Staying high and dry during the perfect storm

September 09, 2010
by Heather Mayer, DOTmed News Reporter
This report originally appeared in the August 2010 issue of DOTmed Business News

Hospitals are being hit hard with financial hardships, and as the uncertainty of health care reform law lingers, they continue to struggle to find ways to cut costs without compromising quality.

In 2010, it isn't just a weak economy that plagues hospitals across the country. Loss of insurance coverage and a draining of savings due to unemployment pose challenges for health care facilities as well. Patients are now delaying elective surgeries, a big revenue generator for hospitals. When it comes to nonprofit hospitals, the picture is even grimmer. Endowments and charitable contributions have slowed to a trickle as donor finances drain away.

"It's a perfect storm of issues...that really challenge the finances and the ability [for hospitals] to deliver," says Gary Blackford, CEO of Universal Hospital Services, a medical equipment management and solutions provider.

While these financial issues aren't anything new, Blackford points out that their increased severity is what's really challenging hospitals.

"The severity of this [recession] rivals the Great Depression," he says. "Have we seen health care reform? Yes, but not combined with the recession...They've all come together at one time in severity and created extraordinary challenges for hospitals."

In order to confront these obstacles and not be held back by financial restraints, hospitals could benefit from better equipment management. Focusing on bringing together the technology, staff and processes used to keep track of assets. Having a handle on these areas will help drive down capital and operating costs, which improves efficiency and patient outcomes.

Blackford explains that hospitals tend to lose a lot of money with upfront costs to acquire certain equipment. But it also costs a big chunk of change to insure, maintain and repair this equipment.

"Our perspective is that with those large costs, you're not getting the full benefit of the equipment you've acquired," he says. "In many cases, in a hospital setting, not only is there that direct loss in operating costs, but the unintended consequences in managing equipment poorly, which can lead to higher infection rates."

Hospitals generally run into money problems after purchase, Blackford explains. They don't always factor in the costs of maintaining equipment or of training staff to operate new or upgraded equipment. When budgeting, hospitals should be mindful of not only the upfront costs of purchasing equipment, but also the costs of repair, maintenance and training.

To become more cost-effective, what's needed, Blackford advises, is a process to ensure that equipment is properly maintained, stored and cleaned. Studies have found that some hospitals report utilization rates of infusion devices to be in the high 20 to low 30 percent range.

"That would suggest at any time, two-thirds of the devices are not in use on patients," Blackford explains.

That translates to idle assets and loss of potential revenue.

But it's not only the equipment that doesn't fulfill its maximum potential. When equipment is broken, hard-to-find or not ready to use, nurses, who should be caring for patients, are forced to find a fix or a substitute.

"Nurses are forced to go looking for equipment or clean their own equipment," says Blackford. "That takes them away from their primary mission of patient care."

When it comes to implementing an equipment management program, Blackford says it relies on three main components, all of which are a part of UHS' Asset360 program. In 2009, the program helped customers avoid more than $5.1 million in repair costs.

"If you're missing any one [of the components], it's very difficult to have a successful asset management program," he says.

Hospitals need to have technology - systems that allow staff to know where equipment is at any given time. Another component is having people who understand the equipment and technology that drive production and utilization. Finally, hospitals need to make sure equipment is accounted for, repaired and maintained.

"In a hospital setting, I've yet to find more than a dozen hospitals who have a documented, well-defined process for equipment management," Blackford says.

But not having an equipment management program doesn't mean it's intentional, he continues.

"Asset management doesn't get up on the radar screen," he says. "It's not high on their priority list. If you think of all the chaos hospitals have these days, all these events that take management away."

Hospitals can also optimize cost savings by training on-site staff to repair expensive equipment, says Blackford. Currently, many hospitals outsource equipment repair to OEM technicians, which tends to be expensive.

"Hospitals should focus on the higher-end, imaging lab equipment to be repaired in-house," says Blackford. "[Hospitals can get] better rates if the lower-end repairs are out-of-house."