Many health system CFOs are in the midst of an annual ritual: capital equipment requests (CERs).
Hospitals submit their business cases to add medical equipment totaling tens of millions – sometimes hundreds of millions – of expenditures system-wide. In the perioperative realm, these requests typically serve one of three purposes:
- support service line expansion, based on anticipated case volume
- improve patient outcomes and/or safety by upgrading to a newer technology, such as the latest specialty surgical table
- replace a piece of equipment that has reached the end of its useful life.
The Fundamental Flaw With Capital Equipment Requests
Most systems undertake a rigorous evaluation of individual capital equipment requests based on the best information available to them. But with medical equipment destined to sit idle nearly 60% of the time, how can CFOs feel confident that results will meet expectations?
Many CFOs tell us that they don’t feel confident. For one thing, their prior medical equipment purchases have entered something of a black hole – whether promised value was achieved comes back to them anecdotally, if at all. But there’s a more fundamental flaw. Health systems increasingly need to act as single, cohesive networks, but medical equipment purchases have remained stubbornly siloed. This inefficiency is costing millions of dollars.
Three New Questions CFOs Should Ask About Any Equipment Purchase
Adding high-value medical equipment to a central platform – from which it can be tracked and shared across facilities – allows today’s CER process to shift from outdated hospital siloes to system-level efficiencies, in alignment with other C-suite priorities. For CFOs, that means they will be able to ask entirely new questions to unlock value from any clinical asset purchase:
- Does the requested equipment already reside at a nearby facility? If so, industry data would suggest it has nearly 60% excess capacity. CapEx can be delayed or avoided altogether through sharing with peer facilities. One Cohealo client averted $250K on an Endoscopic Ultrasound in precisely this manner, while driving new revenue off its existing asset through a 5x increase in case volume.
- Can multiple equipment requests be consolidated into one? Rather than purchase four new specialty surgical tables – two units of two kinds of table – the innovative OR directors at two hospitals looked to instead buy one of each and share them from the start. Given recent price increases, this could represent $200-300K in savings for the system while supporting new high-value procedures with leading-edge technology.
- What equipment should we buy that has NOT been requested? Once CFOs are able to make equipment decisions at a system level, they may find that some of the biggest opportunities had never before reached their radar screens. Case in point: many hospitals traditionally averted expensive laser purchases by renting them on demand. We’ve found that many systems have facilities clustered together collectively spending hundreds of thousands or even millions on these rentals. Buying the lasers and then sharing them across hospitals could be dramatically more cost-efficient.
Cohealo has found that the CER process is a powerful catalyst to begin centralizing, sharing, and tracking utilization of medical equipment across hospital sites – hard-dollar value is clear while OR teams will have a high-impact focal point for their new collaboration.