A New Way Of Thinking About Medical Equipment Costs
Originally published in Becker’s Hospital Review
Some old adages continue to be true, like the one that goes, “No one ever made a good decision based upon bad information.”
That’s especially true when it comes to hospitals spending $93 billion per year on medical equipment lifecycle costs. If you’re reading this, you’re likely aware that the medical equipment lifecycle (MELC) – all the activities related to the purchase, service, and disposition of medical equipment and technology – presents some of the most complex and murky challenges for hospitals trying to reduce their spending. Due to a lack of accurate information, internal resources, bandwidth, and specialized expertise, even the most diligent hospitals are missing savings of as much as 12-16% of their entire MELC costs – or $12,000 per bed per year.
To be sure, there are multiple tools and services hospitals have used historically to help navigate the purchase, servicing, and disposition of medical equipment. But after spending more than 12 years immersed in this field, I see clearly that hospital needs have evolved far past the first-generation tools currently serving them. At the same time, suppliers have gotten smarter about protecting their pricing information with confusing 30+ page proposals that make it difficult for hospitals to understand what the “right” or “fair” price to pay really is. It’s time for a solution that covers the entire lifecycle – from purchasing new equipment to maintaining and servicing equipment over its useful life to replacing and disposing of equipment at end of life – backed by better data from a larger pool of resources. It’s time for hospitals to not only know the right price but also have access to tools and services that ensure they actually get that right price from suppliers. And it’s high-time hospitals are given the resources they need to confidently make and execute smarter spending decisions. That’s why we at Miga Solutions have developed a methodology that directly attacks these cost inefficiencies in the medical equipment lifecycle. We call it Benchmarking 2.0® .
Benchmarking 2.0® has two simple concepts at its core: Know the Right Price and Get the Right Price. Easy enough to remember, but the complexities involved in each one play a large part in the amount of savings your hospital can realize.
Know the Right Price
In order to make smarter, more confident buying decisions, you need the most complete, currently updated, and relevant information available. You need a robust database of sources, models, and manufacturers at your fingertips; information not just on new equipment but also on used equipment, service contracts, repair costs, and trade-ins. The first-generation services you’re likely using rely mainly on hospital-reported data, which is both a tiny slice of the most relevant, actionable data and almost always fails to capture the truly best prices available in the market. There are many other stakeholders in the medical equipment lifecycle that are valuable sources of data that should be included in your data pool as well—OEMs, distributors, resellers, finance companies, governments, and more. They have product and pricing market intelligence that can greatly enhance the data hospitals need to know the right price to pay.
This deeper, more nuanced well of information is the source of the pricing data and insights hospitals need to know the right price. Hospital-reported data is becoming more and more biased towards average prices (many hospitals openly admit they don’t submit their best and final price to existing benchmarking solutions) and fails to capture the truly best prices available. They also tend to focus mainly on purchase prices, which represent only 30% of annual MELC spend. Truly maximizing savings requires addressing the many other costs – service, trade-in values, training costs and more as mentioned above – that account for the rest. So, why do so many hospitals still rely upon a first-gen price benchmarking solution that only covers 30% of the MELC spend? Beats me, but that’s how more than $11B MELC spending is wasted every year.
Get the Right Price
Knowing the right price doesn’t mean much if you can’t actually get that price from a supplier. First-generation solutions don’t provide information and support services across the entire lifecycle that are critical to actually realizing the best possible price. This is one of the most important and unique aspects of the Benchmarking 2.0® methodology – combining accurate and comprehensive pricing data with expert and specialized services required to get the results you need. When your benchmarking provider also helps with acquisition, finding service options, and donating and recycling equipment, they go beyond being just a pricing resource. Their myriad connections across the marketplace mean easier access to the most qualified suppliers, unbiased expert negotiation support, and experienced insights into purchasing strategies, service contract management and disposition solutions that you may not have access to.
Getting the right price occurs far too rarely in this industry. In fact, missed MELC savings are the largest portion of hospital spending not yet adequately addressed by hospitals. That’s why we’ve put so much effort into our Equipment Value Management System® (EVMS), to enable the vision of Benchmarking 2.0® become reality.
While I’m obviously biased toward Miga’s platform, the broader issue of informed hospital equipment lifecycle spending is one we all need to be thinking and talking about. No matter where you’re getting pricing information or how you approach contract negotiations, the decisions you make about medical equipment are some of the most important and consequential spending calls in the hospital. Enabling your hospital with a Benchmarking 2.0® strategy is the best way to make sure those calls are as informed, confident, and cost effective as they can possibly be.
Miga’s Benchmarking 2.0® solution, Equipment Value Management System® (EVMS), better informs and enables hospitals to drive 12-16% incremental annual savings across their entire medical equipment lifecycle by providing more accurate pricing data, better tools and faster marketplace execution. Better decisions mean greater savings. Guaranteed.Tweet