Critical Factors that Contribute to the Total Cost of Ownership of Biomedical Devices
Part two of a three-part series on how healthcare providers can reduce costs and protect revenue by managing the systemic total cost of ownership of biomedical equipment.
An actionable biomedical device TCO model evaluates all of the associated costs involved in the purchase, maintenance, optimization, disposal and complete lifecycle of a capital asset. Cost estimates should quantify clinical and support staff, maintenance and repair costs, and the tools, instruments and training needed to operate and maintain equipment. Of course, there are variances in these considerations that are affected by organization (size and region), the specific device in evaluation, and other related factors, but primary considerations should include:
This is affected in large part by contractual buying relationships such as with GPOs, volumes, local agreements, and other discounting factors.
New or Refurbished Equipment
This can include a cost/benefit analysis of using “last year’s technology” at a significant cost savings (assuming a reliable/ trustworthy dealer relationship is established to ensure equipment quality and provide a warranty).
There will be a cost difference between outright purchasing versus leasing or other installment programs.
Freight and Logistics
Be cognizant of the fact that the cost of shipping can outweigh the cost of buying local, and also factor storage and staging costs.
Electronic Health Record Connectivity
All IT personnel and software requirements needed to correctly capture or exchange data will incur some overhead cost. This may also require additional software integration costs that were unknown at time of purchase and can oftentimes cost more than $20,000.
Construction and Installation
Construction costs can have a significant impact on TCO, especially if major building adjustments or space configurations have to be made to accommodate large equipment, such as moving, removing or adding walls. This cost dimension can also include handling, mechanical, plumbing, and electrical supply considerations, plus all data port and wall mounting requirements.
Look for opportunities to negotiate upgrades at the time of purchase, or lock in future upgrade pricing.
Are there limited hours of support available, and are there any on-site support options? What happens when a user needs off-hours support, what will the costs be?
Can a lower-cost consumable be used, or is the device owner tied to the consumables for that device only from that manufacturer? What is the typical downtime for the device? How much revenue is lost when a device is inoperable?
Training and Implementation
How many training hours are included in the original PO, and does it include both clinical and maintenance training? What are the costs to train additional users, or is there a “super users” training program? Are there refresher courses available as upgrades are released? Is training off site, and will the organization need to pay for travel costs?
Repair and Maintenance
What is the warranty agreement, and does it make sense to purchase extended service contracts? If so, do the extended service contracts cost more than the equipment over the lifetime of the device? What about failure rates, repair costs and parts?
Consider the cost of disposable supplies and instruments, and maintaining necessary par levels for the device to operate as intended.
What are the decommissioning and removal costs of the equipment?
Put Total Cost of Ownership Insights into Action
Are you interested in learning more about assessing — and leveraging — total cost of ownership data? Download the free guide: How to Consider the Total Cost of Ownership When Making Biomedical Device Purchasing Decisions.