From the August 2018 issue of HealthCare Business News magazine
By James Laskaris
Healthcare is evolving, and new reimbursement structures such as Pay for Performance (P4P), Bundled Payments, and Accountable Care Organizations have added pressure on providers to reduce cost while maintaining quality. Each year, the healthcare industry spends more than $15 billion on service, which translates to $4,000 to $7,000 per bed, for maintaining medical equipment. This makes service a key target for reducing costs.
Revenue generation is always on the mind of hospital administrators, and saving is a factor that directly affects revenue. Because the best-performing hospitals generate margins in the 4-6% range, a hospital must generate at least $20 in revenue to make up for every $1 in costs. With new revenue generation a challenge and multiple service options available, maintenance is an excellent area to focus on savings. But one size does not fit all when addressing maintenance needs.
To compound the challenge of reducing expenses, the cost of service has been increasing. Service contacts for existing equipment have risen at a rate of 2-3% per year. As healthcare continues to progress, the practice of medicine will rely more on advanced technology that is maintenance-intensive and software-dependent. These combined factors suggest that service contract costs will continue to increase, at least for the near future, as vendors look for ongoing revenue sources.
To address these challenges hospitals have been open to evolving service strategies with the goal of reducing costs and streamlining replacement schedules. Though not a new concept, more providers are investigating the idea of consolidating their hospital-wide medical equipment maintenance with third-party service and/or asset management organizations. With advancements in Computerized Maintenance Systems (CMS), hospitals now have the data to manage costs and accurately determine replacement cycles. The key is to attain lower costs without compromising outcomes.
A strategy directed by a CMS memo designed to reduce costs focuses on “Evidence-based Maintenance Practices.” This program is designed to use a technology’s service history to justify alternative routine maintenance schedules. This will allow hospital plant and clinical engineers the leeway to modify routine manufacturer-recommended maintenance schedules and protocols if the situation warrants. Equipment that has proved to be very reliable or has had limited use becomes eligible for less-frequent routine maintenance. The goal of this approach is cost savings without compromising patient safety.
