In Pursuit of Value: Hybrid Service Contracts Blend In-House, ISO and OEM Skill Sets

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By Matt Skoufalos

Traditionally, health care facilities have faced an either-or circumstance in servicing their medical imaging technologies: find an external solution, whether from the original equipment manufacturer (OEM) or a third-party independent service organization (ISO), or do the work in-house. For OEMs, those service contracts have long been a reliable source of revenue, but as hospital purse strings tightened, ISOs made more headway in the market by offering comparable support at reduced rates.

As both groups have jockeyed for position, some health care institutions sought to control more of those costs by bringing service work in-house. Hybridized versions of support agreements that blend responsibilities among the OEMs, ISOs and in-house teams have emerged, as the pursuit of cost savings has forged a collegiality of relationships among groups once believed to be firmly set in stiff competition. At the root of that shift is a pursuit of value-based operations that has pushed creativity in the formation and execution of service agreements into new places.

“Clinical engineering is more powerful and more engaged then they have ever been in our history in diagnostic imaging,” said Tim Peeler, vice president of service for Canon Medical Systems USA. “Their goal is to create value through clinical engineering, and that is to drive costs down and maintain quality at the same time.”

Service strategies can vary according to specific modalities and even individual pieces of equipment, all depending upon what produces the greatest value for the institution. In-house imaging service departments may directly service modalities like ultrasound with less support from equipment manufacturers than computed tomography (CT) and magnetic resonance (MR) systems, which tend to draw a higher level of external support.

“It’s IDN-specific as to where their service plans create value,” Peeler said. “Based on the capabilities of their own engineers, the performance of the system, and the related costs, they make a judgment as to how much value they can create for the modality or the individual system.”

Service contracts have become more of a component of the vendor-customer dialogue at the point of purchase, as opposed to discussing those terms upon the expiration of warranty, with even more of that dialogue occurring in the middle of a multi-year agreement, Peeler noted.

“[Health systems] are trying to create value all the time, at all the points of the life cycle of equipment, moreso than they ever did in the past,” he said. “There are plenty of customers that, once a point-of-purchase agreement was consummated in a five-year term, it was never touched until it expired five years later.”

Today, however, those discussions are taking place before customers make a decision on what equipment to purchase, when they purchase a warranty, and even modifying existing agreements to drive additional cost savings.

“There’s no point in time at which they’ve given up trying to create value,” Peeler said.

In-house, a lot of that value can be created by training clinical engineering staff to service imaging equipment without relying on third-party or OEM technicians. But as the service workforce turns over due to retirement and relocation, it can be difficult for organizations to maintain quality. Equipment standardization can help, but when there’s inadequate training of staff, or a lack of specialized training on the pieces of equipment in need of service, institutions will work toward an external service agreement.

“If they have the ability to make any contribution, they try to make a contribution,” Peeler said. “If they have no ability to make a contribution, they just try to create the best value in a contract model.”

“What’s untouchable today may be touchable tomorrow,” he said. “If [an institution] can’t contribute at all [to an equipment service plan], they’re trying to at least negotiate the contract down.”

Canon customers’ in-house imaging service staff have access to the same comprehensive training programs, curriculum, documentation and diagnostic tools as do Canon engineers. Peeler described the relationship as a “partnership model” with “no barriers to entry.” Some of that training is included in the purchase, and some is available as a value-add to a GPO purchase.

“We give full access to our customers to get the training they need to collaborate,” he said. “They receive the tools, the training, the documentation, everything they need for partnership solutions. When you have the tools and the training, you have the same capabilities as our own engineers.”

Canon service agreements include preventive maintenance (PM)-only deals, comprehensive agreements, time-and-materials “and everything in between,” Peeler said. Its In Touch Flex solution, which Peeler said was created out of a desire to offer a more flexible service agreement to its customers in a value-driven environment, works to negotiate the differences among full-service, first-pass, partnership and PM-only agreements.

It’s also the kind of plan that wouldn’t likely have been available as recently as five years ago. Then again, the financial challenges that health care facilities are facing today are more exacerbated than those of five years ago, too.

“I believe we’re still the only OEM that doesn’t charge annual licensing fees for diagnostic tools,” Peeler said. “That’s not an area we try to make money on at all. We always felt that a clinical engineer working on our equipment was the same as our own engineer if we provided them the training and the tools and the documentation to be successful.”

“We need them up, we need a happy customer, and if the customer chooses to have their people be the first responder, we give them the tools, the diagnostics, and the training to be able to do that,” he said. “It always equals 100 percent, whether it’s 100 them, zero us, and everything in between.”

As larger health systems try to standardize on a vendor – at least on modality, if not multi-modality agreements – they have more capabilities to train their people, to take advantage of synergies and volume, and to increase savings and value. The more they standardize, and the more volume that they have, the more value they can create.

John Barbati, senior director of service business management at Siemens Healthineers, said that large hospital organizations are taking on more in-house service duties than they have in the past, and are seeking customizable solutions to do just that. Sites that have the facilities and wherewithal to staff a full-service, in-house team might still purchase third-party or OEM services for offsite diagnostic imaging centers or ambulatory clinics.

“It depends on the size of the institution, and it also depends on their philosophy,” Barbati said. “I like to think of this as market segmentation. We try to work with customers to understand and define what their mission is. If we’re talking about it being an in-house operation, our training program for customer engineers is the same as training for our engineers – in the same classroom alongside our engineers.”

One of the customer agreements that Siemens Healthineers recently introduced is Share 360, which spans the gamut from on-demand support to a comprehensive menu of options for a “second-level relationship.” That relationship integrates Siemens’ expertise into the customer experience via branded, handheld devices with which to access the Siemens call center, order parts and tools, and get service information as needed.

“In that situation, it’s almost like they have a full-service agreement from us, the difference being they rely on us for all of the backbone to be successful,” Barbati said. “They have certain needs all the way to helping them run their operation, and the data-driven activity to help them be more efficient and more effective at what they do.”

Full-service agreements guarantee on-location support and parts delivery, which absolves facilities of the burden of planning for those types of needs; on the other end of the spectrum, Siemens also offers in-house training and application support, which fits what Barbati sees as being more popular in a “DIY” service environment.

“Right now, the market is going that direction more than it was five or seven years ago,” he said. “More and more, customers want to do more of their service themselves. We have moved very rapidly to support them at every possible level.”

One facet of service and support that’s aiding vendors more than ever is the idea of data-driven technologies, Barbati said. Onboard equipment can analyze the probability of parts failures and the likelihood of their occurrence, remotely monitoring technology and modeling service at planned intervals.

“Instead of waiting for a machine to go down, and then figuring out what you’re going to do to fix it, we’ve spent a lot of time developing tools to figure out when and what we have to do to prevent that from occurring,” Barbati said. “We are not just monitoring the system, but we have a set of tools that alert us whenever there’s a potential problem with the system.”

That kind of technology also supports remote connections of engineers to diagnostic information, or automated fixes based on pattern recognition, and without having to send a technician or get the customer to intervene. For example, one of its latest services, TubeGuard, can predict when a CT tube is going to fail, allowing facilities to dictate their service windows during off-hours.

“Most of the time by doing preventive maintenance and doing a lot of the monitoring that we do, we’re able to predict and keep those problems from occurring,” Barbati said. “We’re able to keep those pieces of equipment up almost 100 percent of the time.”

From the perspective of the health system, whether working with OEM or ISO service vendors, there’s always room for negotiating standard-template service contracts, said Wendy J. Stirnkorb, director of imaging services at Regional West Medical Center in Scottsbluff, Nebraska.

Those kinds of details can include specifics like hours of service, equipment uptime percentages and the length of the initial warranty. It can also include a multi-agency service agreement that supports a variety of vendors, or a mix of vendors and in-house staff that might have been more difficult to compile not long ago.

“We’re all in business to make money while incurring the lowest cost possible,” Stirnkorb said. “That is crucial to financial responsibility. There’s a growing trend to have more of a partnership with our vendors and a less adversarial relationship.”

Stirnkorb’s career has spanned large, matrixed organizations, huge academic research organizations, and smaller, community-health-based organizations. From her perspective, most of the bigger institutions can afford and staff their own in-house service personnel. Sometimes they recruit from OEMs or ISOs, which she said assures “built-in experience, skill and knowledge of the equipment.” Smaller organizations that do not have that luxury most often rely on in-house teams “with mixed results” she said.

Ironically, larger organizations have newer equipment that may require less service, whereas those smaller, regional hospitals might depend on older equipment that needs closer attention and more frequent maintenance. One thing servicers of either need, however, is lots of training.

“You pay for one or the other, whether you’re paying additional salary hours or you pay for them to go to training with someone who has those skills and experience, or paying for an internship where they’re working with someone you trust and respect who already has that skill set,” Stirnkorb said.

Paying for training means dedicating budget to it (as well as to travel and lodging as necessary), and making sure that training is calculated as a piece of the investment in service. Those things can help with employee retention, pass-through of technical knowledge and creating an environment in which in-house staff are valued. Stirnkorb said she works in a facility where training and professional development are valued highly, but that they must always be advocated for and justified to assure fiscal responsibility is being weighed with training needs.

“I’m a big believer of investing in your employees,” Stirnkorb said. “They tend to stick around a little bit longer, and your return on investment is not only with engaged and happy employees, but you have this built-in knowledge base that’s there to support patient needs.”

Wherever the responsibility for the balance of the work lies, all sides involved are interested in maintaining cost controls, keeping equipment running and maintaining operational efficiency. For that reason, Stirnkorb believes nontraditional service agreements will continue to evolve and specialize to meet the individual needs of customers.

“Collaboration with service specialists who are skilled and experienced in servicing specific equipment is a cost-effective and efficient way to assure regular preventive and corrective maintenance occurs as suggested, extending the useful life of the equipment,” she said.

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