A Holistic Approach to Hospital Equipment Service Cost

The fact that hospital executives are working feverishly to drive down costs isn't exactly a revelation. The winners in the race to cut costs, however, will be those who are able to identify the best opportunities to quickly reduce operating costs and create healthier bottom lines, while maintaining patient's access to quality care. By now, most hospitals have tackled the "low hanging fruit" in an effort to achieve efficiencies, but there are still considerable opportunities to shape up the bottom line by taking careful stock of the money spent on servicing clinical equipment, and by managing those costs more actively.  

We have found that annual clinical equipment service costs are typically between $5,000 and $7,000 per year per bed.  Clinical equipment includes the capital assets used in providing patient care, such as biomedical, laboratory, monitoring, life support and diagnostic imaging equipment.  It goes without saying that after skilled and caring clinicians, patient care depends on available and fully functional equipment.  And this means that equipment servicing and maintenance are a necessary and value-added cost of doing business.  Over the last several years, some hospitals have chosen to shoulder higher service costs on some equipment and reduce or even drop service contract coverage on other equipment, all in an effort to shrink overall service cost.  
Equipment service costs can be significant and it is essential that hospital executives thoroughly understand what they are spending on service and actively manage that portion of the budget.  An accurate measure of all service costs will likely identify opportunities to lower costs within the hospital's existing service delivery model, or it could provide new insights that would allow a hospital to change the overall service model.  My suggestion is that a full understanding of clinical equipment service costs lays the groundwork for the hospital to reduce these costs and optimize associated vendor and outsourcing arrangements.   These outcomes could provide significant wins with savings accruing directly to the bottom line.  The new approach may even improve patient hospital experience if equipment is always ready and performing as needed.

In this first blog I am advocating for a holistic view and approach to managing service cost.  Unfortunately, most hospital cost accounting systems and practices simply are not up to the task of accurately measuring service costs. 

Please also check out Part 2 and Part 3 in this blog series.