By Matt Skoufalos
In conversations about the durability of medical equipment, the most commonly constructed analogies – namely those about asset depreciation, maintenance and after-market acquisition – are comparisons involving motor vehicles. But for the first time across both industries, the impact of the novel coronavirus (COVID-19) pandemic also conjured up another apt comparison: that of supply chain shortages, parts and equipment delays, and confronting the financial challenges that such factors complicate.
Dean Skillicorn, clinical engineering manager at St. Luke’s Health System in Boise, Idaho, has spent 30 of his 38 years in healthcare technology management (HTM) in a managerial role with various organizations. Throughout the different environments in which Skillicorn has worked, he’s seen a variety of approaches to capital equipment life span planning.
“When I worked for the OEM, I was involved in a capital planning project for a customer,” he recalled. “We had a consulting side at that time. Our team took some of the things from the consulting team, and some of our own ideas, and through discussion with the customer, built a system for them. I use those concepts today.”
The challenge with any piece of medical equipment, Skillicorn said, is that “technology comes in the door in stages of technology growth,” and changes rapidly. In considering how to calculate the useful life of any piece of medical equipment, an understanding of how device manufacturers manage end-of-life transitions for the products and services they offer is inherently necessary. Knowing in which life stage a piece of technology exists at the time of its purchase means acknowledging the pace of changes to come, and how that device will be supported as it ages, whether by an in-house clinical team, a third-party independent service organization (ISO) or the OEM, Skillicorn said.
“Let’s say you buy the product in the initial year it’s brought to market,” he said. “For a start, technology changes so quickly today that, by the time it gets to market, it’s already different from when it was initially conceptualized. Then it starts to mature immediately; the onboard computer technology evolves faster than the rest of it. If you don’t upgrade that platform within at least a couple of years, and you then try taking that technology into Year 10, Year 12, you’re done. You can’t afford to do that today.”
According to a 2022 report from Jason Feder of aftermarket medical imaging equipment supplier Radiation Oncology Systems of San Diego, California, the average age of medical imaging systems resold in the United States continues to increase. Aftermarket CT scanners are typically around 12 years old at the time of their resale, which Feder notes is fairly consistent with pre-pandemic usage. But as of 2022, most MRI systems for sale by their owners are around 14 years old; on average, that’s a year older than when those same systems were sold in 2019 and 2020. The average age of PET-CT systems, which were being resold after nine years of use in 2019, jumped to 14 years by 2022. Similarly, linear accelerators, which were resold in 2019 at an average age of 11 years, are now being resold at around 14 years old. Feder hypothesizes that the COVID-19 pandemic put a damper on capital expenditures that might have been dedicated to the replacement and maintenance of these imaging devices, and that the questions of what follows next continue to bubble to the surface as supply chain and logistics concerns resolve themselves in the wake of the pandemic.
But without specifically defining the expected useful life of a piece of technology with the OEM that produces it, device purchasers can be in the dark for planning upgrades, maintenance and replacements. Skillicorn believes the time to solicit information on OEM end-of-life standards for devices in question is at the time purchasing and service conversations are being held. Comparing that information against institutional purchasing timelines can help establish concrete timeframes for device retirement as well as for service agreements.
“We are developing a scorecard to determine what our activity is like in our last few years of equipment life,” Skillicorn said. “What’s the volume of repairs we’re seeing outside of preventive maintenance? What’s our utilization? What’s our service history?”
In addition to collecting and evaluating data points from existing imaging devices, Skillicorn advises that imaging equipment managers cultivate a willingness to renegotiate existing service contracts based on a deeper understanding of the functions and capacity of the existing inventory they manage. He also recommends establishing service and equipment costs based upon list pricing before contemplating any vendor incentives, the better to conceive of maximum potential risk exposure over time. The more those additional variables can be defined – from supply chain considerations to healthcare information technology costs to staffing – the more accurate capital planning conversations will become. Moreover, the benefits derived from dialing in the process can extend to other operational segments.
“The ability to plan imaging equipment is the biggest equipment cost we have as an organization,” Skillicorn said. “By being able to do that, we can design the same structures and management processes for buying general medical equipment, robots, anything. It’s all the same; it’s just parts and money. You have to get people to understand the difference between age-staging, technology-staging, depreciation, and understanding the physical age of the equipment versus the age of technology. Then you can grow from a break-fix mindset, and start to plan and get very strategic.”
Bringing financial professionals into the capital planning conversation is another integral strategy for maximizing value in purchasing conversations. Skillicorn credits a close working relationship with Valerie Timm, capital portfolio manager at St. Luke’s Health System, who has helped the organization refine its planning approach for medical imaging equipment. Timm, whose background is in supply chain, works to facilitate capital requests within the institution by compiling business cases that support a clean decision-making process within the leadership structure at St. Luke’s. She also maintains and monitors the annual capital plan on a rolling basis to help certify that institutional financial priorities are being met for the year when those conversations are taking place.
Moving to a data-driven approach to calculate the scope of operational, maintenance, repair and replacement costs has helped firm up some of the variables in those conversations, Timm said. Likewise, the decision to standardize some of its imaging devices under a single OEM vendor across the entirety of its health system has helped St. Luke’s to streamline other elements of its capital planning process.
“CT devices were one of the first big pieces that we started to standardize and apply this model to around 2021-2022,” Timm said. “It helps Dean’s team to look at service contracts with a single vendor instead of three or four, and there’s cost savings for us on the procurement, training and support side as well.”
“That’s money that can be turned back to the capital side of things if the organization wants,” Skillicorn added.
In generating a request for proposal (RFP) from prospective imaging device vendors, Timm said information and perspectives are cultivated from throughout the health system, including from supply chain professionals, clinical users and other stakeholders. But she also makes use of outside services like ECRI, the independent authority on healthcare technology and safety, to help frame in-house conversations and answer questions about the market landscape for the kinds of devices for which they’re shopping.
“That way, we’re operating from a place of a little more knowledge when we meet with prospective vendors,” Timm said.
Nonetheless, she and Skillicorn acknowledge that the impact of the COVID-19 pandemic is still a consideration in capital planning: slashed revenues and limited service operations redirected enterprise focus into technologies related to the care of patients hospitalized with respiratory symptoms. In the course of refocusing back on normal, non-pandemic operations, institutional planning has required a reset and reassessment of existing conditions to address the best way to keep the technology that’s already within the fleet functioning effectively.
“Break-fix and proactive planning, that’s where a lot of health systems are right now, because so much of our attention was on pandemic response,” Timm said. “We have to focus and re-prioritize and do what absolutely needs to be done now.”
Skillicorn also pointed out that the same COVID-related pressure has sidetracked OEM objectives as well; as they’ve worked to shore up supply-side demand for the components that comprise their technologies, “it’s putting pressure on the future already,” he said.
“We are looking at delivery times that are twice to three times what they used to be before COVID,” Skillicorn said. “It’s critical that organizations rely on advanced planning to avoid extended equipment downtime, and mitigate long lead times.”
After years of working in clinical engineering, strategic technology consultant Carol Davis-Smith has learned that the best decisions made around capital purchases are those that acknowledge the differences inherent in every health care institution at the top of the conversation. Aligning business and financial strategies across an organization – and making sure all stakeholders in the procurement conversation are similarly aligned – allows for clarity of purpose and an easier process.
“On the business side, one of the debates we have is, should we buy things just because a clinician, a physician wants it?” Davis-Smith asked. “What are your organization’s business and financial strategies?
“Maybe it is a marketing decision, because we’re trying to build a practice, or grab some market share,” she said. “Does your organization participate in value-based contracting with the payer world? If so, you have to think about where you’re delivering services. Maybe rather than adding another unit at your flagship hospital, you want to put it out in the community somewhere. Literally, physically, where are we going to put this that’s going to meet that value-based market share?”
“Maybe you need to upgrade the technology, but what’s sitting there?” Davis-Smith continued. “Is it still good clinically; still a viable technology? What’s my ROI on that upgrade? Do I have to factor in the relocation of new technology offsite? Do I need to think about cost of implementations? Upgrades? Do I have clinical staff to operate the thing in that new venue? Do we have clinical protocols within our institution that are standardized within operations?”
“These are big business decisions,” she said.
Given the scale and variability in those conversations, not only from institution to institution, but sometimes from department to department, Davis-Smith has honed a professional skill set in leading purchasing discussions by anchoring her input in a perspective of collaboration. Departments get siloed; decision-makers unwittingly can become blinkered to perspectives outside their areas of expertise. Without understanding the achievement of a common institutional goal as a shared win, the tug-of-war can tear a conversation apart.
“We’ve all sat at both tables, one where everybody’s playing as a team, and one where everybody’s protecting their own interests,” Davis-Smith said. “I have ideas, and my staff has ideas, but the very best idea is in the middle of the table, when we put all this information out there, and acknowledge that there’s going to be tradeoffs.”
“What I try to teach is process,” she said. “Circumstances change; the one constant is that life happens. But if you have a good process, you have something to fall back on; something that cannot be buried in the details of a procedure.”
“It’s that next level up,” Davis-Smith said. “How do I be flexible, and how do I deal with these changes? Are you willing to take one for the team?”
“Taking one for team” only works when all the players share a foundational dedication to an overarching standard. Whether it’s an institutional paradigm, a professional value, or an understanding about expectations, defining clarity of purpose provides a critical reference point upon which to evaluate the entire discussion that follows, no matter how divergent the perspectives shared therein.
For Davis-Smith, if the ultimate underlying principle is better patient care, then conversations driven toward that end will end up benefiting everyone participating in them anyway.
“If I look at the goal of the conversation as being a steward of my organization’s success in delivering affordable health care, then I am going to get what I want,” she said.
