Capital Equipment Strategic Plans Boost Your Bottom Line
BY JEFF LITTLE
Partner
[October 4, 2023] – The process of planning for, successfully executing and later efficiently managing the lifespan of hospital capital equipment can quickly turn into a complex, multi-faceted, multi-tiered mish-mash of checklists, priorities and considerations. And lots of opinions, self-serving requests, and unnecessary expenses.
It doesn’t have to be that way.
Yes, there are many factors to take into consideration – when to pull the trigger on a purchase and managing the high-dollar cost most notably – but if you draw a correlation between the CapEx purchasing/management process and setting a household budget, suddenly matters become far less daunting. Let me explain …
Say you ’re driving an aging vehicle but putting money into major repairs is no longer a wise decision. Your car is nearing the end of its usefulness and the need for a replacement vehicle is on the not-so-distant horizon. Undoubtedly, you’d prepare for the inevitable purchase by first identifying the specific type of vehicle you need, a price range within your budget/cash flow, essential features, the benefits of financing versus outright purchase, the viability of a service warranty, and anticipated lifespan based on data. Once you’ve done your diligence, it’s much easier to make an informed, non-emotional decision that ensures you’re making the best decision and achieving the greatest bang for your buck, as they say.
Same’s true when purchasing expensive hospital capital equipment. Let’s take a closer look at how to optimize the process by creating a Capital Equipment Strategic Plan [CESP].
The Importance of Having a CESP in Place
The best decisions are informed, non-hurried decisions and the best hospital administrators and purchasing agents know this. That’s why getting ahead of the process via a CESP is so vitally important.
With a CESP in place, opinion-based investments step aside in favor of decisions made based on qualitative data and analysis provided by a third-party who has no skin in the game and can set aside emotions and personal preferences.
If you don’t already have a CESP in place, you’re likely wasting time and energy pursuing purchasing decisions that may or not be the best decisions. Here are the steps to developing a custom CESP that will optimize future capital equipment purchases:
High-Level Assessment - Begin by taking a top-to-bottom look at all capital equipment currently in use in your hospital. How old is it? How satisfied are your providers with its performance? Are you assessing its operational efficiency and quantifying its success rate relative to patient outcomes? Is the equipment protecting the hospital from unnecessary expenditures?
Next, prioritize your capital equipment needs going forward. Where are there gaps in your existing patient treatment programs that need to be filled? How can you improve operational efficiency while driving higher levels of profitability and improved outcomes
Step 1 ensures you’re factoring in all perspectives and serves as the foundation of your CESP.
Dig Deeper - Look at your list of current capital equipment in use and add meat to the bones. Compile vendor-provided lifecycle data, warranty programs, maintenance history, and quantify in dollars and cents what the cost of ownership has been for each item.
Along the way, you will begin to see where money has been spent unnecessarily and where there are still gaps, and you’ll be able to make a better decision once the equipment has reached the end of its road. You’ll also be able to identify and prioritize which type of equipment is needed most and develop a multi-year timeline for these purchases that will work within your future budgets.
It’s critically important to strike the balance between purchasing new equipment versus the cost of keeping aging equipment up-to-date. At some point, those lines will cross and you’ll know the time is nigh.
Hire a Consultant - Independent, third-party perspectives help you make objective decisions based on fact. It also opens the door to a broader understanding and knowledge of current vendor offerings, best practices in the industry, and next-gen equipment expected to hit the market in the near future. Independent consultants are also likely to be more aware of purchasing program options and can steer you to the best available phased or group purchasing plans.
Stripping the Emotion Out
The three most important factors in hospital equipment purchasing are data, data and more data. Did I say data? Yes, I did. Data supporting ROI, equipment lifecycles, maintenance costs over time, group purchasing programs, etc. must be assessed and factored into all purchasing decisions. Doing this ensures you’ll be making a strategically-sound, priority-weighted program for all upcoming capital equipment purchases and associated maintenance plans.
Developing a trusted relationship with an unbiased, clear-thinking third-party consultant helps you decide, given the existing economic environment, whether you should delay replacement and update your current equipment or take the plunge and make the investment now. Building and honoring a strong CESP while leaning on the independent consultant means you’ll know exactly what your options are and you may even discover you’re able to upgrade or add equipment sooner than expected.
Bottom line: The CESP protects and enhances your bottom line. Making informed decisions will likely lower your top-line capital costs, improve patient outcomes, and protect or enhance your bottom-line profitability.
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IN INSTALLMENT 2: We’ll look a little deeper at six critical items for hospitals to consider before purchasing capital equipment.
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ABOUT JEFF LITTLE
Jeff is a recognized thought-leader in hospital supply chain, purchased services, hospital operations, facilities and construction, and medical capital equipment. He brings a unique perspective and is well-connected throughout the healthcare industry, having worked in clinical settings within world-class hospitals, and multiple Integrated Delivery Networks [IDN] and Group Purchasing Organizations [GPO]. He is able to educate clients on subtleties and nuances of the complex healthcare ecosystem and excels at the development of commercial strategies.
Jeff is an active member of Association for Health Care Resource & Materials Management [AHRMM], American College of Healthcare Executives [ACHE], Federation of American Hospitals [FAH], the IDN Summit, and serves on the board of the ACE Summit.
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ABOUT EXCELERANT CONSULTING
Excelerant Consulting is the go-to organization for med-tech companies that need to position products and services successfully for value analysis committees, contract acquisition, and sales modeling and execution to commercialize the launch of medical devices or services with Group Purchasing Organizations [GPO], Integrated Delivery Networks [IDN], or Regional Purchasing Coalitions [RPC]. Clients rely on Excelerant to enhance their product positioning, navigate corporate contracting opportunities, and provide sales support to accelerate growth and profits.
For more info, contact Excelerant Consulting at info@excelerantconsulting.com