurately project total lifecycle value beyond the warranty period.”

3. They know how to marshal and wield resources.

“When properly engaged most Supply Chain leaders excel at procuring the equipment and supplies we need for our facilities,” Archer stressed. “With resources like GPOs, regional purchasing collaboratives and benchmarking services, we are properly equipped to make sure our facilities have the equipment they need to care for our communities.  The concern comes when the Supply Chain does not have individuals trained and focused primarily on capital procurement that opportunities are missed. Opportunities pass because Supply Chain leaders either do not have the time to take the extra step or they are so focused on other commitments that they are unable to give the attention required to lead these efforts.”

Steve Sutton, Director, Planning and Design Group, Belimed Inc., North Charleston, SC, recognizes success achieved by his customers.

“Many of our customers have implemented effective quality processes that have improved the supply chain purchasing process,” he observed. “Working with our customers, our observations of supply chain best practices include negotiating local pricing and partnership agreements with qualified vendors, holding hospital staff and vendors equally accountable, and having a forward-looking vision of the project by beginning with the end in mind. They do not select equipment or scope a project based on today’s problems. They plan 10 years out into the future, anticipating those needs. This guidance typically comes from a strategic plan authored by the hospital’s leadership team.”

4 COMMENTS

  1. Rick I would add that reallocation of Capital is an important aspect of planning and replacing current legacy systems. Healthcare can get caught up in the “trade in value” and lose 20-30% in market value. Although you might pay a little bit more for a piece of equipment the return of $$$ to your capital budget can be huge and offset any addition cost………if any. Many OEMs offer the trade-in to get your business.

    • Hi Tim,

      Thanks for commenting and for being a loyal reader of HPN. You make an interesting point. Savvy Supply Chain department heads certainly should take (if they don’t already have) an inventory of existing capital equipment at all locations throughout the enterprise – whether this involves a single hospital, single hospital with satellite ASCs, clinics and physician offices, or a multi-facility IDN – to determine where an existing piece of equipment could be re-allocated to satisfy a patient/service need. However, they first would have to determine whether it makes financial and operational sense to retain the equipment vs. trading it in to the OEM, or to a third-party supplier for an “upgrade,” or even to a reputable equipment broker or charitable organization that will move the piece of equipment to a Third World country.

      There are pros and cons to each of these strategies/tactics, depending on your point of view and financial and operational needs.

      By moving a piece of equipment to another facility within your enterprise may mean you’ll pay a bit more for the newer model “upgrade” as you suggest, but it would be up to the savvy Supply Chain executive to convince the C-suite (e.g., CFO, particularly) that the additional short-term costs will be offset long-term by the expanded capabilities to meet patient demand at the other facility now using the repurposed piece of equipment. In theory (and hopefully in practice), the move will lead to revenue gains for the organization as it fulfills the needs of an anticipated larger patient load. One side benefit that could be an option is if you buy the new model from the same supplier as the re-allocated one you might be able to negotiate a service deal extension to cover both that could save money in the long run.

      Of course, a savvy Supply Chain executive could trade up by using the old equipment and then offset any cost outlays or anticipated revenue gains by working a deal on maintenance and service and/or related consummables. But he or she would have to understand the numbers and “control” the deal.

      At the very least, a life-cycle costing strategy should govern how an organization’s assets are managed.

      Finally, a savvy Supply Chain executive could donate the equipment to a reputable broker or charitable organization and take a tax write-off, but he or she would have to determine whether that financial result is more beneficial to the organization and its patient service capabilities. Keep in mind that the OEM could take that trade-in and strip it for parts or even off-load it to an equipment broker or charitable organization to record its own incremental gain. You simply have to follow all the potential money trails as part of your life-cycle costing strategy. I’m reminded of what I call the “American Pickers” philosophy, based on the “History Channel” television show. The host, Mike Wolfe, once said during the program, “We buy junk and sell antiques.” You just have to determine if you’re willing to let someone else benefit more from your asset than your own organization and patient population, or if you have a longer-term strategy that incorporates acceptable “losses” on the road to that big win for your organization and patient population.

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