An article profiling Lehigh Valley Hospital and Health Network (LVHHN) in the October 2004 issue of this journal described the long-range planning process in use at LVHHN that governs how technology is acquired in the radiology department. Whereas this process is critical to the long-range health of an organization, it is the annual capital budget that drives the organization from year to year. However, as I learned last year, flexibility is an important ingredient of any plan, and nowhere has this been more evident than in the rapidly evolving modality of computed tomography.

To preface that discussion, it is important to understand how preparation for the annual capital budget is approached at LVHHN. The process begins in November/December for a fiscal year that begins July 1. A team including the managers and myself begins by discussing the department needs in general terms at our three different Lehigh Valley Hospital (LVH) sites: LVH-Cedar Crest in the suburbs of Allentown, LVH-17th St in downtown Allentown, and LVH-Muhlenberg in Bethlehem, Pa. Growth, patient demands, other programs in the institution, and feedback from clinical leaders are also considered. The managers talk with the chief radiologist for their sections as well as technical staff to develop their list for the next year. Individual managers obtain quotes from vendors for the equipment on their list.

Last year, we budgeted for an 8-slice CT scanner, but before we could begin the purchase process, the radiologists determined that we needed to buy a 16-slice CT scanner instead. There was not enough money allocated for that purchase, so we decided to wait and budget the additional money ($900,000) in the capital budget for this year. As we went through the Request for Proposal (RFP) process and went on site visits, technology continued to change. We received Joint Commission on Accreditation of Healthcare Organizations accreditation for our stroke program at the Cedar Crest site. Once again, the radiologists told me that we should buy the highest technology we could afford to address our clinical needs. The bottom line is that in 1 year we went from an 8-slice CT scanner to a 64-slice CT scanner. In the 25 years I have been in radiology, I have never seen this happen.

FILLING IN THE BLANKS

A template is used in developing the capital budget. All information is entered electronically into the capital budget system. Basic information like site, modality, name of equipment, age, and price is entered. There are boxes for the manager to check if he or she thinks the request needs review by clinical engineering, facilities and construction, or information services. Clinical engineering and facilities and construction review most requests, adding costs in the appropriate boxes. If there are additional operations costs or savings like staff or supplies, there is an area to capture this. The system adds all entries for a total project cost.

Figure 1. Each team member scores the proposal of each RFP respondent.

The most important part of the capital budget submission is the justification, which tells the story to the capital budget committee. After I read all justifications and suggest changes and/or additional information, the budget is copied for a leadership group to review all requests. As a group, managers and radiologists rank all our requests in priority order. If a particular piece of equipment has an “end of life” notice, that is usually prioritized high in the ranking. Once this is done, I enter the priorities into the system and try to spread the purchases over four quarters.

If equipment is not a replacement for something we have, an additional financial analysis is performed with a finance department representative. Additional volumes, potential referrers, scheduling backlog, and utilization of current equipment and rooms are examined and included in the analysis. This is submitted with the capital budget so the committee knows the net present value (NPV) when that request is reviewed.

The capital budget committee usually begins meeting in late February or early March. Mark Holtz, vice president of operations and my immediate supervisor, calls me throughout the process to negotiate what needs to stay on the list and what can wait. About 6 weeks later, we know what was approved. The actual approval occurs at the June board meeting. However, we begin planning from a goal and timing perspective for the approved equipment in the next fiscal year.

SELECTING EQUIPMENT

The process we use to select equipment in the department is rather unique. A template RFP for the type of equipment being purchased is utilized. Section One includes instructions to bidders, a communication protocol, and two dates and times the vendor can schedule to inspect the room. Section Two includes technical specifications and codes the vendor must comply with if they are selected. Section Three includes terms and conditions for the purchase. Sections One and Three are pretty consistent in terms of language for any equipment. The physicist, manager, and I modify Section Two to reflect the equipment on the market. The templates are usually a couple of years behind the current specifications.

A team is assembled that includes the manager of the section, a radiologist selected by our chairman, Robert Kricun, MD, a technologist or two if multiple sites are involved, our materials management representative, our physicist, and the imaging manager from clinical engineering. The RFPs are distributed electronically with 4 weeks to respond. The tour/inspection date is usually scheduled for a week or so after RFP distribution, which gives the vendors time to include any space, power, or HVAC issues in their RFP response.

Figure 2. A separate comment sheet allows each team member to contribute their thoughts and questions.

A strict communication protocol that has to be signed by the sales representative requires the vendor to communicate through our materials management representative only. Any questions or issues can be shared with all vendors, which assures an objective process. When the RFP responses are submitted, we distribute them to the team with scoring and comment sheets (Figures 1 and 2, above). The team submits them to my assistant who tallies the scores and comments for me (Figure 3, below). We meet as a group and review this information, and usually there is a demarcation line where the vendor responses are split, making it easy to see the top two. If there are more than that, we decide whether to go on two or three site visits. The manager schedules the site visits, and afterwards we meet as a team so the group can report which vendor it prefers to move to negotiations.

Figure 3. Individual scores and comments are tallied to produce a final score for each vendor.

The RFP is quite specific about which items to include in the base price and which ones provide prices as options. However, after the team goes on site visits and sees the way options are utilized, it may change its determination of which software packages are necessary. During the team meeting, I verify with the group what they want to include and exclude in the deal. Then I go to work with the representative from the company the team has selected.

PLANNING FOR INSTALLATION

Once the negotiations are completed, planning for the installation begins. The manager uses the technologists and radiologists on the team to help with any decisions about the room, training, or timeline to maintain consistency. As a rule, LVHHN does not buy leading edge equipment. Although the department does participate in a significant amount of research, it does not have equipment dedicated exclusively to research. Our mission is to serve our patients and our community and use the institution’s dollars wisely.

Depending on what is going on in the department, the selection process usually takes about 3 months. The CT selection took more time because of the logistics involved in coordinating the schedules of two radiologists to go on the site visits with the team. Our radiologists, technologist, and managers spoke to numerous other institutions about specific clinical questions.

Because the selection is made as a team, the possibility of making a mistake is almost eliminated. For example, through their investigation, if the team finds that there are a number of service issues or problems with a particular model or a specific vendor, it may be eliminated from the selection. The decision has never just been based on cost. We also factor the cost to service the equipmentwhich we call life-cycle costsinto our decision. If a machine has a purchase cost of $1,000,000, annual service costs of $100,000, an estimated useful life of 5 years, and no additional supply or operational expenses, the life-cycle cost is $1,500,000. Another machine may have a purchase cost of $1,200,000 and annual service costs of $80,000 with a life of 5 years so the life-cycle cost is $1,600,000.

A WRENCH IN THE WORKS

There really is not a perfect process for this, and there are times when the best-laid plans have to be adjusted. When it came down to the CT purchase, our radiologists wanted the highest technology for the money we had approved in the budget. Since the technology is moving so quickly, they did not want to have to ask for an upgrade within the first 6 months of our purchase. The clinical reasons were to address trauma, stroke, and cardiac patients. The CTA (CT angiography) studies on the scanner are incredible and look like we actually performed an angiogram on the patient instead of a CT scan.

There is not a huge difference in the speeds of the scanners, but there is a huge difference in the amount of information that is acquired. For example, we used to acquire about 40 images on a CT scan of the abdomen and pelvis and it used to take 45 minutes to perform the scan. Today we are scanning a head in 7 seconds and can scan a head, c-spine, chest, abdomen, and pelvis on a trauma patient in a couple of minutes. It takes longer to move the patients on and off the table than it does to scan them. We are seeing image sets of 600 images for one of these studies, a phenomenal amount of data for the radiologists to review. The radiologists are working to develop new protocols and will probably review the images in 3D image sets instead of every individual image.

With the pace of innovation in CT, it is difficult to plan for the future. The bottom line is that you cannot do this type of planning in a vacuum. You absolutely need to get the best minds around the table to try to plot out capital purchases and respect the limited resources of the institution.

Sheila M. Sferrella, MAS, RT, CRA, is administrator of radiology, Lehigh Valley Hospital and Health Network, Allentown, Pa.