Hospitals Can Save Money with Equipment Replacement

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Money-thumbCut costs. Save money. Create new revenue streams.

These are three of the many directives upon which healthcare leaders are expected to deliver, both from their own organizations and from the federal government.

The question is, How? How to cut, save, and create without sacrificing or exploiting quality of care?

Richard Neff, vice president and general manager of U.S. and Canada service at GE Healthcare, examined one area in which savings can be found in an article at H&HN Daily: equipment replacement, an area that can cost organizations millions of dollars.

Too often, he writes, hospitals will “purchase equipment based on subjective perceptions that a given sort of equipment, such as a CT scanner, is not meeting clinical needs, when in reality that machine simply may not be used to its best or fullest capacity.” Equally as often, many hospitals will under-purchase on equipment.

Neff believes that “technology planning may be able to effect a 10 to 15 percent improvement in capital capacity. By looking closely at workflow, equipment use, and equipment status, an organization may reduce its five-year capital expenditure plan by as much as 35 percent.”

Therefore, he advises implementing the following three-step strategy before an important purchase.

1.)   Know what exists today.

“Historically, equipment replacement budgets are allocated to a department and then carry over from year to year,” he writes. “This means budget decisions typically are approached from an incumbent position, not from a perspective developed by exploring the current real needs. Therefore, data used to inform purchasing decisions often are outdated and based on anecdotal requests from departments.”

Simply put, take a physical inventory of what you already have. Make sure equipment is being returned to its proper place after it’s used. “A health system might learn  it has 15 percent more assets than it realized.”

2.)   Have a plan…and take it one step at a time.

If you don’t have an equipment replacement plan, you’re not alone. Most organizations don’t, and if they do, it’s usually not updated.

Neff writes, “After sitting down and taking an inventory of what’s under the roof today, anticipate needs over the next year or years, focusing on priority areas. Rather than trying to target equipment cost as a whole, segment it. Focus on the highest-cost equipment, programs most important to the organization, and so forth…Understanding workflow and factors surrounding equipment status and usage can reveal quite a bit. Findings may indicate lower capability in areas where more was thought necessary, needs for newer systems with higher throughput, or even excess capacity.”

Take mobile equipment. The average hospital has a utilization rate of 42 percent on mobile equipment, but increasing that rate to 65 percent can have a dramatic effect on a hospital’s operating expenses.

3.)   Put programs in place.

You have goals, but now you need a framework to meet those goals, he writes. “Consider programs that will help manage equipment in the hospital better and establish committees to oversee purchasing requests and investigate if other measures (such as updating existing technology or redeploying assets from one location to another) could solve the problem. Also, consider engaging with external partners and suppliers.”

What are your thoughts on Neff’s tips? How does your organization approach equipment replacement and cost savings?

-by Pete Fernbaugh

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