Asset management has six primary components. It includes service management, of course, but it also incorporates proactive involvement in long-range planning, technology-utilization studies, technician and end-user training programs, the analysis of equipment life-cycle costs, and the application of all relevant information to equipment acquisition. While outside sources of some or all of these services are available to most hospitals, a thorough analysis of one health system’s situation predicted that full asset management could be obtained (at significant savings) by phasing in a centrally managed in-house program.
Within the Lehigh Valley Hospital and Health Network (LVHHN), based in Allentown, Pa, equipment was located at the three sites of Lehigh Valley Hospital, the three sites of Muhlenberg Hospital Center, the three sites of Breast Health Services, the two sites of Invasive Cardiology, and the individual sites of Lehigh Valley Diagnostic Imaging and Lehigh Magnetic Imaging Center. Some of these 13 sites were as much as 15 miles apart, making service coordination a challenge.
In addition to a large number of motorized film viewers, film processors, and related equipment, the asset-management program needed to cover 21 portable radiography units and C-arms, 16 radiography rooms, 12 nuclear medicine cameras, nine ultrasound rooms, seven radiography/fluoroscopy rooms, seven mammography rooms, five cardiac catheterization rooms, five MRI scanners, five CT scanners, and four angiography rooms.
In 1996, when it acquired a new administrator, LVHHN’s radiology department had nearly all of that impressive amount of equipment in place, and most of it was fairly new (less than 8 years old). At that time, the hospital was engaged in a program intended to reduce its expenditures. Clearly, the method chosen for the provision of equipment service can have a considerable effect on the cost of that service; for this reason, the new radiology administrator suggested the evaluation of service contracts.
The LVHHN directors of biomedical engineering and materials management, however, had already made several unsuccessful attempts to change the hospital’s service method, which consisted of multiple service contracts with original equipment manufacturers. For this reason, the administrator waited a year before attempting to build support for a service-method change.
PREPARING FOR CHANGE
After that interval, an 18-person team was assembled in order to address service issues and move the program toward asset management. The group included a radiologist, along with staff members representing the radiology departments, cardiac catheterization laboratories, breast health services, and radiation oncology departments of the six LVHHN entities.
At its first meeting, the team was charged with the evaluation of service options. As an initial step toward that end, it was presented with the need to choose between two types of consultants: those who would limit their involvement to writing a request for proposal covering global service needs and those who could analyze the facility’s service costs and options, after which they would propose a service program for implementation. One was strictly on a cost per activity basis, and the other program was custom-built to the goals of our proposed program. A consultant of the latter type was chosen by the team.
Once a contract with the consulting company had been negotiated, the analysis phase of this project began. In conjunction with the consultant, the radiology department defined the project’s scope in terms of sites and equipment. Because there were six components of LVHHN involved, there were six budgets for equipment maintenance. All existing service contracts were reviewed, and a list of equipment in place was developed and verified. All policies were reviewed and were checked for compliance with the requirements of the applicable accrediting and regulatory bodies.
The consulting company was responsible for acquiring copies of all service contracts, collecting the available information on time-and-materials service expenditures, meeting with service-team members and with the biomedical engineering staff, reviewing service policies and available service records, and visiting all sites that had equipment in place.
In applying due diligence to this project, the consulting company reviewed and analyzed existing service contracts and obtained competitive price quotations from two sources (Table 1). Time-and-materials cost estimates were, in the absence of sufficient data from LVHHN, based on the experience and information sources of the consultant.
COMPARING OPTIONS
Four program models were next evaluated, and the probable implementation and operating costs for each model were determined. In addition, the radiology administrator developed a list of 12 quality indicators for use as benchmarks that the chosen service program would need to meet (see Table 3). The results of the service-program analysis were, at this point, presented to a large group of hospital managers and vice presidents. The evaluation team recommended an in-house asset-management program to this audience, which required approval by the vice presidents of radiology and biomedical materials management, as well as the buy-in of the chief financial officer.
In-house equipment service was chosen because it has the potential to be the least expensive service alternative (although the institution assumes the risk of exceeding its service budget and must, therefore, have additional funding available to meet urgent service needs). The facility retains full control of all service decisions, and there are no conflicts of interest for service technicians. Equipment vendors do not see in-house engineers as their competitors in the provision of service, so they are likely to maintain a good working relationship with the service staff.
Because there was equipment in place at multiple facilities, the team projected that consolidation of service programs would result in cost savings and quality improvement. The consultant and radiology administrator recommended that all radiology equipment service budgets be combined under the authority of one new asset-management program, to be based in the radiology department of Lehigh Valley Hospital.
The new program was slated to begin on January 1, 1999, and a merged budget was to take effect (after adjustments for equipment added and deleted since the initial analysis) on July 1, 1999. All existing full-service contracts were recommended for cancellation, with service to be provided by the same vendors on a time-and materials basis. For contracts that could not be canceled, renegotiation using new capital purchases as leverage was recommended.
PROJECT INITIATION
The consultant and the radiology administrator developed a budget covering a 3-year implementation for an in-house program (Table 2). Because there were too many sites and types of equipment in the system, it was clear that all sites could not move toward an in-house program simultaneously. The project was started at Lehigh Valley Hospital; expansion to other sites was planned to coincide with the hiring of additional service engineers and with the completion of the in-house program’s initial fine-tuning phase s. The program was initiated at Muhlenberg Hospital in October 1999, and will roll into budget in July 2000.
On February 1, 1999, LVHHN hired a program manager for this project. Meetings with service vendors were then scheduled, and all existing contracts were canceled or allowed to expire (with most of this phase being completed by September 1, 1999). The consultant acted as a mentor to the new program manager and assisted the facility in its implementation of the in-house asset-management program.
Since two of the goals of the program were to increase customer satisfaction and decrease turnaround time for equipment repairs, a baseline customer-service survey was distributed to the members of the initial project team, who gave the program an average score of 3 out of 5. It will be repeated prior to performance appraisals in September 2000.
One of the most important parts of an in-house asset-management program is the accurate tracking of equipment holdings, service expenditures, failure rates, preventive maintenance, labor hours, and service types. At the recommendation of the consultant, LVHHN purchased a dedicated tracking system for equipment. The new tracking software was installed in February 1999 and was loaded with equipment data for all sites.
Negotiated discounts for time-and-materials service provision were also sought by the program manager. A recommendation was made for the establishment of a single telephone number that could be used to request service on any equipment. All service vendors were to be covered by the new program’s procedures and documentation policies.
The consultant recommended the use of in-house staff to perform minor maintenance (as permitted by the available staff’s time and expertise). Additional minor and preventive maintenance tasks were to be shifted to in-house engineers as indicated by accumulating service data. After the program manager had been hired, two service specialists were hired for the nuclear medicine and CT areas. The tools and testing devices needed to begin phasing in in-house service were acquired.
The consultant also recommended the purchase of tuned power filters for equipment that exhibited a high failure rate. After the installation of these filters for the four pieces of equipment leading the failure list (a cardiac catheterization laboratory, a nuclear medicine camera, an electrophysiology laboratory, and a CT scanner), their breakdown rates decreased by 35% in the first 4 months.
CONCLUSION
Failure rates for equipment are now being evaluated, and equipment life-cycle planning is being performed. In addition, the other components of a complete asset-management program are being provided in a coordinated fashion from Lehigh Valley Hospital-Cedar Crest campus.
The recommended long-range goal of the project was to reduce the cost of equipment service to 4-6% of the equipment’s value from its initial level of 10-14%. For the first phase of the project, during which the program will function as a self-insured time-and-materials plan, service costs are expected to decrease to 7%. Once full in-house support has been attained (after approximately 3 years), the program’s service cost should be 4-6%.
The program has now been in existence for a full year now. The projected savings for the current fiscal year (ending in June 2000) exceed $700,000 (25%), and the program is expected to achieve that figure. To date, the program has operated at considerably less than the cost budgeted for it.
Sheila M. Sferella, RT, MAS, is radiology administrator, Lehigh Valley Hospital and Health Network, Allentown, Pa. This article has been excerpted from Asset Management for High-technology Systems, which she presented at the annual meeting of the Radiological Society of America on November 29, 1999, in Chicago.
