Saving on travel cost for maintenance - Data Trends - Brief Article - Statistical Data Included

Healthcare Financial Management, July, 2002

Labor expense associated with servicing equipment can be an important component of a healthcare provider's maintenance costs, particularly in rural areas where travel required of the vendor often is significant. Vendors charge for travel either on an hourly basis or by geographical zone. By determining which type of travel charge offers the better value, providers can save significant dollars throughout the life of the equipment.

Hourly travel rates are based on the service provider's hourly labor rate (see Exhibit 1). An analysis of various equipment modalities shows that hourly travel rates associated with laboratory maintenance costs increased the least on average, 21.5 percent from 1998 to 2001. Diagnostic imaging rates increased the most, 48.9 percent. As a whole, the average increase for the modalities was 35.8 percent.

Comparing travel rates by zone is difficult, because each service provider sets up their zone charges using different variables, such as by distance between the service center and facility, the size of the vendor's service zone, the modality serviced, and overtime conditions. Because of these variables, travel-rate averages cannot be statistically accurate.

However, certain conclusions can be drawn by studying specific zone rates by company. For example, Exhibit 2 shows the rise in travel rates by hour and zone for two different computed tomography (CT) manufacturers for a facility located less than 100 miles from the service center. Vendor A charged $408 for two hours of service in 1998 and $740 in 2001. This change is an increase of 81.4 percent. Vendor B charged $232 by zone in 1998 and $240 in 2001, an increase of only 3.5 percent.

Exhibit 3 shows a similar breakdown of zone costs for a facility located four hours from a service center. Not surprisingly, the charge on a zone basis was higher than that in Exhibit 2--$960 in 2001. Additionally, the hourly cost was almost double the zone charge.

Because hourly travel rates and increases typically are higher than zone charges, zone charges often are the better value, as shown in these examples. However, facilities should examine their own variables and service suppliers' conditions to determine what is best for them.

Negotiating the type and cost for travel during the purchasing process could save a provider significant money. Even if the manufacturer will not offer a firm zone rate for travel, negotiating a maximum total charge or a reasonable annual percentage hourly increase could save money

Data for this analysis were drawn from USCS Equipment Technology Solutions' GENISYS[R] proprietary databank, consisting of audited maintenance data on more than $5 million worth of equipment from more than 300 manufacturers and more than 1,000 independent service suppliers. More information about GENISYS[R] can be found at www.us-cs.com.

EXHIBIT 1

HOURLY TRAVEL RATES BY MODALITY

                                                             Average
                      1998 Average  2001 Average            Percentage
Modality              Hourly Rate   Hourly Rate   Increase   Increase

Laboratory                $215          $261        $46       21.5%
Surgery and Laser         $157          $208        $51       32.5%
Radiation Therapy         $170          $239        $69       40.4%
Diagnostic Imaging *      $168          $251        $83       48.9%
Overall                   $178          $240        $62       35.8%

                           Average
                      Annual Percentage
Modality                  Increase

Laboratory                   6.7%
Surgery and Laser            9.9%
Radiation Therapy           12.0%
Diagnostic Imaging *        14.3%
Overall                     10.5%

* Diagnostic imaging refers to MRI, CT, general radiology, special
procedures, nuclear medicine, and ultrasound equipment.
EXHIBIT 2

COMPARISON OF ZONE AND HOURLY TRAVEL RATES FOR A FACILITY LOCATED WITHIN
100 MILES OF THE SERVICE CENTER

                Client                                 Annual
            than 100 Miles                Average     Average
Vendor for   from Service                Percentage  Percentage
CT Scanner      Center       1998  2001   Increase    Increase

    A       Two-Hour Charge  $408  $740    81.4%       22.0%
    B         Zone Charge    $232  $240     3.5%        1.2%
EXHIBIT 3

COMPARISON OF ZONE AND HOURLY TRAVEL RATES FOR A REMOTE FACILITY

                                                          Annual
                                             Average     Average
Vendor for                                  Percentage  Percentage
CT Scanner   Remote Client    1998   2001    Increase    Increase

    A       Four-Hour Charge  $816  $1,480    81.4%       22.0%
    B         Zone Charge     $928    $960     3.5%        1.2%