As clinical technology continues to advance, medical equipment can quickly become outdated and require replacement. What many hospitals don’t realize however is that their continued investment in new equipment often results in a growing pool of unused or underutilized assets that represents significant hidden costs – and untapped savings. As we reach the end of the year, reducing these hidden costs is an immediate opportunity to boost year-end financial performance and set the stage for greater savings in the coming year.
It All Starts with the Right Information
The foundation for any effective strategy for finding hidden savings in underutilized medical equipment is having the right information. The “right” information starts with an accurate inventory of your hospital’s equipment. Ideally this information will include not only equipment specifications, but also key financial information such as annual service costs, net book value and more that can let you know what equipment is really costing your hospital.
Your hospital then must identify equipment that is no longer in use or is underutilized, and determine if it has value. Many hospitals assume that they’re fully using all of their equipment, but in fact, industry data indicates that only 42% of medical equipment is completely utilized and every hospital is likely paying to maintain and house equipment it never uses.
Four-Step Framework for Getting the Most Value from Underutilized Equipment
Follow the steps outlined below to recover maximum value from your hospital’s underutilized medical equipment.
- Redeploy Equipment Internally
The single best use of underutilized equipment is to continue using it by redeploying it within your hospital or health system. The key to redeployment success is proactive planning: knowing the equipment needs of other departments in advance and identifying usable equipment that can be redeployed before it is removed from service and either sold or traded-in.
For one hospital upgrading its infusion pumps, the right information meant knowing that another hospital in its system needed and could use the old pumps. Instead of trading them in for nominal value, the corporate supply chain manager transferred the old pumps to the hospital that needed them, eliminating $300,000+ in planned capital spending.
- Resell in the Open Market
Implementing an objective resale process helps hospitals recover maximum value for their equipment. The key is knowing what equipment is worth, how to sell it and who will buy it. And don’t assume the market value is the same as the net book value or trade-in value – these values are almost always vastly different from one another.
With the right information, a hospital that was offered a $100 trade-in value for patient monitors they were replacing knew they were worth far more, and quickly found a buyer for the old monitors who paid $600 each – 500% more than the trade-in offer and $69,000 in unplanned cash!
- Trade-in Toward New Equipment Purchase
Trade-ins are the “easy button” for most hospitals and while resale will usually create the best financial return, trading in equipment, when used selectively and with the right information, can also yield a good outcome. This is particularly true when trade-in offers include promotional incentives that can make the trade-in value far more than the resale value.
A hospital upgrading a 1.5T MRI was going to sell its old MRI to a local physicians group for $105,000. This was until they learned that the manufacturer could offer promotional incentives that made their MRI worth $165,000 as a trade-in – well above the market value. Armed with the right information, the hospital opted to accept the trade-in offer, realizing an incremental $60,000 (57%) in value recovered.
- Donate to Non-Profit Healthcare Organizations
If the above alternatives for recovering value are not an option for equipment your hospital doesn’t need, consider donating usable equipment to one of the many worthy charitable organizations that always want and need equipment resources to support global medical missions. While arranging donations can take a bit of time and coordination, it is far less costly than paying to recycle or throw equipment away, with the added goodwill and intangible benefits of contributing to the needs of the global healthcare community.
A 500-bed hospital was replacing more than 100 15+ year old electric patient beds that they could not trade-in. The beds were working and usable, but due to their age had no market value. The hospital found a local long-term care facility with even older beds that was happy to accept the beds as a donation. The hospital provided a valuable community service and eliminated the need to pay third-party storage fees.
Hidden cost and value are lurking in your medical equipment! Instead of overlooking these assets or relegating them to storage, consider them as a source of savings and financial value that will impact your hospital’s bottom line both now and in the future.
If you have questions or want to learn more about how you can put the right information to work and drive savings in all your medical equipment lifecycle costs, contact us. We look forward to hearing from you!