How to bring equipment maintenance costs under control

Healthcare Financial Management, Sept, 1989 by Duane H. Bluemke

How to bring equipment maintenance costs under control

As healthcare organizations strive to control equipment maintenance costs, they should discard service options that create unnecessary expense. Saving money begins with an organized effort to review current upkeep expenses, compare them with other organizations, and make purchasing decisions based in part on servicing costs.

When buying major equipment, finding the right service formula can be as important as choosing the equipment itself.

Healthcare organizations reviewing maintenance costs should begin by asking whether dollars spent for upkeep provide the best value.

Obtaining the best maintenance value may involve improving repair-tracking techniques, changing vendors or manufacturers, and making other moves that lower costs while minimizing equipment downtime.

The first task is to list current maintenance expenses and gather data from other organizations with similar equipment and operations. This step provides a baseline for comparison and improvement. Where needed, a third party may provide additional data for completing this test.

After reviewing the information and implementing early recommendations, the healthcare organization should monitor the results over a sufficient period. This may be done within the facility or through a special computer system.

The system should be designed for analysis by various hospital personnel, including those who manage the equipment, those who monitor its costs, those who know how it works, and those who know little about it. This sort of variety brings objectivity to the process.

Three types of service

A healthcare organization has three basic options for servicing equipment: in-house personnel, service contracts, and "time and material" provided through the manufacturer or a third party. Most hospitals use a combination of these. Regardless of how the service is performed, the method or combination of methods should be evaluated regularly.

In-house servicing can offer the lowest costs. To ensure efficiency, however, this expense should be examined to prevent it from becoming a routine part of the budget that is potentially overlooked.

Manufacturers' service contracts usually have the highest cost, and the cost-value relationship is impossible to analyze without a large database. Traditionally this system also required the least amount of monitoring by hospital staff. Rising costs during the past several years have changed this, creating the need for ongoing monitoring to control spending.

Service contracts from third-party vendors often are less expensive than those with manufacturers. But here too, the cost-value relationship eludes monitoring.

Time and material service methods strike a compromise between in-house and contractual options. The hospital merely contacts its preferred service vendor when equipment repairs are needed and is billed for the expense of securing necessary parts and installing them, plus travel costs. The service agent may be either the manufacturer or a maintenance firm. In some cases, providers may discount time and material servicing.

Overall, the method requires that technicians keep a close eye on how a machine operates, tracking its ups and downs much the same as a knowledgeable person would monitor an automobile. The hospital also may schedule preventive maintenance visits, based on the manufacturer's recommended schedule or one suggested by a reputable group such as the American Hospital Association. Preventive work also may be performed on a time and material basis, and no extended agreement need be entered.

Because the user becomes more involved in every facet of the equipment, from operation to service, money spent can be more closely watched.

The time and material method differs from maintenance contracts in that the healthcare organization takes full control of maintenance, both emergency and preventive. These arrangements have grown in popularity as the costs of purchasing fixed-price annual contracts have risen sharply.

Time and material systems rely on keeping extensive records of equipment activity, including corrective and preventive maintenance, quality control, and downtime. The process permits objective analysis of each piece of equipment and each type of service. Thorough records also help determine whether the equipment is being properly used, whether additional training is required, or whether the equipment should be replaced.

Buyer beware

Even more fundamental than considering value earned for service dollars spent, the healthcare organization should ponder the way it buys equipment to determine whether money spent over the life of the equipment is wisely invested. When purchasing, the buyer should know that multi-year service contracts drawn to ensure fixed prices for more than two years probably do not provide significant savings in the long run.

Changes in operations and equipment during the contract period can create an opportunity for modifying the agreement and its cost, provided neither is sacrificed under initial terms.