Finding true savings in today’s business environment is a difficult task, but new savings opportunities often appear outside of what some consider traditional supply chain areas. Equipment maintenance is one such area, but some materials managers feel they aren’t responsible for controlling the associated costs. Some of the excuses used are, “We have a maintenance department,” “The company will provide slow service if we don’t carry a maintenance agreement,” and “We don’t have time to spend on that project.” All of these excuses may contain some small piece of reality, but not enough to stop progress, potential service improvement and large cost savings.
Hospitals have at least six different methods available to provide maintenance for their equipment: do nothing/status quo, maintenance agreement for every piece of equipment, in-house service, outsourced equipment maintenance companies, insurance companies and self-insurance programs. The best answer for every hospital is a combination of these options.
Maintenance agreements (MAs)—They may include preventive maintenance visits and system updates. Materials managers need to ask questions about the type of service included, hours of coverage and other concerns important to your hospital. Original equipment manufacturers usually support MAs, but other companies provide service as well. Like other purchases, you can negotiate MA pricing, service levels and hours of coverage. Also, in-house staff can provide service at a reduced rate. Often the problem isn’t the MA, but in the negotiation process before the MA is sent to purchasing. For example, an end user talks to a repairman who happens to have a maintenance agreement available.
The end user signs off because he is told the deal is too good to last; but this process doesn’t allow purchasing to intervene and negotiate. In this case, hospitals might pay too much and/or receive improper coverage.
In-house service—Depending on the repair history and the dependability of the equipment, in-house service may be very beneficial and provide a great savings opportunity. Life under in-house service increases the risk for the hospital, but with low-tech and inexpensive items the risk is not great.
Outsourced equipment maintenance— Companies that provide service options for hospitals range from covering specific equipment to all equipment, including old fax machines. This type of service is very convenient; if a piece of equipment goes down, an authorized hospital employee calls a phone number and the equipment is fixed. The downside is that this option is not the lowest cost plan and the service personnel may not be up to date on your equipment.
Insurance companies—Insurance companies can reduce the equipment maintenance expense 15 percent to 25 percent and many provide software for tracking equipment history. The best aspect of using an insurance company is that you learn more about your hospital and equipment. The experience gained from working with an insurance company is vital if a hospital ever wants to migrate to an in-house, self-insurance program. Drawbacks include the time and effort of working with the insurance company, nonreimbursed claims and the possibility of greater savings by doing your own self-insurance program.
Self-insurance—If a hospital does not have good equipment records or if departments cannot work together, it can be a costly method. But, the rewards can be huge for hospitals that are willing to put in the work and know the equipment history. Savings can range from 35 percent to 40 percent of the equipment maintenance budget. Self-insurance doesn’t mean the hospital has no MAs, preventive maintenance or in-house agreements. It means the equipment that needed coverage was assessed and placed into a risk category. Generally, the older or high-use items are placed in the high-risk group.
Not many savings opportunities exist, but hospitals need to maximize the ones that do; especially when savings contribute to the bottom line. Researching equipment maintenance expense and cooperating with other hospital departments can create true savings. More importantly, know how and where maintenance money is spent to help you improve safety by weeding out the lemons.
John Cashmore is the director of MMIS Integration at Rush University Medical Center, Chicago. write to him at john_k_cashmore@rush.edu.
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