Make Your Capital Spending Count

Take advantage of every cost-saving opportunity to boost the bottom line of your most expensive long-term investments.

When it comes to making big-ticket purchases, two clinicians with decades of experience in ambulatory surgery centers like to ask questions in sets of three. For Jay Horowitz, CRNA, a clinician and president of the Quality Anesthesia Care staffing company, the key pre-purchase questions ASC and HOPD leaders should ask are:

• Would the new equipment provide a good return on investment?
• Would it make existing operations more efficient or provide the opportunity to add a new service line?
• Would it improve patient or staff safety?

Thomas Durick, MD, clinical professor at The Ohio State University College of Medicine in Columbus and assistant clinical operations director at the university’s Outpatient Care New Albany integrated health facility in Westerville, Ohio, says leadership should get answers to the following queries from surgeons before making a decision to buy:

• What existing equipment do you use regularly?
• What do you want that we don’t have?
• What do you absolutely need?

Once these sets of questions are answered, a facility will be in a good position to make a sound long-term investment on devices and equipment that improve practices through expanding service offerings, shortening procedure times or allowing for a higher quality of care for patients.

“When you ask your providers why they want an upgrade or an emerging technology and they say it will shave 20 minutes off each procedure, you can perform a value analysis that can demonstrate the savings equate to two or more additional cases a day,” says Dr. Durick. “That’s a great value. Making a big purchase without doing those kinds of cost analyses would be a disservice to your facility.”

Strong vendor relationships

Negotiations with vendors can cut costs when successful, but navigating those talks isn’t always easy. Vendors will often try to sell their equipment at the highest cost, suggest add-ons or consumables you may not need, and say the most expensive service plans for ongoing maintenance are your best bet.

One way to avoid these pitfalls is to enter negotiations only after educating yourself as best you can about the product. This will better inform your discussion with the vendor about how often equipment will need maintenance and repair and whether you need a service contract at all.

“With a C-arm, for example, you need a good working knowledge of its parts and which ones may break moving forward. Ask the vendor how much the image intensifier or head would cost to repair if they break,” says Dr. Durick. “Tell the vendor to be honest with you. Ask them how often these devices need to be repaired and whether it’s the most expensive parts that break down the most.”

Agreeing to buy the disposables from the equipment vendor is a great way to save $40,000 or $50,000 that the piece of equipment itself costs.
Thomas Durick, MD

Don’t commit to a service contract until you’re armed with that knowledge and only purchase one if it makes good financial sense. The volume of your practice will also help with this decision in terms of how often you’ll use the new piece of equipment. Remember also that you don’t necessarily need to enter into a service contract at the time of purchase, as some vendors will forgo them until the first repair on the equipment is needed. Talk to your vendor rep and see if such an agreement can be worked out. If so, you’ll save on the monthly service fee that you would have been paying from when you bought the equipment until it needed its first repair.

ASCs can often avoid the upfront cost of equipment entirely by signing purchasing contracts for disposables and reusable equipment and tools in exchange for large medical devices. “Agreeing to buy the disposables from the equipment vendor is a great way to save the $40,000 or $50,000 that the piece of equipment itself costs,” says Dr. Durick.

Mr. Horowitz agrees, saying, “The more ancillary stuff you buy from any company, the less you’ll pay for the main piece of equipment.”

Perform a cost-benefit analysis of entering into such an agreement before you seal the deal, however. Projecting how many supplies your practice will use over time will enable you to effectively calculate long-term ROI by committing to an exclusive agreement for buying the disposables. Leasing the equipment is another cost-saving option that makes particularly good sense for new equipment emerging into the market, such as 4K and 3D imaging technology.

“Leasing often makes sense with that stuff, because the technology is changing so fast you don’t want to be stuck with something that’s outdated in a year,” says Dr. Durick. “These new all-in-one systems are expensive, so they entail replacing three or four pieces of existing equipment. Leases are good for these items even though you’ll pay a bit more upfront. It’s especially important to have the latest technology if you’re in an area where you’re competing with a lot of surgeons from other practices.”

Ask vendors if they have any creative agreements that can reduce costs, such as participating in research projects. “Engaging in research initiatives with various vendors can lead to decreased costs for capital items in the form of cash stipends for doing so,” says Mr. Horowitz. “It might not be feasible for some ASCs because the arrangements require a certain level of personnel, computing ability and knowledge of reporting, but it’s an avenue that doesn’t get a lot of thought from practice managers.”

When to buy, when not to

VALUE ANALYSIS Dr. Thomas Durick regularly asks pointed questions about the critical capital equipment his facility uses when making purchasing decisions.

Some new technology can help you avoid making capital investments entirely. Handheld ultrasound devices, for example, can be purchased for a couple thousand dollars and save facilities from needing to purchase a larger ultrasound machine that Dr. Durick says costs in the mid-five figures.

Other purchases, meanwhile, are requirements for new service lines. Dr. Durick remembers a purchase of percutaneous tenotomy technology more than a decade ago to treat tendinosis patients that resulted in $2,000 to $5,000 of revenue each time the equipment was used. The purchase allowed hundreds of patients who could have otherwise gone untreated to receive care. Dr. Durick says the facility that made the purchase attracted new sports medicine doctors to perform the procedures at the center. “A lot of places are doing outpatient gastric bandings with devices that didn’t exist five to 10 years ago,” he adds. “There is always an opportunity to bring in a new procedure and an entirely new subset of providers to your facility.”

Mr. Horowitz notes that relatively inexpensive anesthesia machines can allow some facilities to add new service lines such as facial plastic and other cosmetic procedures for nominal investments.

Value-adds to your practice

Understanding how an expensive equipment upgrade will enhance your facility’s practice in the planning phase of purchasing is of the utmost importance. If your calculations don’t show a significant future return, it may be wise to delay a big-ticket purchase unless it would clearly improve the quality of care your facility can provide to patients. Always view these capital purchases though the lens of the value-adds they can provide to your practice and look for creative ways to save money if you decide to move forward. It will position your facility well for the future. OSM