Parts and Service - The Full Story

November 04, 2014
by Sean Ruck, Contributing Editor
While parts and service come in many different flavors, one thing is always consistent — you can’t talk about parts without service, and vice-versa. So DOTmed HealthCare Business News polled dozen of industry professionals, including those with several leading OEMS, ISOs, and health care providers about how the increasingly competitive nature of the parts and service business is affecting the way they do business — and will affect it for years to come.

With financial pressures squeezing the health care industry seemingly from every direction, the impact that parts and services have on every facility’s operating budget, make this year’s reports more important than ever.

In addition, we have some eye-opening statistics shared with us by IMV’s Medical Information Division on the priorities providers set for themselves when it come to imaging equipment parts and service.

There are also tips from MD Buyline on what to think about, and what to do, when negotiating a service contract. Meanwhile, The Remy Group will help you assess the quality of the service your provider is offering.

And near the end of this section, there is a special advertising section that features some of the top ISOs in the business, if you are so inclined to use or need their services.

The OEM Story
Across-the-board reimbursement cuts, the pressure to improve the quality of the patient experience, and a slew of regulations regarding equipment maintenance have providers reeling. Many are turning to the OEMs they do business with to share their pain and be part of the solution. Parts and service costs are definitely among the the expenses hospitals are scrutinizing for potential cost saving.

But working with the equipment manufacturers has been complicated by the fact that they are feeling the pinch too – new equipment sales have been taking a hit for several years now. The OEMs, in response to that, have moved beyond their primary role as purveyors of new equipment and are aggressively expanding their role as service providers, serving not only their own products but that of their competitors by building new service arms or through the acquisition of established service companies.

In the following responses to HCBN’s questions, you’ll see how the OEMs use their unique access to proprietary parts and technology to make their case as the preferred service provider -- you can compare their arguments side-by-side. If you’re looking for a new or extended service contract this is required reading.

No one ever got fired for buying . . .
If you’ve been in the health care field for any length of time, you’ve likely heard the old adage, “No one ever got fired for buying GE.”While it’s impossible to confirm the veracity of the statement and any number of OEMs could fill in that blank in place of GE, the general sentiment holds true. That is, there’s less risk going with the company that manufactured the machine when making a purchase or entering into a service relationship.

In that, the OEMs have a decided leg-up on ISOs. But they’re backing that name recognition and brand loyalty with increased and expanded service options in order to keep existing customers and bring on new ones.

Bud DeGraff, general manager of diagnostic and clinical services at GE Healthcare probably appreciates the sentiment behind the statement. While he wasn’t asked the question directly, he did point to GE’s reputation as something that he thinks sets the company ahead of the competition. He addressed the company’s insights, experience, data and tools that help hospitals to improve their business, bottom line and the ever-critical patient outcome and experience.

“Clearly, it’s not business as usual,” DeGraff says. “That’s true for GE and the hospitals we serve. In the past, we’ve focused on helping to increase the reliable uptime performance of advanced medical technologies. We’ll continue to provide that support in a costefficient manner. But we know that in today’s environment, our customers need more. They need sustainable improvements in performance that will help them meet business objectives over the long term.”

DeGraff went on to explain that when GE partners with hospitals, the answer for improving performance rests in three key operational areas; managing assets, improving patient workflow and workforce utilization. “In this ‘not business as usual’ environment, we are focused on helping our customers improve the financial and operation health of their enterprise,” he says.

And in a turnaround from the direction many hospitals are going— taking more responsibilities in-house — DeGraff says that by enabling facilities to outsource maintenance and management of their clinical engineering services, the company can help to reduce the operating costs associated with clinical assets by 15 to 20 percent.

GE, like most OEMs offering service in today’s highly competitive health care environ, has taken steps to provide parts and service beyond their brand. Although they have a large number of service techs dedicated to servicing GE products, there are also techs covering competitors’ equipment. “GE has more than 1,000 service engineers, trained to work on non-GE equipment,” says DeGraff.

GE maintains a Multi-Vendor Services Center of Excellence in Arlington, Texas that serves as a training facility for those techs. There, techs train on nearly 50 different pieces of equipment installed in the facility, according to DeGraff. “This is in addition to field-based training programs that include many more non-GE systems,” says DeGraff. “The TCOE is also home to a parts repair operation that handles more than 700 repairs each year.”

The techs servicing non-GE imaging equipment have on average more than 20 years of experience on other OEM products and receive an additional 15,000 hours of training annually on non-GE systems. Those techs are well-stocked with parts from GE’s $30 million supply consisting of more than 74,000 unique parts numbers from more than 200 suppliers, stocked in 59 warehouses across the country according to DeGraff.

Yet, it’s not always a question of getting a part to fix a problem. Remote diagnosis of issues along with the possibility for remote repair also factors in or should factor in to the decision a hospital makes about who will service their equipment. According to DeGraff, GE online engineers utilize more than 40,000 broadband connections for more than 50,000 connected systems that ultimately resolve 40 percent of the issues that arise in less than 30 minutes.

GE is also leveraging technology to prevent problems before they occur. The company offers iCenter, a web-based application that provides information on maintenance history and asset utilization by consolidating inventory, planned maintenance compliance and performance comparisons, according to DeGraff. Complimenting that system is On- Watch which monitors and analyzes device performance to help identify any possible red flags before a problem escalates.

Relying on professionals for ProCare
According to Alisandra Rizzolo, vice president general manager of customer care for Stryker Corporation’s instruments division, while it’s very hard to predict when a piece of equipment will fail, by partnering with a quality service, hospitals can better manage costs since repairing an item is usually less expensive than replacing it.

Even better than repairing a piece of equipment is preventing its failure in the first place, thereby saving money on parts and eliminating unplanned downtime. Rizzolo identifies Stryker ProCare as a service the company offers to help do just that. “Stryker ProCare’s preventative maintenance services help hospitals take control of their costs by maximizing the equipment’s life-cycle,” she says. “Our highly-trained service team provides on-site equipment testing and works with hospitals to evaluate how equipment is being cleaned and stored to identify solutions to ensure the total cost of ownership is optimized.”

When even preventative maintenance can’t fend off an unforeseen system failure, the service also offers equipment repair options, onsite support and loaner equipment as well as a troubleshooting helpline for service- related questions, according to Rizzolo.

Rizzolo says the ProCare service team undergoes a rigorous training program in order to be ready to repair equipment according to OEM standards. “For all medical equipment, but especially those used in direct patient care, it is important that the devices being repaired are working in compliance with the highest OEM standards,” she says. “Stryker ProCare service providers are specially trained and certified to handle and repair parts according to the manufacturer’s instructions. They also have access to OEM original parts and the tools specifically designed to repair that equipment, which can elevate health care provider’s confidence in the repair and reduce the risk of malfunction or the need for additional repairs and services.”

Rizzolo says it’s common for hospitals to make the mistake of thinking that all service contracts provide them with the full line of services they need. That’s not necessarily the case, she says. “Hospitals should first evaluate their equipment service needs before selecting a service provider. Once a hospital has identified the breadth, volume and criticality of supplies in their facility, they can make an informed decision regarding what level of service they require and which provider can best match their needs.”

During the negotiating process, it’s also important for decision makers to ask questions about the level of experience the service techs will bring to the table as well as finding out what certifications they hold and how accessible they are. After all, even the most experienced and knowledgeable technician is of little use if they can’t be reached in a timely manner.

In the future, Rizzolo expects to see more hospitals partnering with quality service providers and service providers working hard to keep staff abreast of the latest in medical equipment updates as the equipment continues to evolve at a rapid pace. She believes the relationship will only grow deeper between hospitals and service providers as the need to provide better care at a reduced cost becomes even more of a priority.

The role of Bayer’s arms
Bayer Healthcare has two distinct service arms that deliver support to customers. The first, Bayer HealthCare service strictly focuses on providing preventive maintenance and repair for Bayer radiology and interventional equipment. Anne Osbourn, U.S. service marketing at Bayer, says it’s important to note that service on those products is not limited to theU.S., with service on devices in other parts of the world supported through Bayer Medical Care’s hub in Maastricht in the Netherlands and through a large network of distributors.

Meanwhile, Bayer Multi Vendor Service offers maintenance and repair capabilities on all major brands of radiology coils, probes and imagers used in the U.S., according to Bill Kollitz, head of Bayer Multi Vendor Service. “These products are serviced in the field by our field service engineers, at our facility in Pittsburgh, and our remote facility in Tulsa, Oklahoma,” Kollitz says. However, the MVS division does not service equipment that directly competes with Bayer products, according to Kollitz.

As for getting field service engineers involved with equipment issues, Shawn Kimmel, head of U.S. Service says Bayer field service engineers respond within 30 minutes to requests in order to determine if the problem can be addressed remotely or if onsite service is necessary. When onsite service is called for, service engineers usually arrive same-day or early the following morning.

For multi-vendor service dealing with CR and dry film printer service, technical support is just a phone call away, with Bayer offering free phone-based support to anyone needing it. “If a service call by an engineer is required, that engineer will be onsite within eight business hours of receiving the call for a contracted customer,” says Kollitz. “Calls are acknowledged within 15 to 30 minutes after the service request is placed with our call center. For depot based repairs, Multi Vendor Service can respond to requests for probe and coil repair with a no charge loaner shipped overnight for first priority delivery, and completes most repairs within a few days of receiving the customer’s product in house,” he says.

Bayer is able to provide such prompt service to customers in part because its Health-Care Service team specializes in servicing the company’s product portfolio of power injectors, according to Osbourn. And most parts are near at hand. “These field service engineers carry sufficient ‘trunk stock’ to have the products on hand,” says Osbourn.

This means there’s no delay waiting for a part to arrive. Bayer also offers Virtual Care which allows for remote diagnosis to help identify and possibly resolve errors remotely. All of this is backed by a 24/7 technical assistance center, she says.

As a group, they believe as imaging technology continues to advance, software will play a growing role in its operation and by extension, remote service and monitoring will become a more important service and should be a welcome one for cost-conscious hospitals.

Another tip they offer for cost-conscious hospitals, or really any facility that isn’t looking to throw out money is to be sure of what’s being included when it comes to negotiating a service contract. They suggest hospitals look at the details of the individual proposals to ensure an “apples to apples” comparison. What may seem like a deal can ultimately cost more than another offer once all aspects of a contract are considered.

Keeping true to the source
“When preventative maintenance, repair or repair replacement is completed through KARL STORZ, or any OEM, the product warranty is assured and, in some cases, the warranty clock restarts to ensure maximum protection for your repaired devices,” says Jeffrey Yates, group marketing manager, Protection1 for KARL STORZ.

According to Yates, only KARL STORZ technicians can restore the company’s products to their original factory specifications, thus ensuring optimal performance according to the instructions for use (IFU) that are supplied with the devices when they are new.

Yates warns that repair of those products by an ISO may void indemnification by STORZ, or at least limit any guarantees previously in effect, depending on what repairs or modifications were done. “More importantly however, is that the IFU provided with the device is no longer valid,” Yates says.

He suggests that any facility utilizing third party repair options get validation in writing that states the devices repaired can be cleaned and sterilized using the reprocessing instructions they provide and will perform according to the specifications of a new device.

The company has field service technicians available throughout most of the country to carry out minor repairs, exchange rigid and flexible endoscopes, provide preventative maintenance service and conduct in-service education programs for staff. Onsite technicians are another option. The obvious benefit they deliver is the immediacy of support.

The company also offers customizable service and no-fault service plans and asset management programs.

Yates acknowledges that the impact of the Affordable Care Act on hospital spending has still yet to be fully realized, but capped operating budgets and tight restriction on capital dollars will likely be with us well into the future.

Therefore, while tempting, Yates believes it is critical for hospitals to weigh the balance between short-term savings through independent repair services versus long-term savings that can be realized through a comprehensive service and repair contract. That decision can also have repercussions for patient care. Yates cites ECRI Institute’s top ten patient safety concerns for 2014 as proof of the risk, with inadequate reprocessing of endoscopes and surgical instruments making that list.

When a facility is considering repair options by non-OEM service providers, Yates suggests they ask the service organization these questions:

“A better solution is to carefully consider the total cost of ownership at the time the capital decision is made, and then hold the endoscope and equipment supplier strictly responsible for their devices’ performance and cost over their expected lifetime,” he says.

To illustrate his point, Yates offered an example of a situation where a hospital did take the long-term approach. “The surgery program manager at a hospital named a 100 Top Hospital for 11 years, recently prepared a report on that facility’s experiences and achievement from implementing Protection1 solutions. In addition to eliminating 95 percent of all issues that previously posed ongoing daily challenges (issues relating to quality, safety and cost effectiveness), equipment repair turnaround time was reduced from three weeks to 24 hours, and surgeon complaints decreased from 40 per month to none at all.”

Knowing what you want and getting what you know
For hospitals utilizing in-house staff for preventative maintenance and repairs, there are a few things they need to know in order to control and predict parts costs, according to Mike Schwarzwalder, director of service marketing for STERIS.

First, the total cost of the required part needs to be determined. That includes acquisition, any carrying, obsolescence cost and down time for equipment. The need to know doesn’t end there. It’s also necessary to know the right parts to inventory in order to get things up and running with the first call. OEMs should have data available that will allow them to help in the process, says Schwarzwalder.

Those same manufacturers may have auto-ship programs for PM parts. That option helps reduce in-house storage needs, while providing a physical and timely reminder of the need for a PM.

Finally, by ordering parts from the OEM, you know you’re getting a part that will precisely fit the same part it’s meant to replace, thereby removing any risk of repair delays due to a non-compatible part.

“I travel frequently and it never fails, every time I am out there I hear stories about the wrong part being sent, it was a used part or, a previous generation,” says Schwarzwalder. “While the initial price may attract attention, it is really the long term cost that needs to be considered. Also by using OEM STERIS parts you are assured that it will not void the warranty.”

For facilities tapping STERIS for service, the company technicians start with more than 250 hours of initial training on STERIS exclusive equipment. That’s followed by yearly specialized and new product training, which may equal as much as 80 hours. On average, company techs have been working at STERIS for more than 12 years. Trucks also carry a market specific inventory of replacement parts. The goal is to provide customers with service coverage 24/7, powered by more than 850 field technicians, customer service and training programs, according to the company. This has helped spawn the phrase used by some techs, “call us by lunch and we’ll be there by dinner,” in regard to their response rate.

It’s not just the techs in the field going the extra mile though. STERIS has 20 in-house service engineers who continually evaluate data from field repairs as well as data fed through their ProConnect Response Center which all helps determine if adjustments are needed for the company’s proprietary preventative maintenance check list.

For a hospital’s checklist, at least when it comes to negotiating service contracts, Schwarzwalder cautions against quick comparisons of just labor charges. Instead, make sure to look at the entire picture and all the potential expense that entails. That includes not only labor, but parts costs, response times, travel charges and the timeliness and quality of the service provider’s preventative maintenance program.

Siemens guarantees customers will keep their cool
Siemens Healthcare, like STORZ, has strict requirements when it comes to who can service equipment under warranty, with service by non-Siemens personnel resulting in a voided warranty. But Jon Matthews, senior director of Siemens Healthcare service business management says there’s good reason for that.
Matthews gives the example of a customer with a Siemens MR system. He cites the exorbitant cost of helium and the importance of a well-maintained chiller to prevent issues that could result in helium loss. “Siemens offers a service whereby if our technicians do the maintenance and Siemens parts are used, and for any reason there is a service event due to chiller-related issues, we will not only waive related billable service events including components, but we will also cover any helium lost as a result of the service event,” he says. “Another company could certainly handle the preventive maintenance of the chiller, but in this case, if a service event occurred, the customer would not have the opportunity to have the chiller service that would cover not only the parts but the cost of helium lost as a result.”

According to Matthews, Siemens only supplies genuine Siemens certified OEM parts through the company’s Service by Request program, with parts either new or remanufactured. “Remanufactured spare parts are tested with the same rigor to ensure performance is identical to new spare parts,” Matthews says.

When it comes to advice for purchasing parts, Matthews warns buyers to be cautious. “There are several companies and individuals in the market that hunt for used medical device equipment just to recover ,parts and re-sell them,” he says.

In those cases, it can be difficult to ascertain the provenance of those parts or their life expectancy. “With the pressures on health care providers to ensure patient safety and quality outcomes as conditions for reimbursement, now is not the time to gamble on parts. For confidence and peace of mind, the best option is to obtain parts from the OEM manufacturer,” Matthews says.

As for getting those Siemens certified parts installed, Peter Soltani, senior vice president of Siemens Healthcare customer service touts the company’s Customer Care Center, which is always open. “The Center handles scheduling and implementation of planned maintenance for proactive support, and making remote as well as on-site repairs,” says Soltani.

Siemens has also heavily invested in Customer Service Material Logistics depots across the country. These depots comprise an extensive parts supply system, which enables timely delivery of parts anywhere in the U.S. Meanwhile, via the company’s Integrated Service Management organization, Siemens provides full service solutions for non-Siemens as well as Siemens equipment.

Another option for service needs is Siemens Remote Service, a subscription-based option the company offers. According to Soltani, many customer issues can be resolved with just one phone call without the need for an onsite visit.
Siemens also has the Evolve program. “Evolve enables customers to keep their hardware and software abreast of advances in medical technology with periodic upgrades,” Soltani explains.

While the choices Siemens offers attract quite a few customers, it’s still not for everyone. For those health care professionals, Soltani says they should seek out a strategic partner that will help them to achieve their clinical missions and will be proactive in assisting with the issues regarding patient throughput, safety and satisfaction. Companies doing business strictly on a transactional level might be shortchanging you. “The cost savings you achieve, and the reimbursements you could optimize by finding this type of partner, could yield higher returns than you might expect,” he says.

Avoiding break-fix solutions
Todd Reinke, director of service marketing for Philips Healthcare Customer Services North America, wasted no time getting to the point. “Our focus is on partnering with the customer for the long-term versus providing ‘break-fix’ only solutions,” he says.

In order to do that, Reinke says Philips employs a national network of more than 2,000 engineers that supports both Philips and non-Philips imaging systems. He also says the company continues to invest in remote services for Philips and non-Philips systems.

According to Reinke, Philips has an industry leading Uptime Service Guarantee of up to 99 percent and offers flexible service plans tailored to full-service requirements as well as support for in-house teams. Philips also offers online and onsite clinical application and training support programs.

“While we are an OEM, we also have developed an extensive service team to support multi-vendor imaging and biomedical service capabilities,” says Reinke. With Dunlee tubes and AllParts Medical providing support, the company’s multi-vendor services provide extensive coverage, according to Reinke.

Philips also offers asset management and system utilization tools to help manage the lifecycle of customers’ overall assets, he says. They also offer programs to support in-house teams via ‘first-look’ and ‘selfservice’ plans for their equipment. “These in-house plans help our customers manage costs by carrying some of the service responsibility themselves and we offer parts on programs for customers that do not want service plans, but want access to certified/ quality parts,” Reinke says.

Customers have told Reinke that they expect to see further consolidation and cost control in the service market. On their wish list, they want service providers that can help them maintain older equipment while also providing service and support to new technology and they want to see investment in new types of service options, like remote service capabilities. Reinke believes we will see service requirements from federal and state levels that will increase administrative burdens. He also believes more value-added service partnerships will crop up across entire hospital networks versus individual service plans for individual pieces of equipment or modalities.

In order to handle all the challenges destined to arise in the future, he believes it’s crucial for hospitals and service companies to work closely together and keep the lines of communication open. “By working closely together during the plan development phase, we are able to successfully support mutual expectations for a long term and very positive service relationship,” he says.

Chris O’Toole, national sales director for AllParts Medical LLC, a division of Philips Healthcare is in a unique position as neither an OEM or aftermarket equipment supplier. Instead, according to O’Toole, the company is a multi-manufacturer, multimodality imaging parts supplier. “We also provide multi-manufacturer, multi-modality training, technical support and asset disposition services. We are not limited in what parts we supply to which systems,” says O’Toole.

O’Toole sees a high demand for CT, Xray and portable parts with GE parts being in highest demand. In the past 12 months however, the company’s fastest growing modality has been ultrasound, with MR parts also bringing in healthy numbers.
AllParts is all-inclusive as a parts provider. “Parts ship with a 90-day warranty irrespective of who performs the repair or what asset the part is installed on,” says O’Toole.

For parts shoppers O’Toole recommends finding a parts supplier that offers technical support, tested parts, a breadth of quality assurance bays to test parts for the manufacturer and modality being serviced and the big one on everyone’s mind these days — competitive pricing.

It’s also a big plus if they can train your technicians in order to enable greater self reliance. Topnotch account managers and customer service representatives will also play a part in making the experience as easy as possible. Finally, program flexibility that can evolve with your needs can also prove beneficial.

Focused training and specialized tools
Joe Graham believes the engineers from his company are the go-to experts in servicing Toshiba equipment. Of course, Graham is the vice president of service sales and marketing at Toshiba, so he’s able to qualify that belief. He further backs the assertion by noting that Toshiba engineers tend to service only or two modalities of equipment and thereby receive more opportunities to gain experience on specific equipment. The company also works to keep its service professionals informed. “Toshiba Service communicates all updates quickly and regularly, keeping our engineers on the leading edge of high-quality service delivery on Toshiba equipment,” Graham says.

While experienced and knowledgeable service engineers will no doubt be in high demand for many years to come, Graham believes the big story will be about the equipment. “I think diagnostic imaging equipment will become even more reliable due to new manufacturing enhancements, installation and warranty efficiencies and more dependable components and subcomponents,” he says.

Graham also believes that system software will become more efficient and improvements in predictive programs that will identify component issues before they become critical will be a boon. He also trusts that enhanced utilization tools will be brought to market which will allow clinicians to realize a higher level of operation performance from equipment while helping to make them deliver a higher financial return. “Ultimately, patient care will benefit most with newer and improved technologies in the short-term future,” Graham says.

The ISO Story
Not all independent service organizations are alike. Experience and scope of practice can differ greatly from company to company. So DOTmed HealthCare Business News interviewed more than a dozen ISOs to get their take on how their business has developed and why and how they fit into the big picture. They also offer their insight into what customers should keep an eye out for and offer predictions about what the parts and service sector will look like five years from now.

When it comes to their value propositions, the ISOs all had strong cases to make. The organizations interviewed generally felt that their breadth of experience stretches beyond that of the in-house departments, but it’s delivered at a lower cost than what the OEMs offer.

Exploring options
“Our experiences have made us an equal competitor, if not a better choice,” wrote Damon Kelley, VP of operating for Pacific Medical in an email to HCBN. Kelley feels the company’s team approach philosophy is another way they differentiate themselves from the competition. “Every transaction is with an assigned representative who supports [the customer] through constant communication, instant service updates and after-sales tech support,” Kelley wrote.

Price often comes in below the OEM tag by focusing on replacing single components on a board rather than replacing the entire board, according to Kelley. But replacing components rather than entire modules is becoming increasingly difficult as equipment becomes less mechanical and more sophisticated. “As a result, technicians are expected to be more advanced in their field,” Kelley wrote.

According to Kelley, recertified equipment has become a preferred alternative to brand new equipment and is one of the fastest growing segments of Pacific Medical’s business. For that process, equipment is evaluated by Pacific’s engineering team and then all common failure components are replaced and the piece is recalibrated and retested. It’s triple-checked by the QC department, cleaned and then either put into inventory or prepared for shipment, explains Kelley.

As for negotiating service contracts, Kelley suggested that facilities should educate themselves on the life expectancy of the product, its uptime and replacement parts costs. He also cautioned that they should be sure of the dependability of the company they’re dealing with and not let empty third-party promises or lowest cost be the deciding factor.

Ali Yousef, CEO of USOC Medical echoed the importance of dealing with a reputable company. “Quality!” he wrote when askedwhat makes one ISO better than the next. “There are countless ‘repair’ companies that specialize in patient monitors, but only a handful have the engineering capabilities to actually do the repairs in-house.”

According to Yousef, it’s not necessarily lack of experience that holds in-house staffback. Instead, it’s lack of resources and time that really put the squeeze on in-house teams. But experience can still play a big part. Many hospitals may only have one or two units of a given modality, so troubleshooting and the subsequent practice and familiarity that comes with hands-on experience doesn’t occur as often.

Yousef recounted one service issue that illustrates that point, “A customer was having a problem assigning a telemetry transmitter to the central station.”
It was a matter of clearing out the system cache — a simple fix, but difficult if you haven’t come across the problem before. Yousef’s techs have seen the problem before, so were able to fix it. “The customer was on the brink of purchasing a whole new unit in order to solve the problem,” he says.

When it comes to negotiating contracts or renewing them, Yousef recommends hospital teams sit down and review detailed reports containing trending data for at least a year previous to determine the threshold for repair versus replacement. If it turns out the unit might cost too much to maintain, it might be a good time to retire it.

The role of politics and government policies
There will some big changes in health care within the next few years according to Marshall Shannon, director of Image Technology Consulting. “It depends on whether we get a Republican or a Democrat president,” he says.

Expanding on the thought, he admits it’s not a question of partisanship, but more the fact that the government’s changes are hurting providers and forcing them to keep older equipment working which may ultimately increase costs in the long run. It also makes the service field a rougher place to be for those in the business. Shannon says that the longer the equipment stays in the field, the less new equipment business there is for the OEMs. This forces them to explore other revenue generators and an increase in the number of OEMs offering service and venturing into the multi-vendor service field. It also helps to explain the glut of consolidations and buyouts of ISOs by OEMs.

But there’s a limit to that philosophy. If hospitals are able to readily afford new equipment, that can also make business tough for independent service organizations. “It will decrease the parts business because people are buying new equipment,” Shannon says. “There is less demand to repair the old equipment because people are getting rid of them,” he says.

For health care overall, the consolidation has hit health care providers too. That has caused pain for patients and seems counterproductive to lowering health care costs, according to Shannon. “This year, I have seen 30 or 40 clinics shut down. They have large modalities and were doing mainly Medicare and Medicaid and they were getting reimbursed just enough to stay open.” He says the closures mean patients get pushed off to other larger imaging centers or hospitals and the costs go up. “The customer is forced to pay more because they could have gotten an MR for $500 or $600 and they’re paying $2,500 at a hospital.”

What is the cost of good service?
According to Dale Hockel, senior vice president of Operations for TriMedx Equipment Services, the woes of the health care sector will continue to be felt for the foreseeable future and will continue to exert pressure on providers to reduce spending and save money. That will continue to drive consolidation and stunt growth by hospitals and health systems.

For companies providing service to the sector, those pressures will increase the need to evolve or fade away. “I believe OEMs will continue to maintain a necessary presence, but you will see a greater shift into providing online tools and support for properly trained and informed in-house biomedical teams,” Hockel wrote in an email.

Hockel shares the opinion of a number of industry veterans when he wrote that comprehensive lifecycle programs developed around hospitals’ capital assets will be one of the key focuses for health care in the future. According to Hockel, independent service programs can be a key part of the solution by helping to train in-house biomeds as well as by helping hospitals to assess lifetime service costs, uptime statistics, utilization, failure history and equipment life expectancy for equipment.

“The bottom-line: the future of the equipment service sector is promising so long as hospitals are able to obtain and maintain accurate equipment inventories, gain access to total cost of ownership data, and enlist strong clinical engineering involvement in the capital acquisition process,” Hockel wrote. “The formula for this success cannot be replaced by the latest wave of asset management software. Nor does one solution fit all.”

For some facilities, economy of scale can deliver big savings if they have a large install base, but that won’t be the case for all. “Hospitals must understand the specific objectives around asset utilization and design a process with the appropriate team, training and technology to reach those goals,” Hockel says.

Hockel believes that in order to reach those goals, hospitals must also take a more active ownership, or at least possess a strong understanding of the impact the service contracts have not just on the bottom line, but on the mindset of staff as well. “Service contracts tend to create an environment of unwarranted dependency where hospital staff immediately calls the OEM for repair and preventative maintenance rather than relying on the in-house CE team,” Hockel wrote.

Hockel says that situation regularly results in having no comprehensive lifecycle plan in place, leading to bloated service contracts that make it more difficult to bring service in-house in the future. Of particular concern according to Hockel is that OEMs often have an auto-renewal clause in their service contracts which could lock a hospital into a new long-term contract even if they’re ready to make a move into greater self sufficiency.

“Negotiating service contracts starts with training and ends with communication and teamwork,” Hockel wrote. “Ensuring inhouse CE team is properly trained to handle most service and preventive maintenance goes a long way in reducing reliance on contracts. Ensuring everyone on the capital acquisition team (including clinicians who use equipment) is informed of CE’s role and capabilities and are communicating internally prior to engaging the OEM will immediately eliminate unnecessary costs.”

Multiple solutions from a single source
While hospitals and health care facilities definitely scrutinize costs when it comes to parts and service, deciding to go with one partner or multiple organizations also is important which each option providing benefits and drawbacks.

Zetta Medical Technologies is dialed in to that detail and is one of the companies that positions itself as a multi-vendor service company, carrying MR, CT and PET/CT parts from the major OEMs.

Melissa Roy, marketing and business process administrator at Zetta believes that’s part of the secret sauce to making the best ISOs. “Having all your resources in-house from applications specialists, to owning your own tools and test equipment, to having a team of the best technical support available is what sets you apart,” she wrote in an email to HCBN. “This allows us to use our own resources that’s why there has been to complete services and projects without the need to charge our customers for subcontractors or renting of tools and equipment. These in-house resources include parts repair, equipment relocations, applications specialists, technical support teams and training,” she wrote.

In Roy’s opinion, hospitals need to understand a service company’s technical capabilities. They should also be aware of where the primary engineers are located and what training they have on the systems the hospital uses.
It’s up to the customer to practice due diligence when considering a service provider.

“There’s typically a reason for a lower cost — find out why,” writes Roy. “What is in the fine print and are they really comparing apples to apples?”

Out-of-house value brought the in-house
When Sandy Morford, CEO of Renovo Solutions meets with potential hospital clients, he is often asked about the value that Renovo brings to the table that isn’t already provided by OEM or in-house service teams. In fact, he’s asked the question so regularly that he has developed a list of bullet points in response.
As part of the list, Morford lets clients know that clinical and diagnostic imaging equipment management is Renovo’s only business. And the company’s track record shows it has benefitted from that specialization with more than 300 programs implemented and managed over the last decade. Although Morford provides another half dozen bullet points, the main point is clear— he’s selling service based on substantial experience and a company history to back up their claims. All of which goes back to their business philosophy, “Promises made, promises kept.”

Companies that deliver on their promises deliver dependability. But just delivering on those promises isn’t necessarily enough if all the needs of the customer aren’t being met. Morford knows there’s more than just having the experience and doing a good job. “Primarily, we listen to the client,” he says. “In this business of medical equipment service, the cliché ‘one size does not fit all’ very much applies. If a client insists on OEM service for a critical piece of equipment under our management program, they receive OEM service. We never try to force the use of a particular service provider on our clients, unless we obtain their buy-in and agreement that an alternate service provider makes the most sense operationally and financially.”

Morford advises providers to keep cost in mind while considering service contracts, but to not make that the sole, or even the most important deciding factor. He advises those in the market to give due consideration to service quality, response time, escalation policy and uptime guarantees among other things. He also stresses providers should call around for references before entering into an agreement with any service provider.

Ken Sandifer, as the president of Healthcare Technologies at Aramark Healthcare, has no shortage of references available to speak with potential customers. The company manages more than 1.7 million multivendor assets on behalf of over 550 North American hospitals and health systems everyday according to Sandifer.
That large network of customers has given the company the leverage of scale that has helped it to gain valuable insight regarding equipment reliability and performance, which the company uses to determine the right service solutions for customers.

“Like most organizations, we are optimizing our supply chain through national agreements that leverage our scale,” Sandifer says.

The company has centralized its specialized program development, training supply chain, call center, parts and corporate functions within a new state-of-the-art headquarters in Charlotte, North Carolina, known as the Technology & Innovation Center, and continues to invest in technical training, tools and resources for its staff.

Sandifer sees that investment in innovation as a necessity, especially in these days of health care reform. “Healthcare reform is driving a fundamental shift in how and where care is delivered,” he says. “At the same time, the medical equipment and environments that we serve are becoming more complex and more networked every day, which requires a shift in our talent profile. The needs of our customers are changing and will change even more in the next five years.”

Parts as a piece of the puzzle
While many companies offer service solutions and some sell parts in addition to offering service, fewer concentrate solely on the parts side of the equation, with companies in that group often specializing in specific products or manufacturers.

Josh Glas, president of PhiGEM Parts is among that smaller group delivering parts when and where they’re needed. According to Glas, navigating the parts arena requires dedication to the business. It is fast-paced with purchase decisions occurring quickly— usually within minutes or hours or at the very least within the same day as an equipment’s failure. The pressure increases when the stakes are high with some equipment downtime amounting to literally thousands in lost revenue each day.

PhiGem generally supplies about 60 percent of the parts they sell to third-party brokers with the remainder going directly to in-house service engineers.
While Glas acknowledges that endorsements by customers can be useful, one of the true litmus tests for determining a parts provider’s ability to deliver relies on their infrastructure. “The ability to truly test parts plays a role in ‘being better,’” he says. “However, if a provider does not have test bays for everything, ask about their pre-deinstall inspections and deinstall procedures. How are they removed and transported and them disassembled and stored? These are all important questions to get answers to prior to deciding to purchase from one vendor or another,” he says.

Glas sees a shift in the parts marketplace, with more partnerships emerging and mergers being discussed. “I am also seeing a lot of brokers who dealt in equipment only trying their hands at parts now, starting new companies or just subsidiaries, etcetera. I think this is in response to the larger corporate acquisitions that have happened over the past couple of years. It really is very interesting to watch,” he says.

In order to deliver savings, Glas says Phi- GEM Parts sells from their own stock 99 percent of the time. “This way we are able to keep costs down, quality up and best-serve the customers’ needs.”

Glas says other cost factors such as time to ship, quality of the parts, limiting downtime and resolution of the issues also come into play.

MedEquip Parts Plus is another player that works in a more specific niche of the parts sector as its main business. Dave French, vice president of the company says the calls they get for parts normally flow in from purchasing managers for larger hospitals while smaller organizations have their techs buy directly. “We offer tech support and parts identification so when a company calls us, the guy right on the job, we can help them figure out the part they need and then they can call it into the parts purchasing department and they order the part. However, because we deal with mostly sterilizers and washers, it’s not usually the type of equipmentthat biomeds have loads of experience on so we can help,” he says.

MedEquip’s buyer breakdown is similar to PhiGEM’s with about 50 to 60 percent of sales directly to ISOs and the rest to in-house teams. “We sell very little to the OEMs. If we sell to the OEMs, we sell a different OEM’s product,” French says.

In the future, while the parts business will still be healthy, according to French, he believes it will be increasingly important to be more imaginative to keep up with ways to help the independent service person. “As long as they’re able to stay in business I think the second source parts provider is also going to do fine,” French says.

What about uptime?
With uptime being so crucial when it comes to profitability, having the tech at your door in a blink is a must. While no service provider is shuttling their techs around in a Learjet, the well-established and well-connected companies have networks of staff throughout the country or agreements with other service companies if they need extra coverage in an emergency.

By providing better response time and access to multiple vendors as well as building relationships, Mike Masterman, president of Imaging Associates is able to deliver lower cost solutions to the company’s clientele. “We’re constantly looking for partners to repair parts like power supplies and problematic parts,” he explains.

Masterman says hospitals need to really consider what their needs are in order to get the best deals when it comes to negotiating contracts. This also means the hospitals need to determine just how catastrophic having a particular machine offline would be and then determining the intelligent spend to insure against that problem.

With the budget crunch affecting hospitals big and small, insurance like that will grow in importance as the health care sector’s fleet of machines ages. “There will be a larger parts business,” says Anwar Abdelqader, sales manager at CBE Medical Inc. “The economy is bad, so companies will replace parts instead of buying new devices,” he says.

But when it does come time to buy, Abdelqader has a straightforward solution. “I gave my customer a comparison between two models , and let him know where to buy from,” he says.

Service strategies
While there are gray areas when one considers that some parts and service providers also sell refurbished machines as part of their business, many bring in their main income by keeping existing equipment up and profitable. In that way, they’re markedly different from the OEMs according to Pete McCann, vice president of sales for Modern Medical Systems. “From the OEM perspective, there tends to be a focus on their products rather than an overall view of the entire service strategy,” he says.

As for what ISOs can deliver to facilities with in-house service, McCann says they can be good for providing services for high-end, advanced equipment. If the facility doesn’t have an abundance of the machines, it may make it financially impractical to train inhouse engineers to fix them. According to McCann, it is typically smaller health systems or even larger ones with remote sites that can benefit from ISOs.

McCann says since Modern Medical is strictly a service company, they have managed to perfect a labor model where they “right-size” the amount of labor needed rather than saying every item has a price. “We look at the entire spend of the system and develop and overall strategy for them.”

One unique component of Modern Medical’s business is their training. While many service organizations, both on the ISO and OEM sides offer technical training, Modern Medical also offers soft-skill training. “We teach management how to communicate with directors of other departments,” McCann explains. “It’s almost as important as being able to fix the item. They need to be able to communicate the issues clearly within their system and even at times with regulatory organizations,” he says.

Still, McCann says that the area where he’s noticing significant growth for the sector is within the acute care setting and with the larger networks that are starting to be able to be serviced through the ACO act.“With that, the affiliates owned by IDNs or health systems are getting attached to licensing groups and where they may have been a standalone physician group, they’re now being held to the same standards to mirror what the hospital is doing. The Joint Commission is going to look for that documentation. ”

Long-term benefits rather than short term profits
BC Technical’s executive vice president, Ken Smith, believes his company offers two big advantages compared to many OEM options in the market. According to Smith, BC Technical has low overhead and significant flexibility. Low overhead means less operating costs to pass on to customers, while the better flexibility means field service personnel can make decisions on the fly getting customers what they need quickly.

On the in-house front, Smith says they don’t compete, but are instead there as support. They can step in to offer assistance especially on systems that the in-house techs don’t get a chance to work with often.

Rounding out the service options, in comparison to other third parties, Smith considers BC Technical somewhere between OEM and ISO. The company has relationships will asset managers in large institutions across the country as well as with all the major OEMs. “We’re really the only true nationwide ISO for PET, Molecular Imaging, MR, CT. So we have the scale and we have capital, backed by one of the largest private equity firms in the country,” Smith says.

BC Technical specializes in molecular imaging, CT and MR in their three facilities. The company also does some field training and multi-vendor service training.

“Some people look at training as if they’re training they’re competitors,” Smith says. “But we look at it as a partnership — we understand we’ll train and it will take some business away from us as things are taken in-house, but we can be there to provide parts or tech support. If they have a person leave, we can step in and fill in until they’re staffed back up.”

Smith’s philosophy is focused on the long-term. “If you’re around the industry long enough, you see the ebb and flow —in-house gaining a lot of traction, asset management gaining traction,” he says. “We’rein a consolidation mode. Imaging centers are consolidating or going out of business. We’ll see a lot of that in service too. I think we’re leading the way; we’ve purchased, I think, 11 companies over the past two or three years. Last year alone it was four or five companies. Our intent is to finish another three to five acquisitions before the end of the year.”

Smith believes the consolidation is fueled by the increase in rules and regulations. Smaller health care facilities and service organizations simply can’t keep up with compliance requirements.

Taking the complications out of contracts
Hospital administrators often have a lot, or even too much on their plates. So when faced with 30 or 40 pages of legalese to decipher for each and every service contract they sign, it’s common for some points to slip through. That’s why Patrick Lynch, HTM specialist at GMI recommends hospitals follow at least one example set by the Veteran Association. “The VA doesn’t sign contracts. They write their own and put them in front of the company to sign,” Lynch says.
It doesn’t make sense for everyone — for instance, GMI and a number of other ISOs have very brief two or three page contracts— but if your facility is regularly signing contracts made up of dozens of pages of dense jargon, investing upfront with a lawyer in order to pound out some boilerplate contracts might be worth looking into.

Lynch also suggests customers have the capability to adjust their contracts quickly as situations change. Adjusting quickly is key in today’s world of fast-changes to reimbursements and service requirements. Being able to ramp-up the service contract for a system that has become more profitable, or being able to cut back on service for one that’s not bringing in as much may be the difference between staying in the black or floundering in the red.

And when it comes to determining what you actually want in a service contract, for the extended warranty Lynch suggests thinking about it as you would an extended warranty from a box store for consumer electronics. “It’s the exact same sales process, and percentage. I’ve asked people at conferences how many have taken the extended warranty at Best Buy and no one ever has. Yet, for hospitals, they purchase differently.”

While it’s a buyer’s market in some ways, there are some components of the service sector that aren’t necessarily end-user friendly. “Part of this depends on what the federal government will require regarding service literature. As equipment gets more advanced on the software side, it’s easier for manufacturers to lock out others (including in-house service),” says Lynch. “The OEMs are well-connected and I mean, the CEO of GE sits down with President Obama, has a relationship there and they’re able to convince people at the highest levels that the same degree of care we’ve been giving for 30 years for all kinds of equipment, that we shouldn’t be allowed to do it for imaging equipment.”

Lynch also points out what he feels is a broken system for incentivizing hospital materials managers. “Unfortunately, materials managers are paid to purchase the equipment as cheaply as they can on the frontend. This actually incentivizes them to sign long-term service agreements. They may get a savings up front of 10 percent and sign a service contract that gives back 20 percent to the manufacturer,” he says.

“I believe that the rewards for GPOs and material managers don’t look at the long term. These agreements are often signed before we in clinical engineering even know the equipment is on the table for purchase.”

History lessons help guide service
Nearly everyone in the service sector agrees that one-size does not fit all when it comes to service contracts. But that still doesn’t prevent some from selling a one-size solution. That’s why Rick Stockton, president of Atlas Medical Technologies, places emphasis on looking at the history of a machine before finalizing a service contract. “If you look at the history of the machine, it may not have had a problem in a particular area,” he says. “So we’d rewrite the contract based on what they need.”

Customers may have a full-service contract, or may opt for a shared-risk contract. “If you’re not being utilized, you’re not paying,” he says. And if you do need service, the contract is set so that the customer will pay up to a certain amount and once the threshold is hit, Atlas covers the additional.

“We’ve reduced their overall expenditure to run the scanners and the liability hasn’t changed at all on the equipment,” says Stockton. But each customer needs to work with their provider to figure out the best fit for their needs. And they should be wary of the fine print. “There are so many things buried in these contracts ,” Stockton warns. “For example, if you exceed the mAs bracket (the milliamp seconds or tube usage) they have set, then you pay a larger contract cost and that’s also then the contract agreement that they give you for the following year because that’s what they’re recorded as running under.”

Stockton says one of the driving factors in how Atlas does business is based on an aversion to diversion. That is, his team wants to do everything in their power to avoid diverting patients to another facility knowing that valuable minutes are lost when diversions occur. “If it was your family, you wouldn’t want to have a diversion,” Stockton says. “We need to have the scanner up and running as fast as possible.”

Patient safety and staff efficiency
Echoing the commitment to the real customer — the patient — Jim Spearman, president and CEO of Consensys Imaging Service says patient safety and staff efficiency are the key factors to consider for any successful service organization. If staff is frustrated with downtime or equipment not operating up to expectations, they’re less efficient. That drop in efficiency trickles down into the patient care. Even if staff provides the proper level of care, lower efficiency means patients will be less satisfied.

To keep staff frustration to a minimum Spearman says hospitals should ask their service organizations some key questions. Things to ask include: Where is the service engineer coming from? What is the quality of the part? Are they doing system testing with full load or just doing bench testing or are they just doing harvesting? Can they get there the same day?

Another question hospitals might ask is what happens if they want to take their service in-house? “When a customer wants to go in-house with complicated technology, we do an empowerment. We helped someone go from full-service from ultrasound to absolutely self sufficient,” Spearman says.

Moving into a self-sufficient operating model is more challenging than ever, with greater scrutiny from ACR and CMS among others. But that challenge is there for ISOs as well, so it really comes down to how well the techs know their stuff, regardless of them being in-house or outside they’ll need to know what they’re doing from a regulatory aspect. “You’re going to see that some ISOs that can’t play the quality game,” says Spearman.

“If you have a problem with an asset, the FDA will show up shut down the asset and demand to see all the paperwork — they’ll want to see the paperwork on all the parts etc,” he says.

Still, Spearman sees multiple scenarios coming up. In-house options are becoming more attractive for larger providers and more and more facilities are starting to consider them. “There is a large IDN in the Southwest— they had a two million dollar service contract that went to zero. That customer is completely empowered after a three year service transition,” Spearman says.

Repair versus replace
A lot of components on both CT and MR are completely repairable, says Jeff Fall, president of Oxford Instruments.

That means facilities have a choice to make. By not having to troubleshoot, but instead just replace a whole module may save time in some instances, but it can be costly, especially in the absence of a full-service contract. So time versus cost is an equation the hospital will have to solve.

For hospitals going to part replacement route, that means they’re going the ISO route more likely than not. In that case, Fall says facilities need to be well-aware of the reputation of the company they’re working with. “Not all third-parties are equal,” he says. “I think third-parties all get lumped into one group and a lot of consumers don’t know there’s a difference between them.” One differentiator is the certifications a group holds. If they’ve met certain accreditation standards and ISO requirements that will help to prove the company has the experience and knowledge necessary for the job.

That accreditation will be a key component in the future and consolidation seems to be increasing allowing for more accreditations under one roof. “What I see happening and has been happening is a consolidation of the vendor base,” says Jeremy Probst, COO for Technical Prospects. “Companies that do centralized procurement are requesting and requiring more out of vendors.”

Probst feels that high-quality and technical support will be the future of the industry. And like others, he believes customers will be looking for partners and solutions rather than just transactional business.

He also sees customers taking new imaging equipment off of contract faster than they have in the past. “They’re looking for freedom of choice faster than they have in the past,” Probst says.

Learning from others
“For parts entities to survive and remain profitable they’re going to have to invest in high-technology,” says Charles Gauthier, executive vice president of service for Shared Imaging.

Gauthier says parts entities will need to be able to assess, repair, test and deploy high-tech circuitry. He believes they’ll also need to learn from other industries outside of health care and catch up to what other industries have been doing for years.

“I think what we’re seeing in health care in general is a shift away from pure technology or products into process, workflow and streamlining the service care that we all support,” Gauthier says.

Within the health care sector, Gauthier insists professionals need each other to be successful. “OEMs, ISOs, in-house — the days of flying solo have never really evolved. We have what I like to call “coopetition” or cooperative competition,” he says.

It’s not just OEMs taking a chunk of the market, it is health care organizations moving service in-house as well, but it’s rare that either situation happens entirely. Instead, according to Gauthier, people are looking for solutions that fit their needs under the most fact-based and diligently researched programs available that have been assessed for service and performance. “Any provider that can’t connect clinical and operational workflow and financial benefits will be at a competitive disadvantage,” says Gauthier.

Even in the future, Gauthier believes there will be no sole provider providing a sole solution. “It will be a blended model of shared risk without being a detriment to quality, with in-house, ISO and OEM each playing their part. All three of these providers will be measured on a performance basis to include financial penalties — whether operationally or capital-wise to that performance.”

One way everyone can work together better is to have all service contracts in synch. “We try to make all the service contracts possible in a conterminous structure. It enables them to not only plan to set aside the right team at the right time, it also makes it less likely they’ll miss a contract renewal or renew agreements they no longer need or that need revisions,” says Gauthier.

STACKing the deck
Sodexo Health Care subscribes to STACK certification according to Vinnta Rivers, vice president for business development and clinical technology management. Sodexo’s team is trained on crossmodalities under STACK. “It gives them to ability to lower their expense when we can provide 90 percent of the service with the team on site,” Rivers says. “That enhances the speed to turnaround and recovery.”

Rivers believes there will be a continued systemization in the market as well as consolidation and alignment of even larger health care providers.“I think it represents opportunities and challenges for all the players in this footprint,” he says. “Finding the right partners, finding the right scale, finding a system that is able to be scaled will all be important. Finding a deliverable service at the right price will be the challenge to be a viable player in the market place. We have a belief system that the more educated, the more trained the more certification a technician can get under their belt, the more valuable they are to us and our clients,” Rivers concluded.

The Provider Story
Providers today have so many more options than they did in the past when it comes to parts and service. It’s fortunate, because the challenges they face are also much greater than they were in the past. With financial challenges, regulatory issues, staffing concerns and of course, the need to stay abreast of new technology, the lines between departments are blurring and fewer people are expected to get more done with less resources.

There is no one right answer to solve all the problems and different providers approach problems in different ways. Some large providers have economy of scale working to their advantage and can benefit from in-house services, while others can’t or choose not to go in-house.

Meanwhile, some smaller facilities feel they cannot afford OEM service or justify an in-house team, so they explore alternative service options. In some cases, whether large or small, hospitals might use a blend of all three.
It seems based on the professionals interviewed for this story that there is no hard and fast rule. Oftentimes, the choice is a reflection of the personality of the people in charge. Some people have a do-it-yourself mentality while others prefer leaving certain responsibilities to others as they focus on different tasks.

Although in-house service technicians are onsite and provide the fastest initial response time, unless the organization has that economy of scale, they likely need support from an outside service group.

In-house teams not only help to maintain equipment by keeping up with preventative maintenance, but they also serve to provide an immediate first look in the event of equipment failure. While not every facility may be large enough to justify a full-time in-house team, it’s a valid option for many. And in-house isn’t an all-or-nothing proposition. Many OEMs and ISOs work closely with in-house teams, providing training and support, in some cases even working with those professionals to help them become more self-sufficient and thereby take charge of more of their hospital’s service needs.

While alternative maintenance programs using risk-based assessment have been carried out for years, officially, it was against the rules to deviate from manufacturer recommendations for maintenance according to the requirements set forth by The Centers for Medicare & Medicaid Services. But CMS, whether understaffed or unconcerned, didn’t go to great lengths to enforce the rules as long as hospitals were keeping the equipment in good order and had the documentation to support their risk-based maintenance decisions.

That all changed in late 2011, when CMS issued a memo specifying restrictions to those alternative maintenance programs. According to the memo, hospitals had the option to examine and adjust maintenance schedules and testing frequency where appropriate, but could not deviate from manufacturer recommendations for any equipment that could impact patient health and safety or for any equipment too new to have an extensive maintenance history. Hospitals, ISOs and numerous healthcare associations were up-in-arms and the outcry was so loud that CMS toned down the directive. The final decree is that hospitals must follow the manufacturer’s recommendations when it comes to laser devices, imaging equipment, radiological equipment and equipment too new to the market to have adequate maintenance history to develop an alternative program.

While that comes as a blow to some in-house service teams, the savings and efficiency they deliver still makes the option attractive to many hospitals. Other hospitals swear by longstanding relationships with OEM partners and haven’t concerned themselves with the CMS drama.

DOTmed HealthCare Business News spoke with a number of providers about their service needs and the experiences they’ve had. The group has had a mix of using in-house, ISO or OEM services and has had a mix of success with those options.

Keeping the long-term in mind
Low cost offerings and immediate savings can be attractive propositions for hospitals, especially in these days of shrinking budgets. Yet savvy health care professionals realize they’re running a marathon instead of a sprint when it comes to ensuring the ongoing health of the hospital or health care system they’re with. Frederick McMurtrie, CBET and biomedical supervisor of a leading Florida Hospital System and Past-President of the Florida Biomedical Society realizes he’s in a marathon.

“In our system, we work with our OEM partners to cover parts for seven years and labor for one year or parts three years and three years of labor; it is all part of the cost of ownership and is negotiated up front during the purchase process,” says McMurtrie.

With cost containment a hot button topic for health care professionals, stretching the profitable life of equipment assets is highly desired. Taking care of the equipment, keeping up with preventative maintenance schedules and even just being sure to keep it clean goes a long way to helping the machine go a long way. “We try to manage the equipment with the idea that it should be maintained in as close-to-factory-new condition as possible,” says McMurtrie. But it’s sometimes easier said than done, especially when parts get scarce or service support dries up.

In instances where the OEM has discontinued support or the cost to upkeep through OEM services become prohibitive in comparison to the revenue a machine is generating, then McMurtrie will explore aftermarket parts options or other options for service. In general though, his hospital system relies heavily on OEM service and materials. “I would say the percentage breakdown would be 85 percent OEM and 15 percent aftermarket,” he says.

It’s a balancing act when considering the revenue a piece of equipment can generate and the cost it takes to maintain the machine. If outside service companies are used (whether OEM or ISO) a carefully designed contract can help a hospital more accurately determine when it’s time to retire a machine. However, if the last few years have been any indication of things to come, return on investment will require very careful planning and considerations like service and parts will have to figure in significantly to the overall plan. “Most parts we pay for have gone up,” says McMurtrie. “In some cases, doubling or tripling in cost over a year or two,” he says.

While McMurtrie’s hospital system does belong to a GPO and prefers going through it for services, they do have flexibility to look outside those boundaries when a situation warrants it.

Uptime equals patient satisfaction
Donal Teahan, director of practice development for the department of radiology at NYU Langone Medical Center, is a strong voice in the parts and service discussion. Teahan washes his hands of the notion of taking services in-house and welcomes continued service by the OEMs.

“I rely on Siemens to service much of our equipment because I believe that in our environment with the uptime I’m required to have, that I have much more control and get a much better response than I would from an in-house engineering department that’s fixing beds one day and MRs the next,” Teahan says.

“I have worked with in-house service, ISO service and OEM service and have seen that our response time is better with the OEM. That the staff is better-trained and most importantly our uptime is greater,” he says.

To make the numbers work and to keep his budget intact, Teahan says it’s necessary that he produces on the backend. “We get a budget from the institution to take care of service. It’s a global outside budget and once we produce on the back end no one is looking to cut our budget.”

When Teahan made the decision to make uptime the top priority he requested changes to his old service contract. “We had a service contract from 8 to 4, Monday through Friday and everything else outside was overtime and outside the standard hours. We now ask the OEM to work on any equipment maintenance from 12 midnight to six in the morning. If you’re taking my equipment away from me at other hours we can’t see patients,” he says.

He believes that taking service in-house only looks good financially for a few years, when the equipment is still new and unlikely to require any significant repair or service. As time goes on and parts begin to wear out or fail, the financial benefits can start to fade.

With Teahan’s hospital in a major metropolitan market, patients aren’t the only thing facilities are competing to bring in. Just as facilities are investing in advertising to bring those patients in, so too are they investing when they want to bring the parts they need in. “If I have an OEM contract and the hospital up the street has it all inhouse and we both need the same part, who do you think is going to get the part if there’s only one available?” he asks.

Teahan is also pragmatic when it comes to in-house capabilities and working with limited resources to handle a large number of modalities and units. “We have Siemens and other OEM engineers on site and they know their modalities. It is just not possible for in-house service to compete because they cannot know everything.”

“Of course we are interested in reducing costs, but uptime is more important,” Teahan says. “Uptime will produce the revenue to cover the costs and uptime results in better patient outcomes.”

“In the grand scheme of things, what we pay for service compared to the uptime we experience supports our business strategy,” Teahan says. “It does not make sense to risk uptime for a percentage drop in service costs. We need to be running 24/7/365 and we cannot afford to have a system go down because it could delay a patient going to surgery.”

Teahan believes his philosophy also gives his hospital better positioning with OEMs because they’re not looking to distance themselves from OEM services. Instead, they’re bringing them in as partners. That approach may be refreshing to the OEMs. “Especially in today’s environment where they are being squeezed by everybody, we stand out. We get the part because we’re paying for it.”

To Teahan, with all the talk of patients coming first, people aren’t putting their money where their mouths are. “In my opinion, people are placing too much emphasis on cost of service at the expense of patient outcomes and patient satisfaction.”

When a system goes down, that broken link disrupts the whole chain of care. “It’s not just the imaging portion — it’s the back up all down the line in the hospital,” Teahan says. “We can’t get a patient discharged, we can’t get a patient admitted.”

By maintaining service contracts and avoiding in-house options, Teahan is also able to reduce the time spent playing politics. “Bringing it in-house becomes more stressful and there’s more administrative arguments and bureaucratic wrangling internally if all of a sudden you have to purchase a part that’s $250,000. I never run into that problem. Do I have to pay a premium for that? Yes. Do I think the premium has value? Absolutely.”

Although Teahan holds partnerships with OEMs in high regard, they shouldn’t look at his way of thinking as a free pass. In the spirit of true partnership, he wants it to be a two-way street. According to Teahan going forward OEMs will need to better demonstrate the added value their service and parts supply delivers. They’ll need to more clearly define the total cost of ownership on equipment as well. “The OEMs also have a better ability, when they finally listen, to create an infrastructure that helps us all in the long run.”

With technology allowing more systems to be remotely monitored, that means there should be ample warning in most cases that maintenance is needed. “No piece of high-end imaging equipment doesn’t tell you electronically in advance that it is going to have a problem and the OEMs should develop systems to monitor that more than they do now,” says Teahan.

He points to MR scanners as prime example of that notification. “Ask anyone who takes care of MRI scanners and they will tell you that 95 percent of significant downtime is caused by the environmental specs not being met by the end user, e.g., chilled water conditioning, humidity and power — all of which can be monitored remotely.”

But the process needs improving. Teahan believes the OEMs need to be more proactive in tapping into that technology and providing solutions or preventing issues from occurring. He says he hasn’t had an OEM come in for an install yet to say they want data points to monitor not just the things on their side, but the issues on the hospitals side as well. So for instance, if the MR’s chiller shuts down in the middle of the night and sets off an alarm on their side, they could call to tell Teahan to turn it back on so that the machine is ready for patients in the morning. “My OEMs are in the process of doing this, we monitor everything else, but we’re not monitoring our machines,” he says.

That type of data monitoring and infrastructure is difficult to come by for in-house departments in his opinion. “If you go to the administration and ask for the tens if not hundreds of thousands of dollars to accomplish that, you’re probably not going to get it. OEMs should ask for the specs. It’s a proof of concept — you will save money.”

The monitoring requires a shift in thinking and a change to historic roles. Teahan stresses that responsibilities should be clearly outlined for the OEM and if there’s in-house or third party, they should know their roles as well. So that there’s not a situation where everyone thinks the other group is handling a problem.

Ultimately, he believes regardless of whether you use OEM coverage or clinical engineering internal, there has to be an independent monitoring system that monitors both sides of the equation — the equipment and the house environmental side, so that the appropriate group can access the logs and see what the problems are.

“This is the future,” Teahan says.

His facility has been using OEMs for parts and service for more than a decade and he feels strongly that it’s the right decision. “Do I want my budget to go down? Yes. But there’s a balance and I see the other side of it,” he says. “If a CT scanner in a hospital setting is down for any period of time, forget the cost in money, what about the cost to the patient waiting to get in or be discharged? I believe in five-year’s time, when hospitals and OEMs actively monitor systems that we can cut the cost of service significantly and provide better service and uptime to the end user, and the end user — me, the docs, the patient — will be much happier. A 24/7 hospital has to happen because you can’t have downtime for these types of equipment. Maybe there is a balance between all in-house and all out-house. I have that balance because I have in house engineers provided by the OEM. I know there’s a cost attached to that. But we have proven over 10 years that it works,” Teahan concludes.

Neighbors to the north
While the same rules dictating service and maintenance in the U.S. don’t apply to Canada, the basic challenges still hold true. That is, hospitals still look to maximize equipment uptime while minimizing service and parts expenditures. Chris Buck, executive director for the Lower Mainland Biomedical Engineering program, offered insight into how his group handles service and parts. LMBE services four health authorities, including Fraser Health in Vancouver B.C. and provides service to 26 acute hospitals with approximately 5,000 beds total. The largest facility they service is Vancouver General with just over 1,000 acute beds. His fulltime staff numbers 193 with 172 being technologists.

According to Buck, Fraser Health has only a few service contracts with companies. In part, that’s because of the difference in Canada’s equipment maintenance requirements. “We canceled a lot of service contracts, particularly for imaging and some in monitoring,” Buck says. “We use outside service providers for some specialty work, particularly MRI cryogen work as this is more cost effective and safer than training our own people who would not get sufficient hands-on time to stay competent,” he says.

As a general rule, they don’t enlist the services of OEMs citing the higher costs involved.

When it comes to parts however, the options are wide open. “We give everyone a fair shot with price, quality and delivery key components,” Buck says.
Still, with price concerns being a top factor, OEMs are not typically the supplier of parts for Fraser Health. “Buying from OEMs has gone down a lot over the past three to four years because of cost which has gone up, but sometimes the OEM part is the best choice,” he says.

Generally, they work with alternative parts providers, but the OEMs have been working to be more competitive with their pricing since Fraser is such a large organization, according to Buck. “We buy in excess of 60 percent on the open market, but of course, that’s hard to do with newer technology,” he says.
Bucks’ experience seems to mirror that of many of the other providers we spoke with. There seems to be a trend to buy more parts in the open market. And while independent parts dealers are not eclipsing OEMs in terms of parts sales, their market share is definitely growing.

Buck says by collapsing $6.5 million (roughly $6 million U.S.) in service contracts by bringing them in-house, the organization saved just shy of $2.8 million U.S. He acknowledges that overall spend is going up because the organization is growing, but total cost of ownership on individual pieces of equipment has gone down.

Parts supplies present a little more of a challenge due to the geographical location. “We found third party vendors have been very good with standing by their products. Parts become an issue when it is time sensitive,” Buck says. For instance, they can get CT tubes by overnight delivery from Chicago most times, but sometimes the delivery is held up in customs for a few days. “For a CT tube, we can’t afford those three days, so we keep two tubes on consignment at all times. They are in a warehouse here on consignment and we pay when we use it and order another.”

Freedom of choice
Legacy Health is the largest nonprofit, locally owned health system in the Portland-Vancouver area, according to information on the organization’s website. The organization largely depends on in-house service for equipment no longer under warranty, handling about 85 percent of the work, according to Russell Magoon, an imaging service technician at Legacy as well as the president of the Oregon Biomedical Association. “The OEM percentage is 13 to 14 percent with ISOs making up the last one or two percent,” says Magoon. “For things that we have OEM contracts on, it makes sense to use them. The driver for using OEMs is the lack of downtime,” he says.

Magoon adds that there are some modalities that no one can do as well as the OEM and their hospital relies on the OEM to service that equipment.

When it comes to parts, the decision for most purchases are left to those that will be working with those parts. “The techs make the decision to use the vendor they feel most comfortable with,” says Magoon. That means some techs may look to the OEMs while others may have a familiarity and comfort level with third party parts vendors, so they’ll go there. “The relationship between suppliers is so important,” says Magoon.

Before bringing most of their services in-house nearly eight years ago, Legacy’s service and maintenance needs were managed by Aramark. Today, although techs have the freedom of choice when it comes to who they’re getting parts supplied by it’s rare that they do actually use OEMs for parts. “When it makes sense we do, when it’s a quick turnaround situation,” says Magoon. He puts the amount of parts sourced directly from the OEMs at around 20 percent with the remaining 80 percent being left up to what makes sense to the techs.

The asset management company MedAssets negotiates capital purchases and service agreements for Legacy but the health system doesn’t use the company for parts purchases and non-contract service needs. “We do have a reduced price on parts and service from GE and that’s due to the MedAssets negotiation,” says Magoon.
During the course of reporting this story, we’ve found that GPOs don’t play much of a role in the purchase of spare parts or noncontract service.

While the current system has served Legacy well, Magoon says things can get shaky when there are management changes. “When there are management changes, sometimes new managers will look to reduce expenses and make changes. In some ways, ISOs deal with this better because the ISOs have more experience working with management changes that the average in-house service team would. That’s why ISOs do well. They are very good at knowing when there is a management change and when they can offer a low price on something.”

Networking to keep equipment working
Helen Jones is the unit director I of MedWest Harris, MedWest/Swain, which have 100 beds total.

Like Magoon at Legacy, Jones says that once equipment is out from under warranty, effort is made to move the servicing in-house. Jones says that generally, the equipment serviced in-house has been in use for a long time and is rarely still supported by the OEM. Moving away from outside service is Jones’ ideal. “We try and minimize it, but a specialty like tissue pathology you have to use OEM service. For 4,000 pieces of inventory, we only have 10 contracts that cover about 19 pieces,” she says. But there are challenges with providing in-house service for equipment OEMs have ceased to support. “It’s frustrating because it’s hard to find parts,” she says.

Getting those hard-to-find parts is all about who you know. “You have to find out who your reliable second source vendors are,” she says. “About 90 percent we do it ourselves. I remember who’s good because I still use them. My networking and relationships help me find parts.”

OEMs are still relied on though. “We do buy from them and sometimes we buy refurbished parts from them, many times we have to,” Jones says. She estimates that about 25 percent of the parts they use come from the OEM. For the rest, it’s getting in touch with contacts or getting creative. “We’ve bought from the Internet,” she says. Networking with peers and organizations also yields results. “We ask around, ‘do you have this part or know where to get it?’”

By getting a little creative, building relationships, networking and doing some investigative work, Jones has managed to minimize many expenses. She also uses a tool at nearly everyone’s disposal —the Internet. “The Internet has changed the way we do business,” she says. “To buy a bed cable from a bed manufacturer cost $120, but just $30 from a cable manufacturer. But it’s a generic item. We have to search, but it’s a perfectly fine part and not putting anybody at risk.”
Although they do buy from non-approved GPO vendors, there are limits to who she will and can buy from. “There are certain vendors the company does not want us to buy from. So we buy from both (GPO-approved and non-approved) but we give preference to good proven history,” she says.

Total in-house service
Some hospitals fully rely on OEM service, others may tap ISOs or use a mix of the two along with their own in-house. None of that applies at NC Baptist Medical Center when it comes to servicing their radiology imaging equipment. “We are 100 percent in-house,” says Stuart Grogan, radiology equipment manager at the center. While the biomed department is serviced by Aramark, Grogan’s department has autonomy when it comes to their service needs. “We are a separate department with the responsibility of servicing our own equipment,” he explains.
To be at 100 percent in-house service requires, in addition to experience, quick and accurate parts acquisition. For that, Grogan says it’s a mix. “It’s a complete mix, it’s whatever the situation requires,” says Grogan.

Grogan says if the OEM is more expensive, but has the needed part on-hand and it’s critical, they’ll move forward with the purchase. “It’s situation driven and machine driven,” he says.

Although the purchase decision is situation driven, there are checks in place to make sure the system isn’t abused. “We look on the open market and our engineers are measured on how well they do on cost savings and time in getting the parts,” Grogan says.

“The OEMs try to sell us service contracts; they say they can save us time. But we have good independent vendors. We do have some parts agreements with the OEMs,” Grogan says. “Some vendors’ parts are more prevalent on the open market than others. If we can’t get it we go to the OEMs.”

Grogan says they have negotiated parts support contracts with OEMs in the past and it wouldn’t be off the table in the future —the decision is financially driven, but with the ultimate goal of providing a high level of patient care.
Grogan says their spending on parts has increased slightly as they have actually had to turn to OEMs for parts more in recent years because they’ve been replacing technology with more current models. Newer equipment usually means a scarcity of parts and it means the OEMs are sometimes the only game in town when it comes to acquiring those parts. “We have new state-of-the-art MRs, so we are of course on parts contracts that we’ve negotiated for that equipment,” he says. “You don’t need that for 15-yearold X-ray machines.”

Get a number, find a part
“The only things that are outsourced are CAD systems, the treatment planning systems and anything that has a hot radioactive load,” says Joe Kaminski, director of imaging services at Geisinger Health System. “We generally go the OEMs because it’s purely software driven and they make sure the software is up-to-date. In that case, the OEM is your only option,” he says.

With just those systems outsourced, he estimates in-house probably takes care of about 90 percent of the equipment service. For parts, again while they might go to the OEMs for hard-to-find newer components, generally they have staff hit the open market to find parts. “We rely on our engineers when we can. Our sourcing team also hunts for parts when the model number is straight forward.”

Kaminski says the overall part spend has gone up over the past three years, but not because of an increase in parts costs, but rather because of an increase in the size of Geisinger and the increased demand for parts. But he maintains that they work hard to drive the total cost of ownership down. They do this in part by managing well from cradle to grave.

Kaminski says they not only manage the equipment, but they also manage their own assets in the department and are not interested in employing the services of an outside asset manager or insurance company. “Did it once, got burned , won’t happen again,” he says.

Parts and service – and that’s the full story

While the OEMs, ISOs and providers all have agendas, during the course of our research and interviews, we discovered some trends and themes that run throughout the parts and service sector.

Several people from each segment stressed the fact that price should not be the only consideration and not necessarily even the largest consideration, when it comes to determining the best service contracts or parts buy for your facility. Hospitals that aggressively pursue cost-cutting without considering the result of those actions may ultimately spend more if they’re not adequately covered for equipment maintenance or repair.

On the flipside, hospitals pursuing a “business as usual” line of thought may be overspending on service contracts for machines that aren’t worth the maintenance expenditure. It’s a balancing act that requires hospitals to do their homework to get educated about exactly what they need and what they should be paying to get those services and materials.

While hospitals do often turn to group purchasing organizations for supplies and services, that seldom seemed to be the case when it comes to parts and service maintenance, with only a brief mention of GPOs by one interviewee who speculated that those organizations may make a move into the sector in the future.

There continues to consolidation among ISOs as independent imaging centers and standalone hospitals either close their doors or get absorbed by larger health care systems. With the change, they’re more likely to follow the channels established by the group they join when it comes time to obtain parts and services.

On the OEM front, more and more original equipment manufacturers are offering expanded service options. Some continue to specialize in providing parts and service for only their own products, while others service not only their own products, but those of other manufacturers as well. Most predict the trend will continue as spending remains lighter than usual on new equipment forcing the OEMs to explore other revenue streams. With OEMs more involved in service, more ISOs will likely be purchased by OEMs as manufacturers look to expand service offerings or in order to eliminate competition.

Although there has been increased consolidation among hospitals and ISOs, the market share for service seems to be growing, with a slightly faster rate of growth forthe in-house teams. Biomeds and in-house service engineers are becoming more important to the total service mix in their facilities and are increasingly becoming the first-callpeople for more and more modalities.
For the in-house, even as some facilities put their teams on more modalities, other hospitals continue to look to the OEMs or ISOs, with most having a mix of services.

Hospitals are expected to do more with less in many different areas of operation, so “partnership” was a word that came up often during interviews. With partnerships, parts and service providers are being called on to deliver solutions or guidance for customers rather than just transaction-related interactions.

Many interviewees stressed that the future of the parts and service sector will hinge on relationships, with those having strong skills at building and maintaining relationships being at a marked advantage over others.

If you’re interesting in the ISO option for parts, service or both, please take a look at the Services Directories on the pages that follow this summary. There’s also a special adverting section that follows of DOTmed Gold Parts Vendors if you’re interested in used and refurbished parts for your equipment, especially if that equipment is off warranty.

DOTmed Registered HCBN August 2014 Parts Companies

Names in boldface are Premium Listings.
William Dixon, Advantage Medical Electronics, AL
Robert Koeritz, Alpine Solutions Inc., CA
Anwar Abdelqader, CBE Medical, Inc. , CA
DOTmed Certified
James J. Donoghue, MDLabServices, Inc., CA
John Vano, Radiation Oncology Systems, CA
Steven Kelley, United Medical Instruments, CA
DOTmed Certified
Moshe Alkalay, Hi Tech Int'l Group, FL
DOTmed Certified
David Denholtz, Integrity Medical Systems, Inc., FL
DOTmed Certified
DOTmed 100
Randy Cox, MRI Technical Services, Inc., GA
Wes Solmos, Creative Foam Medical Systems, IN
DOTmed Certified
Scott Wasson, Radiology Services LLC, IN
DOTmed Certified
DOTmed Certified
DOTmed 100
Michael Zanish, Pro Select Services, MN
Marc Fessler, Independence Cryogenic Engineering, NJ
DOTmed Certified
DOTmed 100
Leon Gugel, Metropolis International, NY
DOTmed Certified
DOTmed 100
Jim Filer, BioMedtronics Service, OH
David Hurlock, Varian Medical Systems, SC
DOTmed Certified
John Drury, TransAmerican Medical Imaging, UT
John Vandersteen, Technical Prospects, LLC., WI
DOTmed 100
Dan McGuan, Viable Med Services, Inc., CA
Bill Murdock, VIP Medical, Inc., VA
Volodmymr Marevych, Vomark Technologies, Inc., IL
Mike Ghazal, Zetta Medical Technologies, LLC, IL
Michael Feezor, Ultimate Imaging Solutions, TX
Bhavin Bole, UMRi, MO

Mila Heeman, TeledyneDalsa, Netherlands
Guenther Perhofer, Mides, Austria
DOTmed Certified
Ashish Bhavsar, Wave Visions, India
Roberto Otarola, Otarola Ingenieria, Chile
Andrew Hague, CellSonic Ltd, United Arab Emirates
Wolfgang Ackermann, Ackermann Medical Systems GmbH, Germany
Kasper Hyllebjerg Raal, Denmark
Thameen Ansari, Apple Technologies Ltd, UK
Ronen Bechor, ElsMed Ltd & Relaxation Inc, Israel
T. Simons, Hospital Equipment Services BV, Netherlands
Sankar Kamatchi Gnanamani, Germany
Ramakrishna Ch, Man Machine Electronics, India
Aydogan Polat, MEDSSER Medical Services, Germany
Tom Becher, Medtec GmbH Germany,Germany
href="">Saeed Hashemi, NASS MedImage, Canada
Sadiya Simran, Sid Med Dot Co, India
, India