|
by Jennifer Kelley
Article: RT Image
The U.S. healthcare industry has taken significant financial blows in recent years. In addition to operating within the boundaries of a faltering economy, rising insurance costs and depleting reimbursements have resulted in the need to slash budgets across the board.
A sizeable chunk of any medical facility's finances is sunk into purchasing new equipment or upgrading existing technology. So how can hospitals and imaging centers obtain less expensive equipment without compromising patient care? One answer may lie with the new players in the medical equipment industry: second source distributors.
The Secondary Market
A limited budget means limited choices for many medical facilities. Fiscal restraints mean that they may be forced to choose between buying only one brand new unit and upgrading multiple modalities by purchasing pre-owned units. A major reason people buy refurbished equipment is so they can offer a wider range of services to their patients. "Just because you have money doesn't mean you have to blow it or spend it unwisely," says Ford Green, vice president of sales and marketing for Anderson Medical Equipment Company, Cincinnati . "Most facilities that do well financially also purchase from the secondary market. They are simply being responsible with their money," he adds.
"We bought refurbished equipment first and foremost because of the price difference," says Sam Perri, BS, CBET, supervisor of biomedical services at Goshen Hospital in Goshen , Ind. "I probably saved around 30 percent over the original equipment manufacturer's (OEM) price and I received the same warranty that the OEM offered."
There is a significant price differential between buying from OEMs and buying from second source distributors, says Don Hubbard, vice president of sales and marketing at PartSource, Hillsborough, N.J. "In some cases, there can be a 300 percent mark-up. But, as far as the quality and reliability, there's really no difference at all. The warranties are similar and in many cases even better than that from an OEM," he says.
Perri considers the service contract provided by manufacturers of new equipment to be extremely expensive. "An X-ray room with glassware is between $50,000 and $60,000 every year for a service agreement with the OEM. But the refurbished equipment distributors I've dealt with required no contract and provided us with a list of vendors that can send over replacement parts should anything go wrong with the units I've bought from them. This is ideal because we can then fix the problem in house and save quite a bit of money over the OEM's service fees," he says. Perri adds that most facilities don't have the option of fixing a brand new piece of equipment in house because putting outside parts on OEM units voids the warranty.
It's important for secondary source distributors equipment to negate the stigma that tends to be attached to used medical parts and equipment. Many vendors offer excellent warranties on a used machine in addition to meticulous inspection, cleaning and the possible replacement of its parts, in order to boost consumer confidence. However, a buyer should be mindful that this attention to detail only applies to certain classifications of pre-owned equipment.
Unfortunately, the secondary market vernacular confuses many purchasers. Generally, three distinct classifications define the majority of pre-owned equipment:
- Remanufactured equipment — All worn parts have been replaced and significant changes or upgrades in performance specifications have been made, which usually requires re-approval by the U.S. Food and Drug Administration (FDA).
- Refurbished equipment — Equipment performance does not change from original specifications; worn parts are replaced; unit is cosmetically refurbished.
- Refinished equipment — Purely cosmetic changes have been made; dents and scratches are repaired, cushions and paint are replaced and retouched.
The FDA has good manufacturing practice standards that many second source vendors strictly follow. "But some distributors do what's called the 'spray and pray.' They just spray paint the exterior of the equipment, leave the interior as is and pray it still works right," says Jeff Dalton, equipment sales specialist at PartSource.
Setting Standards
Until about 10 years ago, the secondary market was not widely respected within the medical industry, recalls Jim Guirsch, vice president of vendor relations at USCS Equipment Technology Solutions, Brookfield , Wis. Until 1992, the majority of remanufactured and refurbished equipment was primarily sold to HMOs and outpatient clinics — only a small portion of the equipment was sold to hospitals and research centers.
"The International Association of Medical Equipment Remarketers and Servicers (IAMERS) has done an excellent job making sure their members adhere to strict standards, which upgrades the market's standards in general," says Guirsch. "They recognize the secondary market was not well-regulated in the past, and their organization is correcting that with every new member, as well as providing needed confidence to customers," he says.
These days, over 90 percent of pre-owned equipment is placed in hospitals and universities across the country. Many vendors attribute their rapid rise to success in the marketplace with IAMERS significant impact on the industry, which has strongly resonated with its customer base.
While IAMERS is not an official regulatory commission, the radiology-based organization was founded in the early 1990s to provide quality control for buyers and sellers of used equipment. One of the organization's principle missions is to maintain and enforce high standards of ethical practices within the industry. Accordingly, IAMERS grants membership only to those companies that have agreed, in writing, to adhere to their code of ethics — a broad statement of general principles and a specific guide to professional practice, which is enforced by the IAMERS Ethics Committee.
The Ethics Committee investigates complaints from members, non-members and healthcare providers. "It's comforting for a buyer to do business with a company that's a member of IAMERS," says Don Bogutski, president of the organization. "If there's ever an issue or problem with the equipment, there is a higher power to go to if they don't receive recourse."
The committee also imposes a variety of penalties on members that violate their code of ethics, including expulsion, which can be the kiss of death for a pre-owned equipment vendor. "If a member is investigated based on a complaint, they are held in front of a formal ethics committee and judged according to IAMERS' strict ethical code," says Bogutski. "If we find that the company violates these guidelines, they face the possibility of having their membership revoked, which would become public information." It has proven itself a balanced process that helps the pre-owned equipment industry keep its standards high, he adds.
Green notes that becoming a member of IAMERS is an ethical decision. "The [vendor] chooses to treat customers as they'd want to be treated when purchasing equipment. Most of us have either worked for the OEMs or have been the director of a department within a medical institution. As such, we understand the problems that our customers go through: dollar constraints and budgetary issues that they have to deal with on a daily basis," he says. "Having been in that seat, we try to make it easier for our customers and provide them with a better product for the dollar, which allows them to purchase additional equipment."
For those hesitant to buy pre-owned equipment, Green advises they examine their total capital budget, focusing on the bottom dollar. "Consider what could be accomplished by saving 30 percent to 40 percent — maybe even 50 percent." However, he warns, the savings only make sense if the purchasing institution gets quality equipment and service. "This is why I recommend going through IAMERS. They are the only association out there that oversees the pre-owned medical equipment venue."
Dalton says that second source distributors are finally enjoying more power in the industry because, in addition to increased standards, there is an ever-growing demand for less expensive, quality equipment. "As times have changed and hospitals' budgets are cut, administrators are not willing to spend as much on a piece of equipment," he says. "So, instead of spending $30,000 on a mobile scanner, they can come to us, spend much less than that and get quality equipment that rivals the OEM in every way."
Waste Not, Want Not
The secondary source market can be a very efficient industry. Items that no longer have value for one segment of its customer base may have a great deal of value to other segments. Some vendors describe the basic structure of the secondary market as being similar to the food chain (i.e., there are various tiers in the U.S. healthcare industry, from university hospitals and research facilities at the top to community hospitals and imaging centers somewhere in the middle and rural hospitals and emergency centers near the bottom).
"The OEMs produce extremely durable pieces of equipment that will last for years," says Green. "But technology being as quick as it is in healthcare, the state-of-the-art items a high-end facility buys today will no longer be the latest technology within a year or two after purchase. As these facilities strive to capture two or three percent of an area's population base with the most advanced technology, they release the equipment they have, which is still good to about 98 percent of the population." The facilities around the mid-level of the industry may choose to upgrade equipment after around five years, in which case a smaller rural facility can purchase their refurbished models and upgrade from their 10-year-old units.
Some companies, like PartSource, have adopted a cradle-to-grave philosophy in regards to the equipment they buy and sell. "Once a piece of equipment is purchased from us, we keep track of its scheduled maintenance and are able to supply parts to it on an ongoing basis," says Hubbard. "In essence, it's a holistic approach to a hospital's needs, as at the end of the equipment's life cycle at a certain facility, we buy it back, re-perfect it and sell it again."
Know Your Needs
Guirsch says the pivotal decision that should be made when a medical institution looks to bring in more equipment "is whether or not your facility needs the newest bells and whistles in order to obtain the necessary results when using the equipment. If the entire team — administration, physicians and technologists — decides that their purposes would be well-suited buying from the refurbished market, they must then carefully examine the terms involved with the vendor and equipment they consider using."
Guirsch stresses that the entire staff should be involved in the decision process when purchasing pre-owned equipment for the first time. "What have you really gained if you save money on a piece of equipment but no one wants to use it? Work as a team to decide what will best fit your facility's clinical needs and current throughput requirements," he advises.
"Buying from any source — whether it's new equipment, pre-owned or a combination thereof — should always be a team effort," Bogutski says. "If all of the individuals that are called upon to use that equipment aren't well-informed about it or allowed to voice their input, they may feel alienated and the equipment might not be properly utilized." Facilities looking to purchase additional equipment should empower their staff to make the best decision for them, he adds.
Once a decision is made to buy equipment from the secondary market, an assessment of your facility's exact need should be made prior to contacting a distributor. "Once you have determined what you want, the next crucial step is making sure you're dealing with a reputable equipment dealer," says Guirsch. "Expect that a company with a good track record will be able to provide ample references. If possible, obtain documentation and/or personal contacts from where the equipment was used before it was sold to the distributor."
Bogutski emphasizes it's a good idea to check the equipment's pedigree. "Find out where the equipment was first installed as new and inquire as to what types of problems occurred over the life span of its original use." Find out how the problems were addressed and always ask for a history of service, he adds. "It becomes particularly important for items that have changed with technology in the last three to seven years. In these cases you should make sure the latest version of that technology is incorporated into the product."
In addition, Bogutski suggests buyers demand that the warranty on pre-owned equipment is the same as that of new equipment because it indicates the vendor stands behind the product. "Also be aware if the product is still on the market, as opposed to being discontinued," he adds. "If you need parts to fix a discontinued product, you will find yourself incapable of repairing it."
"Our industry is definitely benefiting from the current climate in the healthcare field, as far as budgets tightening and less money being spent on new equipment," Hubbard says. "We see our opportunities expanding dramatically over the next five to 10 years as the economy pushes our potential customers to save dollars wherever they can without sacrificing patient care. Our job is to provide quality solutions, as well as dollars, back to those that choose to buy from the secondary market."
— Jennifer Kelley is the editorial assistant at RT Image magazine and is pursuing a bachelor's degree in journalism. Comments and questions are encouraged and can be directed to editorial@valleyforgepress.com.
|
