Navigating coverage decisions can be overwhelming and confusing, especially for high-end imaging equipment, where service contracts depend heavily on a combination of several different factors. This uncertainty has only been magnified as the Centers for Medicare & Medicaid Services began enforcing strict compliance for equipment manufacturers’ maintenance protocols and schedules in 2010. While this should increase hospital accountability and patient safety, it also requires significant upfront costs. The Joint Commission estimates this change will cost the health care industry $2 to 5 billion. In addition to CMS compliance, there is potential for lost revenue if equipment experiences downtime, and also liability consequences when equipment malfunctions occur due to improper preventive maintenance.

Service contracts for MR scanners, like any equipment, will depend on the specific model, equipment age and hours of coverage desired, but there are five major factors that influence MR coverage:

• Magnet field strength
• Cryogen (helium)
• MR Coils
• Chiller
• Hours of coverage required for Principle Cover Period and PMs

Each of these factors can influence coverage and service costs in different ways, but in general magnetic field strength is the driving factor behind the cost of both service contracts and capital.

Factor specifics
Magnetic Field Strength
Listed below are the price ranges for service contracts broken down by magnetic field strength otherwise known as Tesla Level. In general, MR magnetic field strength can be broken down by high field, low field, intraoperative and specialty MRs.

High field 3.0T MRs are designed for research and large facilities for advanced imaging applications such as functional imaging and spectroscopy. These also include wide bore systems. High field 1.5T MRs are designed for high-volume clinical settings or those requiring advanced imaging options. HFO MRs are super conductive MR systems that operate between 1 T and 1.2T, and are utilized for whole body applications, mainly bariatric, offset main MR extremity exams and claustrophobic patients.

Intraoperative MRs offer capabilities for surgical planning and navigation, such as image-guided surgery applications. Because of this, these contracts typically have the highest associated service pricing due to the different components and software utilized. The other MRs are systems dedicated to breast or orthopedic applications as well as those for extremities only which tend to be at the lower end of the pricing spectrum.

Cryogen
Typically, cryogen contract costs are generally non-negotiable and are dependent on the distance from the cryogen terminal to the site. Traditionally, refills occurred once a year with helium and nitrogen but within the last 10 years, MR systems moved to using only helium and have longer periods of time between refills (most up to five years). Budgeting for cryogen service should be expected between $22,000 to $28,000 per year. MR coils Coils depend on MR applications and vary in cost. Coverage for coils should be included in the OEM service contracts, but any coils ordered after the point-of-sale need to be added to the existing service contract. Always ensure that provisions are made within the service contract for a loaner coil until the original coil is repaired. Third-party coils are also available, but coverage for these are at an additional cost through the third-party vendor.

Chiller
The chiller is required for MR operation, working with the coldhead compressor and coldhead to keep the helium cold and at a specific temperature for optimal product utilization. These are usually a third-party item, as MR vendors typically partner with a specific chiller vendor. When purchased, the chiller is typically list price with no discounting and can add $10,000 per year to the service contract. Most of the “older” chillers are under contract for $15,000 per year. Newer systems are under contract for $7,500 - $10,000. MD Buyline’s database shows that the vast majority of quotes received and evaluated include the third-party chiller from the MR vendor. Very few quotes exclude the chiller, and there are very small numbers of facilities that opt to use their own chilled water system for their MRs.

MD Buyline finds that most issues that occur with the MR are related to the chiller, so proper service and maintenance for chillers are key. Scheduled PMs should be four times a year, at minimum, for the chiller. Magnet maintenance should always include the coldhead chiller, Helium UHF coverage and magnet refrigeration service and should all be covered during these quarterly PMs. Also included in the contract is full inspection, adjusting, tuning and replacement of non-consumable parts (contract dependent).

Be aware that OEMs will offer service coverage for these third-party chillers but it is always best to negotiate and work directly with the chiller vendor for faster service. Hours of service Most MR full-service contracts are for standard hours (Monday to Friday, 8:00 a.m. to 5:00 p.m). Usually magnet maintenance and cryogen contracts are included with routine MR contracts and are covered during the hours of 5:00 p.m. to 9:00 p.m., in addition to the regularly scheduled PMs. PMs should occur quarterly and lead to improved system reliability and magnet life. Coils and connections should be checked for damage during PMs to ensure proper RF signal-to-noise ratio since a decrease in signal quality can lead to poor image quality/spatial resolution. Regularly scheduled PMs can prevent this.

Optional items to consider
• Web portals for EHR/PACS
• Uninterrupted power supply
• Technology upgrades
• Real-time remote monitoring
• System utilization reports
• Service management reports

Best types of service contracts for MR
Due to the high level of service training required on MRs, in-house service is only practical for large enterprises that have multiple scanners and appropriately trained BME resources. For large health care systems, transitional assist contracts offer a full service contract for the initial year while BME personnel are being trained, but they are often much more expensive than full service contracts. BME first call contracts are a better option, offering troubleshooting and PMs only, along with a discount on parts and labor. First call contracts are usually lower in overall service costs than a full service contract. In situations where BMEs are intended to be the primary
service provider, they need to be heavily involved in any new MR installations, as this will facilitate their learning and training.

Shared risk contracts are designed for those facilities that are willing to share in the risk of service, but also want an opportunity to reduce their costs. The customer pays on a call-by-call basis for each repair. If the MR scanner has only a few repairs throughout the year, you can minimize your costs by not meeting your deductible.

Other options besides full service contracts are those that are based on a set annual exam rate per year with an additional cost or fee when the exam rate is exceeded. There is also the option of obtaining an ‘edited’ version of a full service contract that includes standard business hours with magnet maintenance and cryogen coverage, but requires a reduction in uptime guarantee, parts delivery and onsite response time. This is a good way to reduce cost, but these types of contracts are considered a higher risk for the facility.

Additionally, service contracts for MRs can be obtained through a third-party. Third-party service contracts are often less expensive than the OEM. In some instances, depending upon your location, they may also be located closer to your organization than the OEM’s service representatives. However, the thirdparty provider service personnel may not be adequately trained to service all vendors MRs. They also may have some difficulty obtaining specialty parts available only from the OEM, especially if the vendor sees them as competition for service dollars.

When electing for coverage from a third-party, be sure to review the experience of the organization’s field service personnel and their reputation for service support. It will be important to determine the kind of access they have to parts and how long would it take to retrieve them as compared to the OEM. Typically, it is smart to choose a parts and labor contract if electing to go with third-party service as the costs will be capped. In some instances though, this cap is the vendor’s and so should you need further repairs after your cap is reached, then you will be paying for this out of pocket. When considering third party service contracts be mindful for CMS’ memorandum SC 14-07.

Other Considerations
Most service contracts are customizable:
Vendors may not offer this option at first, but you should always ask. This option allows a facility to choose the service type and coverage, uptime guarantee, hours, etc., according to their specific caseload or patient volume. These contracts can include transitional coverage from full service and in-house support over the contract term if
needed.

Point-of-sale service contracts are usually less expensive: Negotiating the service support contract with the purchase can lower your operating costs by 1to3 percent per year, when compared to a contract negotiated at warranty expiration. Negotiating after a system has already been purchased can significantly reduce your leverage. A multiple year service contract will provide additional value as these contracts are typically priced lower. With a multiple year contact, you will want to negotiate paying on a yearly basis. In addition, you will want the option to change contract levels depending on the performance of your system or renegotiate price depending on quality of service.

In Summary
Service contracts are a necessary part of any technology purchase and in some cases can help determine if the investment will lead to a positive ROI. One of the easiest ways to understand how service costs for MR can impact the ROI is with the simplified breakeven analysis seen below.

The breakeven calculator provides a real world example, using generic variables, to show at what point the equipment will be paid for. The purchase price of the 1.5T MR is the discounted net price paid for the system. Life expectancy is based on AHA Guidelines for the estimated useful life of depreciated hospital assets and is five years for MR equipment before a major upgrade is required. The labor cost is derived from the hourly salary of the Radiology Technologist as a proportion of the procedure process time. Consumables cost includes all supplies such as linens, needles, syringes, tubing and contrast. Reimbursement rates depend on location and payment history, but this formula uses Medicare CPT/APC reimbursement values for the most commonly used exams.

With equipment maintenance increasing 2 to 3 percent annually, service is a substantial expenditure for hospitals. Outside of capital and supply costs, service contracts are the next line item that can have a significant impact on equipment’s overall life cycle costs. Keep in mind that 40 to60 percent of vendors’ revenue comes from service contracts and they will typically negotiate the highest level of service at the highest price. It is up to the hospital to determine the appropriate amount of coverage, taking into consideration costs and risk. Service costs are a vital part of any purchasing discussion, and for some technologies they can be the difference of breaking even or breaking down over the lifetime of the purchase.

About the authors:
Loretta Loncoske joined MD Buyline in 1991 with over 30 years of clinical experience in the high-end radiology modalities of MR, CT, nuclear medicine, PET, interventional radiology and general radiology and women’s health. She has held positions as director and assistant director of radiology at several facilities. Ms. Loncoske is a registered technologist as well as certified by the American Registry of Radiologic Technologists in Radiology. She is a member of the American Society of Radiologic Technology and Healthcare Information and Management Systems Society.

Katie Regan joined MD Buyline in 2013, bringing with her seven years of clinical research experience. At MD Buyline, she leads all clinical, financial and general healthcare publishing projects. Ms. Regan received her Bachelor of Science from Texas A&M University and her master’s degree from Rice University.