Sponsored by AUE
By Jim Carr
Because of the importance to patient care and the potentially high costs of breakdowns, imaging systems are some of the few devices covered by service agreements these days. You’ve heard the saying “don’t sweat the small stuff … and it’s all small stuff.” That is not so true when it comes to a contract covering one of the most important assets a hospital or imaging center has, and costing thousands of dollars. That’s when reading the fine print all the way to the end and back, and even reading between the lines can be critically important.
Around the turn of the century, one of the leading ultrasound manufacturers with less than 2,000 employees had a large number of loyal customers that had been on full service plans for many years. (The good old days.) The company was purchased by one of the “Big 3” that was primarily known for X-ray and MRI systems, and shortly thereafter their apprehensive customers started receiving contract renewal letters that were proud to announce, “no increases in service contract pricing.” The contracts had the same annual coverage price but were clearly different, with many more pages and a different format. Looking at the summary of coverage, all seemed to be about the same except for a statement often seen on X-ray contracts; “Glassware is not included.” Most ultrasound systems had flat panel displays by then. So, no worries … until you had a probe replaced a few months later and got an invoice for $14,000, only to find out that on page 11 of that contract there was fine print saying “Ultrasound transducers are defined as glassware.” After many customers were stung by this obfuscation, word and anger spread in the imaging community about the contract wording. Within a few weeks, the OEM amended their contract form and started covering the probes … and raised the contract prices.
Knowing what the contract doesn’t say can be very important. There are often performance guarantees, typically for response time and what percentage of time the scanner is up. A common feature to list is something like “99% Uptime Guarantee,” and that sounds great. But the definition is usually not detailed. The calculation may include all 8,760 hours in a year as the total available time, so the system could be down for 87 hours and still meet the guarantee. But if the contract only covers 8 to 5 on weekdays, the total available time should only be 2,080 hours, and uptime would fall below 99% with only 21 hours.
And, look closely at what the compensation is for missing a performance guarantee. Some will give a future credit toward a contract renewal, based on the number of hours the unit was down in excess of the guarantee. Get the definitions for “available hours” and “down” added to the contract, if needed, and do the math to figure out if the compensation is worth the guarantee.
From my experience writing and reading contracts, the longer the contract, the more you should worry. One of the Big 3 has produced service contracts that have so many words that one has to believe they are counting on eye fatigue to keep people from understanding it. Many of the clauses would be illegal if there wasn’t a signature of someone agreeing to it. A doctor asked for help a few years ago because he kept trying to cancel a contract on a scanner, but the invoices and warnings about non-payment kept coming. We were shocked to find a paragraph in his signed contract that essentially said the agreement could never be cancelled, and was transferable to other systems and to the doctor’s heirs!
By definition, a service contract is an agreement between two parties regarding maintenance and repair of a scanner over a specified period. Both parties need to be protected financially, and the terms of coverage must be clearly defined. What is often missed is the element and importance of trust in the business relationship. AUE has a simply worded three-page service contract with readable font. If we aren’t meeting your expectations, you can cancel. If you can’t find something similar, take the time to carefully review it, get some legal advice and don’t be afraid to use a red pen to make changes. ICE
Jim Carr is Director of Service and International Operations for AUE. He may be contacted via email at JCarr@auetulsa.com.