By Jonathan A. Gaev, MSE, CCE, PMP
Supply chain executives have a role to play
Jonathan A. Gaev, MSE, CCE, PMP
Healthcare can’t be delivered without medical equipment – and that equipment must be in good working order when clinicians and patients need it.
Health technology management departments that lack the skills and staff to repair and maintain all the equipment under their administration contract with outside service organizations, such as Original Equipment Manufacturers (OEM) or Independent Service Organizations (ISO). Supply chain leaders play an increasingly important role in the negotiation of terms and oversight of effective OEM and ISO contracts.
How can supply chain departments get the greatest value from their service contracts?
Compare prices
Hospitals are often surprised to learn that the “best deal” from their vendor is actually 20 percent higher than what others are paying for the same service contract for the same equipment from the same vendor. At ECRI Institute, we constantly see significant variations in contract pricing and know that benchmarking contract pricing can save money.
Seize the moment
The best time to request a service contract quotation is when equipment is purchased. (Ask for the service manuals and training then, too). Contracts for hospital beds purchased at the end of the warranty period can cost twice as much as when purchased at the point of sale. If you are renewing a service contract, start your review at least three months before the end of the contract period.
Buy only the service that you need
In addition to a full service contract, which includes all labor and parts, providers often have the following options:
- Preventive maintenance (PM) only.
- Repair only.
- Repair with first-call screening by the provider’s health technology management department.
Each of these options may or may not include required parts.
Some warranties exclude PM and some are invalidated if service is performed by non-OEM technicians or if non-OEM parts are used. So check your warranty if you need to perform PM on that equipment.
According to a Centers for Medicare & Medicaid Services (CMS) memo dated Dec. 20, 2013, hospitals that are accredited by the Joint Commission must ensure that the manufacturer’s PM recommendations are followed explicitly for:
- Imaging/radiologic equipment.
- Medical lasers.
- New medical equipment without a sufficient amount of maintenance history.
Neither CMS nor the Joint Commission requires that maintenance be performed by the original equipment manufacturer. The service report should provide enough detail so that the provider can use the OEM service manual to confirm that all PM recommendations have been satisfied. ECRI Institute has received reports that in some cases, even OEM service technicians are failing to perform all the OEM-recommended maintenance tasks.
CMS and the Joint Commission allow other equipment to be put on an Alternative Equipment Maintenance (AEM) program, in which the provider specifies the maintenance tasks that may differ from the OEM’s and/or extend the maintenance interval. (Any service organization – in-house or external – may perform the work.) Document your decision and confirm that the work is performed according to your requirements.
Determine when and how much work is needed
24/7 contracts are the most expensive, and not always needed. ECRI Institute has seen 24/7 contracts on expensive imaging equipment that is used only three days a week. Determine when the equipment will be used and the number of other devices that can perform the same function.
After addressing the major points, don’t forget to:
- Get an estimate of the labor rates and other costs for work performed outside of the contract (e.g., nights and weekends).
- Establish downtime penalties for revenue-producing devices.
- Have a plan to address manufacturer recalls and published hazard reports, including changes to maintenance activities.
- Know how you will receive and implement software/firmware and other updates when they become available.
Manage all service contracts
Conduct an annual review to determine the following:
- Have the capabilities of your health technology management department changed? For example, are there categories of equipment that the department now can or can’t maintain and repair?
- Did each vendor do what it was contracted to do within a reasonable time? For example, were all PMs performed? Were there any extra charges for repairs? Should any downtime penalties have been invoked?
- Did you receive clearly written, complete service reports? For example, was the vendor service report data entered in the health technology management department’s Computerized Maintenance Management System?
- Assess vendor performance by comparing PM frequencies, PM times, repair frequencies and times to national benchmarks.
By following best practices presented here, supply chain leaders will be well equipped to get the greatest value from their IDN’s service contracts.
Jonathan A. Gaev, MSE, CCE, PMP is the business line manager for ECRI Institute’s BiomedicalBenchmark™. ECRI Institute is an independent nonprofit organization, with decades of experience reviewing thousands of service contracts for its SELECTplus™ capital equipment advisory service and BiomedicalBenchmark membership programs.
For more information, contact him at jgaev@ecri.org.