BSA Lifestructures

Technology Planning: Capital Equipment Selection Process

Michael HallMay 21, 2021

“Provide for the current clinical needs and plan for the future while being fiscally responsible” is a guiding principle during planning and design projects. The medical equipment budget must meet the needs of the clinical staff but do so cost-effectively. It is critical to identify the appropriate equipment, outline the technology based on the clinical needs, and determine how this equipment interacts with the hospital or organization’s infrastructure both today and into the future.

The first step in this process is to assess the needs of clinical staff and obtain the health system vendor standards while balancing the requirements of the project and the needs of the design team. Creating and producing a medical equipment budget can be difficult, with clinical and technology needs varying greatly between organizations. Does the organization focus solely on a vendor standard?  What are the clinicians accustomed to using to provide patient care?  What are the capital limitations?  In many instances, equipment selection is a mix of both clinical expectations and costs while also weighing the future operational expenses, inclusive of labor, service, and supplies. Annually, each health system, hospital, or organization creates a capital, software, labor, and project budget based on the clinical, support staff, and market requests. These budgets vary greatly; one organization may have an annual capital, software, and project budget over $100 million, while another may have less than $1 million. How these dollars are distributed to the requestor is typically determined by a committee, though it may vary and in some cases, one individual may be tasked with making these decisions.

Distribution of these funds is based on safety and regulatory concerns, the return on investment, improvement of patient satisfaction, clinical efficiencies, and an expansion of services. The medical equipment budget must account for all the equipment (existing and new), future capital requests, and even equipment that will be provided at no cost.  Furthermore, the medical equipment budget should also include the IT infrastructure that happens behind the scenes, detailing out the interaction between the medical equipment and the hospital network.

Group Purchasing Organization or GPO

Most health systems belong to a Group Purchasing Organization or GPO.  The GPO negotiates vendor equipment costs, supplies, service agreements, and 3rd party support services (EVS, clinical engineering, facilities, etc.) upfront and passes these savings to its members. Some GPOs across the country include Premier, Vizient, HealthTrust (HPG), and Intalere.

The health system pricing within these GPOs differs between organizations, and there are variabilities as to the sophistication of the equipment, cost increases, and pricing/discounts. The cost to the facility by the vendor equipment model, supply part number, or service agreement can be viewed within the vendor contracts on the GPO websites by the health system. This price is always the start of the negotiation process. It is used as a baseline, with price reductions above and beyond GPO discounting often being recognized.  Some vendors are more willing than others to negotiate the discount of these equipment costs. Other negotiable items outside of medical equipment include supplies, extended warranties, service agreements, training, and software options.

Vendor Standards

When a health system or hospital has a vendor standard, they usually refer to a GPO contract standard or a contractual requirement to buy a percentage of equipment across the organization by a single source. Most GPOs have several vendors under contract for similar modalities so organizations are not limited to a single vendor when selecting capital. Imaging and patient monitoring are examples of modalities where health systems have several choices if the vendor is contracted with the GPO.

Vendor standards are sometimes determined by a clinical standard, a specialty only one vendor can provide (sole source), or a clinical preference to a single vendor. The organization’s clinical standard could be determined by a clinical specialty and these clinical specialties may have a limited number of vendors that can provide these services. An example of a clinical specialty is robotic surgical-assisted devices; the leader in this market is Intuitive (da Vinci).

Existing Equipment

Organizations can further reduce their overall capital needs by reutilizing as much of their current equipment as possible. Obtaining a detailed list of all existing equipment including vendor standards, models, serial numbers, purchase dates, and service history can help speed up the process. Some factors to consider when deciding on whether to use existing equipment or purchase new are:

  • End-of-life
  • Cost of uninstallation, moving, and reinstallation
  • Availability of clinical and service support
  • Antiquated technologies
  • FDA recalls
  • Service history
  • Safety concerns

The vendors can provide the end-of-life letters for their equipment and the cost of uninstallation, moving, and reinstallation. Service history and safety information can be provided by an organization’s clinical engineering and information technology team. FDA recalls should be within the clinical engineering team’s database but can also be reviewed on the FDA website.

Vendor Relationships

Establishing and maintaining a positive vendor relationship is critical to delivering a timely and cost-effective equipment package. BSA Technology Planning will work with health systems and hospitals to negotiate pricing beyond GPO contracts and request extended warranties, supplies, service, and training during the capital selection process. In some instances, the health system may not have a relationship with a vendor; BSA Technology Planning can help bridge this gap to establish these relationships.

Suppose a vendor standard has not been established or the organization decides to move outside the vendor norms. In that case, multiple vendors may be competing to provide equipment or services, typically through an RFP.  This RFP outlines the request, terms and conditions, provides a timeline for submission, and stipulates the length of the agreement.  In response to the RFP, vendors provide cut sheets, technical specs, and site-specific drawings for their equipment. Some of this information is provided before vendor selection, but in some situations, the vendor will only provide the necessary information, like site-specific drawings, upon issuance of a PO or a commitment from the health system or hospital.

When the design, clinical, and technology requirements are met, the GPO and vendor standards/relationships are established, and the existing and future equipment vetted, the medical equipment budget can be completed.  It is critical that not only are the first costs considered, but also the ongoing operational expenses that will last the life of the equipment.

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