Preparation begins long before devices hit their life expectancy
The key to capital equipment management is planning. That perspective is not unfamiliar to or contested by most of us, but what does planning mean?
Generally, when we plan to replace a device, there are many factors to consider, not the least of which is the financial impact to the organization. How often and why you replace your capital equipment will inevitably affect the bottom line. All of us have the responsibility to maintain each piece of equipment as efficiently and economically as possible, but let’s face it—at some point, every device will leave the building.
The good news is that time should come as no surprise. You will still have the occasional emergency requisition when the central station floods during a water main break or a manufacturer’s recall forces you to pull a device out of service sooner than expected. But for the most part, there is ample opportunity to plan for the replacement of every device in your inventory.
Many organizations use some sort of equipment planning document like a “5-Year Capital Replacement Plan” to aid in this process. However, the content of this document, as well as the organization’s reverence for its recommendations, will vary greatly. More often than not, these documents are generated at least in part by the Clinical Engineering department. The responsibility to provide the most accurate and impartial data to organizational leadership therefore falls square on our shoulders. So, what information do you need to provide, where do you get it, and who needs to receive it?
Data with a Purpose
The information you will be providing will be used (hopefully) to assist your organization in acquiring equipment that will not only replace older systems, but in some cases expand operations and offer new services. This equipment can cost millions of dollars and will be responsible for millions of dollars in revenue. It will also have an impact on soft costs associated with reputation (uptime), litigation (equipment failures), user training, consumables, contracting, etc.
Make no mistake, the information you provide will directly impact the day-to-day operations and financial well-being of your organization for years to come. The decisions made by executive leadership will not be undertaken quickly or lightly, so you will need to forecast your data and be prepared to expand upon your recommendations if requested.
The majority of information you provide will come directly from your computerized maintenance management system (CMMS), which is why its upkeep is critical to operations within your department. A CMMS is best used as a central repository of all things Clinical Engineering. If you utilize some organizational accounting program such as Lawson or SAP for ordering parts or processing purchase orders, those costs need to find their way back into your CMMS to help you determine the real cost of ownership for a given device. You may have an organization process for routing alerts and recalls. These too need to find their way into your CMMS. Those End of Life (EOL) letters that show up and get filed away somewhere are imperative to your reporting efforts.
Essentially, every single event, cost, part, or regulatory correspondence that exists needs to be electronically associated to the corresponding asset record in order to paint an accurate picture of each device.
Unfortunately, the capital planning process is not as simple as running a report on all End of Life devices in your facility and recommending replacement of those devices. As easy as that may be, it’s not always practical, and it certainly doesn’t make the most financial sense. You will gain a lot of credibility with the CFO by not painting with such a wide brush. Making data-based recommendations with the best interests of the organization in mind isn’t always easy, and you don’t always win a lot of friends. But in the end, it’s about doing what’s best for your patients and employer.
The key is knowing how to appropriately employ human filters throughout the capital planning process. Just because a device shows up on an EOL report doesn’t mean it automatically requires replacement. Let’s say you ran a report that indicated a particular device is EOL (based on the letter you attached to the asset record). However, you note that the device is not covered under any type of contract and that you successfully maintain it in-house. You also have two technicians trained on the device and you get your parts from a third-party source. You know from experience that the manufacturer’s install base for the device is about 10 gazillion, so the aftermarket of used and refurbished parts should be around for a while.
What is your recommendation? Does the device still qualify for replacement? If it makes the list, when does it make the list? Should you recommend replacement 3 years out, 5 years out, or longer? Below are some questions that should drive your thought process. (Some of the data you will need to extract from your CMMS):
- How many of these devices do I have? Would we be replacing one device at $10,000, or 400 devices at $5,000 each? What is the financial impact to the hospital? How much time will executive leadership need to plan for this expenditure?
- Do I need to look beyond a simple one-for-one replacement and consider a whole group of devices? Will this replacement require the formation of a multidisciplinary clinical steering committee (Infusion Pump Replacement)?
- Maybe I can support this device and get parts, but how much is it costing me to maintain the device in parts and labor? How often does it actually break? What is the clinical impact of downtime? What is the financial impact of downtime?
- Is there an opportunity to address any standardization issues? Can we get rid of these 10 product As and replace them with devices compatible with the 200 product Bs already in use?
- Is there still a clinical need for the device, or can it be surplussed? Do my end users already have an alternative means of accomplishing the required tasks with another device?
Keep in mind that End of Life and End of Support are simply manufacturer’s designations mandated by the FDA. I can assure you that in most cases, an EOL device will not quit working on the indicated EOL date. You have some time to deal with it.
When OEMs Give You Lemons
Moving on to more delicate decisions, occasionally you will need to make recommendations on devices that have not met their “life expectancy” or “fully depreciated in value.” These situations will not be an easy sell, as it generally indicates that the organization did not get its money’s worth on a particular purchase. The shortfall can be due to several factors, including but not limited to: excessive use (wear and tear), manufacturing deficiencies (you bought a lemon), or improper application (you didn’t buy the right device for the intended application). In any case, it represents a loss to the organization.
These cases are another area where your data will be very important in justifying the replacement of a device. Hard data will tell you if your organization is going broke pouring money into a device that would be better to replace, or if you need to make it work for another year while the C-suite gets the capital together to make a decision. Either way, your data puts the device on the executive radar. And if the organization chooses not to immediately replace a device that will most likely cause a variance in your maintenance budget, it won’t come as a surprise.
The thought process when evaluating equipment in this situation is similar to an EOL device, but you have a few extra options.
- How much runway do you have? If you are talking about a single expensive device, a large volume of devices with a high total cost, or something that may have other associated costs such as construction, the term immediate could still mean 6 to 12 months out. What is your plan to continue to maintain the device until physical replacement takes place?
- What are your contracting options? Is there third-party support available? Is a manufacturer’s parts or labor pool an option? Can the device be insured? If you know that historically the device is a money pit, what are your cost containment options?
- Is renting an option? If you plan to purchase a large volume of equipment to replace your problem fleet, can you rent the same make and model to expedite a break from your burdensome equipment? Do you have a pad to park a mobile CT or MR system until construction is completed for a new imaging suite?
By researching and answering these questions before they are asked, you are giving executive leadership the big picture up front. Your supervisors may return with more questions, but they will be more aimed at finding a solution as opposed to just gathering data.
Use the data in your CMMS as the basis for you recommendation. Downtime percentages, contract, parts, and labor costs are all great data points. But by working with leaders in the end user department, you can add data such as the number of rescheduled patients, repeat procedures, and lost revenue to really knock it out of the park.
A Modest Proposal
Devices get old, they break down, and they get replaced. But how do you report them?
There are, of course, many different ways to accomplish this—e-mail, a Word document, PowerPoint presentation, etc—none which really matters as much as the content. It is important that you do not simply submit a spreadsheet with a list of equipment, as this approach obviously does not paint the full picture.
We have found that a detailed replacement report that incorporates the following pieces of information is most useful: Clinical Service Area, Campus Location, Department, Device Category, Quantity to Replace, and Reason for the Recommendation. For an example, see Table 1. Under the last category, Reason for the Recommendation, you might have several causes to replace a certain item.
Age. The age of the system raises concerns with respect to reliability, future costs, or capability compared to more modern equipment.
Cost of Repair. The maintenance costs of the system are exorbitant. This is frequently the result of overuse (consider replacing with more than one device), age, or poor-quality manufacturing.
End of Support. Similar to EOL, this equipment is not only no longer in production, but the availability of repair parts (both new and used) and alternative support sources are in question.
Regulatory Compliance. These devices are subject to some form of regulatory compliance issue that mandates their replacement either due to safety or reimbursement concerns.
We also include a narrative with each recommendation, explaining how we came to our determination:
This system is faced with two challenges: increasing failure rate due to age as well as XR-29 compliance. It has been proposed by [Vendor] that in order to bring this system into XR-29 compliance would cost in excess of $250,000. With the upgrade of the [Campus] Pavilion to a hospital, system reliability as well as the ability to be reimbursed for services is paramount. Since this system is the only CT at this site, it is Clinical Engineering’s recommendation to replace it with FY ’16 Capital Funds.
I would also consider adding standard replacement items to your recommendation list. For example: If you have 8 CT systems with a life expectancy of 8 years each, that means you replace one per year; if you have 20 C-arms with a life expectancy of 10 years each, you replace 2 per year. Otherwise, you end up in a situation where you are buying multiples of a certain device that all age at the same rate, putting you in the position of buying multiples again at their end of life. It’s a vicious cycle. These big budget hits can be avoided with planning.
In addition to the information above, we provide a departmental budget forecast that details each device (or group of devices) recommended for replacement. That report, seen in Table 2, presents the following data: Device Category(s), Recommended Year of Replacement, Quantity to Replace Each Year, Estimated Replacement Cost (by Device Category), and Total Replacement Costs per Year. Although imaging equipment is used in the sample, the same reporting format is used for clinical equipment replacement.
By combining this data into a customized report, each department can utilize it to support requests for new equipment. We provide this information to individual department leaders as well as their service line vice presidents. We make every effort to provide it early in the budget cycle so directors know what Clinical Engineering will be recommending for replacement. This approach also helps us avoid any contradictory information in their requests.
Unfortunately, your recommendations will not always coincide with the desires of departmental leadership, but that’s why we rely on hard data. By extracting relevant data from your CMMS and properly applying human filters, you can present detailed capital equipment recommendations that best serve the needs of your patients and organization. Good luck, and stick to the data!
Dallas T. Sutton, Jr is supervisor, Imaging Engineering at WakeMed Health and Hospitals in Raleigh, NC. For more information, contact chief editor Jenny Lower at [email protected].
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