Balance In-House, OEM and ISO Healthcare Technology Management to Maximize Savings and Profitability
By Bill Axon
Here’s a reality check: Maximizing cost efficiencies in healthcare technology management today likely involves a blend of the three program options, including in-house, OEM, and ISO. Choosing only one just isn’t going to give hospitals and health systems what they need to maintain service levels while keeping an eagle eye on bottom-line costs. The most impactful costs savings come from bundling two models and maybe even all three.
Today’s healthcare system is facing cost pressures like never before. When I got into this business 33 years ago, there wasn’t as much of an emphasis on cost savings as there is today. Fast-forward a few decades and it’s really a whole new world.
At TKA we’re proud to help hospitals and health systems meet modern price pressures head-on by developing programs designed to maximize cost savings whenever and wherever possible—without sacrificing patient care. But we’re typically not the sole solution. When it comes to healthcare technology management, if we told our partners “It’s our way or the highway,” we’d be doing them a disservice. Finding the best choice for healthcare technology management requires a careful exploration of blending all three types of programs—in-house, original equipment manufacturer (OEM) programs, and independent service organizations (ISOs) like TKA—to minimize costs and maximize savings and profitability.
Healthcare Technology Management as a Hybrid Solution
Now, more than ever, healthcare needs in-house healthcare technology management teams to approach their service delivery in a new way, while OEMs and ISOs develop up-to-date service delivery models to meet changing needs and demands.
Just as TKA has been challenged to evolve and develop new ways to efficiently and effectively deliver the services our clients depend on every day, hospital and health system leaders are striving to find new and different ways to maintain their slowly disappearing margins. Over the years, we’ve seen the healthcare technology management pendulum swing back and forth, from in-house models to outsourced programs and back again. Interestingly, today we’re discovering the best solution allowing healthcare technology management professionals to deliver high-quality service with lower costs and impactful savings is a combination of in-house and outsourced programs. The pressures of the modern healthcare system now require healthcare technology management professionals to consider more hybrid models, rather than the old in-house model that relied heavily on full-service OEM contracts.
As more OEMs realize their old contract models are losing appeal with equipment owners, they are starting to offer models focused instead on parts only, first call, and multi-vendor offerings, for example. In response, ISOs are looking toward cap agreements, enhancing support lines for in-house technicians, and offering training packages empowering in-house teams to broaden their capabilities. Everyone is looking for more ways to do more with less.
Exploring Options for Savings
As a hospital or health system, understanding all the options available to you allows you to identify all potential cost-savings opportunities. Understanding the limitations of your options is just as important, such as with newer technology for which training is not yet available or for which ISOs don’t yet have access to the parts or proper service documentation. In this scenario, you could be locked into a full-service agreement with the OEM, depending on the modality of the device.
When other options become available, identifying potential cost savings will help you evaluate your return on investment with the OEM contract, and ultimately help you determine whether moving forward with another option makes the most sense.
Validating the value of changing service options ranges from answering simple questions like “Does it save anything?” to more complex questions like “The change saves significant dollars, but how will this impact patient care and service expectations?”
To evaluate your return on investment, a good starting point is utilizing the 60/40 rule—60 percent of costs for total service and 40 percent savings. A recent example with TKA was bringing a client’s cath labs to an in-house service for a 72 percent savings versus an OEM service model. The costing for this compares the cost of service contracts for 10 cath labs versus the total cost of hiring the local OEM FSE plus the ISO support agreement and all parts and outside labor needed to deliver this model.
Staff Development is Key to Successful Change
Staff development is key to the success of changing any service model in your healthcare technology management program. Success truly rides on people, and at TKA we believe this wholeheartedly. Start by identifying the current skills of your existing staff. Two questions to ask: (1) Do they possess the needed skills to assume the service responsibilities, and (2) Do they need additional training? Have the courage to realize you may have to hire someone with different skills in order to ensure your new plan will be successful.
If developing an existing employee is determined to be the best path, the cost of training needs to be calculated into your ROI process. Most OEM training can be costly—$20,000 and higher—and you need to identify any pre-requisite training that would be required prior to the training on the actual device. Some ISOs will offer training with their agreement, leaving you with just the cost of travel expenses and salary, or it can be negotiated into your contract. Whichever training path you choose, OEM or ISO, the quality of training will obviously have a major impact on the success of your new healthcare technology management service delivery.
Choosing What’s Best for You
In addition to costs and staffing, many other scenarios can impact the final decision to modify your healthcare technology management service delivery approach, from geography to politics. Geographically, if you are located in places like the middle of North Dakota or the Texas Panhandle, access to outside service could be a challenge. In contrast, the population density of the Eastern Seaboard or Southern California allows for multiple options for service outside your organization. Politically there are the challenges of owning directors who believe only the OEM knows how to work on its equipment, or the perception of departments losing “free” clinical support if OEM agreements are changed or cancelled.
Whatever your specific needs and challenges, it’s important to fully evaluate all pros and cons of a hybrid approach to healthcare technology management, considering options for in-house, OEM, and ISO in order to determine how to best maximize savings and profitability for your hospital or health system. TKA can help you evaluate your current program and make recommendations for change. On the other hand, we may succeed in validating your current program is operating optimally—in which case we’ll recommend you shouldn’t change a thing.
At TKA, we do it better, make it easier, and deliver more to maximize your results and give you a competitive edge.
That’s the smarter way. Partner smart with TKA.