In the midst of cost-containment, operators weigh outside contracts against staff biomeds when considering imaging equipment service.

It isn’t unusual for hospitals and radiology centers to employ staff for basic maintenance and repairs of medical imaging equipment. These in-house engineers often troubleshoot equipment failure and even do minor repairs on x-ray machines.

However, revolutionary advances in medical imaging in the past decade have significantly changed the complexity of imaging equipment with greater use of CT, MRI, nuclear medicine, and digital radiography. These technological leaps also have created new challenges in data management as facilities merge radiology information systems (RIS) with picture archiving and communications systems (PACS).

To keep their expensive and vital equipment and information systems at peak performance, radiologists historically have purchased service contracts from the original equipment manufacturers (OEMs)—not only to serve the needs of radiology patients, but also to ensure these revenue-generating diagnostic tools function 24/7. If the equipment isn’t working, the department falls from a profit center to a cost center.

In a downturned US economy and an industry that increasingly demands cost cutting, radiology centers are seeking alternatives to these pricey service contracts. They want to keep both their equipment and their bottom line healthy.

Gary Kaufmann, a former hospital administrator in Cleveland and now a diagnostic product line manager for Fluke Biomedical, has sat at both sides of the service contract table. As a rule, he says the price of a service contract for equipment with a lifespan of 7 to 10 years should be less than 5% of the original purchase price per year. Yet the cradle-to-grave cost of these contracts can reach $100,000. That’s why some administrators are weighing whether it is less expensive to train existing in-house biomedical technicians to handle these repairs instead.

When the price for multiple service contracts ventures into the millions, Kaufmann agrees it’s time to look at other options. Service contracts vary depending on the type of equipment and the level of coverage in the service agreement. Although the most savvy biotech engineers typically have been employed by the equipment manufacturers, Kaufmann said hospitals are hiring experienced biomedical technicians or training existing staff to perform a more advanced level of maintenance and service in-house.

Kaufmann said most hospital information technology departments aren’t fully optimized and have the ability to expand. Biomedical engineering is a growing field and training for staff is more available. “In many cases, these employees want to add value to their positions, which also improves the institution’s asset management,” he said. “By relying on existing staff, the repair costs become a fixed expense.”

Kaufmann noted that the shift to in-house service does require a transition period, and the OEMs have figured out how to lower their costs to keep the contract in place or they create hybrid agreements to maintain partial service agreements.

“For example, they’ll write a contract for in-house to do preventative maintenance. If there’s a malfunction, in-house has the first call to repair it within an hour and then call the OEM. This saves a lot of money, particularly in false alarms,” he said.

Another option is to hire an independent service organization (ISO), which often costs less than the OEM. But OEMs caught on to that idea and set up their own third-party service companies, which also contract to repair the competition’s products.

Another factor affecting service costs is the reliability and complexity of the equipment. Some of today’s medical imaging equipment actually is capable of communicating its problem to technicians, much like a patient telling his doctor what hurts.

“When it breaks, it calls in sick. The company is capable of remote repair or remote service, at least to get it back to processing patients until someone can come on site and repair it,” Kaufmann said.

After hospitals started hiring ISOs to reduce repair costs, the manufacturers began refusing to make their sophisticated service software available to the competition. In the late 1990s, a Montana hospital and the ISOs challenged the practice as a violation of antitrust laws. Ultimately, the industry was forced to make their adaptive software available.

“That loosened up the capability for a lot of folks to consider these alternative methods,” Kaufmann said. “If you added all these things up, you can say the pressure on the demand for service contacts is low and the supply of alternative mechanisms is high, which is a good thing for all hospital economies.”

Weighing the Options

Monica Caldwell is senior contract manager for Amerinet, a group purchasing organization in St Louis, that helps health care providers manage their expenses. Caldwell’s job is to negotiate service contracts with vendors to give Amerinet members the most effective coverage for the best value.

“What we do here is so valuable for our members,” she said. “A strong biomed department and trained resources are good, but many places don’t have those resources, so then a service contract is a good fit.”

As a former hospital administrative director of radiology, however, she understands that the service needs of health care facilities vary. The factors to be evaluated include the range of medical imaging services the facility provides, the staff available to handle in-house repairs, and the potential loss of revenue or impact on patient care when equipment breaks down.

“We do our best to negotiate a great contract, and then it’s up to the facility to determine if they want to take advantage of that contract,” she explained. “Having a service contract in place is still important for those bigger problems, unless you’re a really huge place and you can afford to have the in-house resources.”

Caldwell said hybrid contracts worked well at her former job because in-house technicians tackled first call and trouble-shooting requests effectively. “Sometimes it was something as simple as needing to reboot or reset, which saved us from calling in repair,” she said.

Unfortunately, the hospital had only one CT, which was critical for providing 24/7 care. She stresses the importance of understanding both the medical and technical needs of specific equipment when choosing service options. If patients have to be juggled or they can’t be served because a machine is down, the potential damage must be considered.

“When that CT was down, we were virtually crippled. We had to put the emergency department on diversion,” she emphasized. “And it can always impact revenue. For as long as that equipment is down, you’re losing the dollars you could have made while it was up and running.”

Training and Response

Wake Radiology in Raleigh, NC, tried a variety of service options before returning to OEM service contracts, according to Robert Schaaf, MD, the center’s managing partner.

“We used to attempt to maintain our own CT and MRIs with our own employees who were very well qualified and certified, but it was very difficult to keep them up to date with all the software and technology changes,” he said. “We just didn’t feel we were keeping up the way we wanted to, and these were expensive people to keep in-house. We found we got better service, more timely service, and probably less downtime relying on service contracts.”

Even though companies such as Siemens and GE provide local training and uptime data centers in the Raleigh area, Schaaf said it was difficult to keep in-house staff on the cutting edge. Wake Radiology hired experienced biomedical field engineers who had worked directly for the OEMs, but, with 75 pieces of equipment to maintain, there just was no time for these engineers to keep up with the necessary training.

“Keeping them up to snuff was more difficult than we thought it would be,” he admitted. “We were finding ourselves having to rely more and more on service contracts.”

He said Wake Radiology transitioned back to just trouble-shooting with first call and hybrid service contracts with Siemens. The company credited them for the in-house work, but Schaaf said the repair process ultimately took longer than if they had called the OEM in the first place. He said they also realized the OEMs weren’t as responsive to these alternative agreements as they were to full-service contracts.

“If you’re not on the service contracts, they’re going to charge you a lot more for the parts. Face it, either way you’re going to pay for this,” Schaaf said.

Because Wake Radiology is not a 24/7 facility, the center can perform preventative maintenance outside of business hours and is able to anticipate equipment problems to avoid downtime.

“Our equipment doesn’t get as much use. It doesn’t take the punishment of a busy acute care hospital,” he said. “We’re just interested in getting the equipment back in service properly and as quickly as we can.”

Wake Radiology, which is paperless and filmless, sees 675 cases per year at its 15 locations, including five hospitals. It relies heavily on its IT department to maintain a secure data center as well as networking and connectivity among various modalities.

“A lot of primary IT people don’t understand the modalities,” Schaaf said. “They don’t know what the radiologist wants out of the modalities, so it’s nice to have service engineers working with our IT people. We want a high level of confidence that the people working on these instruments are highly skilled and knowledgeable.”

Verina Palmer Martin is a contributing writer for Axis Imaging News. For more information, contact .