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In-house vs. Out-sourced Clinical Engineering David M. Dickey, CHC, CCE Corporate Director, Mc. Laren Health Care Clinical Engineering Services
Disclaimer/Transparency n n I do have a biased opinion! 30+ years managing in-house clinical engineering programs n n 15+ years clinical engineering consulting (Medical Technology Management. , Inc. ) www. mtminc. org n n n Currently Corporate Director CE Mc. Laren Health Care Practice area focus is in creating and/or expansion of CE programs Conversion of out-sourced programs to in-house Having been in this profession for my entire career, I know a lot of CE professionals that have ‘gone both ways’, switching back and forth as needed
I do agree n n n Out-sourced programs may make sense for smaller hospitals, < 100 -150 beds, especially if they are not part of a larger system with internal CE resources Not all in-house, or out-sourced, programs are created equal Common factors that impact degree of success n n n Quality and education of the staff Resources Administrative support ‘Fix it’ shop vs. a ‘professional service’…what are the needs? Either type of program is doomed for failure if the program delivered does not fit the needs and expectations of the organization! Neither are free
Top Ten+ Differences In-House Out-Sourced Services provided at cost, no mark up Services provided at cost + margin
Top Ten+ Differences In-House Out-Sourced Parts credits contribute to hospital's bottom line Parts credits contribute to vendor's bottom line* *if the hospital purchased the asset, then, technically, the parts credit belongs to them!
Top Ten+ Differences In-House Out-Sourced COSR on a well developed program run at 45% COSR can be at 7 -15% +
Top Ten+ Differences In-House Cost savings as a result of parts shopping and negotiated discounts lower CE program budget Out-Sourced Cost savings as a result of parts shopping and negotiated discounts improve vendor profit margin
Top Ten+ Differences In-House Out-Sourced CE staff committed to one organization CE staff need to be committed to two organizations
Top Ten+ Differences In-House Out-Sourced Added value services, such as projects, done at cost Added value services, such as projects, may be provided at additional cost
Top Ten+ Differences In-House Out-Sourced Software and data owned by hospital Software and data may be owned by vendor
Top Ten+ Differences In-House Out-Sourced Hospital in charge of cash flow to the vendors Vendor in charge of cash flow to the vendors
Top Ten+ Differences In-House Out-Sourced Concerning the variable portion of program budget, the hospital only pays for equipment that actually gets services (parts and vendor services) Hospital pays full amount of variable expense throughout the year, regardless of when/if device fails. Vendor makes extra margin on equipment with low
Top Ten+ Differences In-House Out-Sourced No conflict of interest Potential conflict of interest if the provider also sells equipment
Top Ten+ Differences In-House Out-Sourced Hospital in control over parts and labor sources, and can easily switch if quality becomes an issue. Provider in control over parts and labor sources. Hospital have to fight for change.
Top Ten+ Differences In-House Out-Sourced Every $100 k in savings offsets need to collect 100% on $3. 3 m in patient charges, if hospitals net operating margin is 3# Every $100 k in savings contributes to profit margin of the provider
Example of cash impact if you outsource n n If inventory is $290, 000 COSR = 4. 7% Budget is then $13, 630, 000 Outsource to a provide that has 20% profit margin, cost now becomes $16, 356, 000 (COSR now 5. 6%) If hospital’s net annual operating margin is 2%, the additional $’s paid needs to be made up by the hospital collection of 100% on $13, 630, 000 of patient charges!
Top Ten+ Differences In-House Out-Sourced Hospital maintains control over staffing levels and assignments Provider maintains control over staffing levels and assignments
Top Ten+ Differences In-house Out-Sourced Expansion of duties provides endless opportunities to add value and save $ (i. e. , IT clinical systems management) Expansion of duties provides endless opportunities for additional revenue
Top Ten+ Differences In-House Hospital fully responsib le and liable for negative outcomes and related damages, if any Outsourced Hospital fully responsible and liable for negative outcomes and related damages, if any, but at least now has someone else to share the
Issues of concern when converting to in-house from out-sourced program n n n n n Software CMMS and data conversions Test equipment and tools Manuals Over due PMs and CM’s wip credits Staffing and ability to hire providers staff Contracts and OEM discounts Policies and procedures Clerical and call center support Clinical engineering expertise Three to six months lead time
In order to convert to an in-house model Develop a business plan (three years), based on cost and quality n Set realistic goals and expectations n Consolidate all service budgets into one n Include contract/vendor management services n Start with general biomedical equipment support n Plan for expansion into service of ultrasound; sterilization; imaging; cath lab; clinical lab; radiation oncology; surgical instrument mgt. n
If you have an out-sourced program n n n n Perform bi-annual assessment of equipment actually serviced, PM or CM, and remove from inventory items never seen, to lower your program contract cost Read your contract and verify deliverables are being delivered Negotiate the margin, full disclosure of all costs If vendor gets credits for parts returned, it should be credited back to the hospital Mandate full staffing levels. If not met, get credit Mandate credits for PM’s not done on time Obtain quarterly downloads (Excel format) of inventory and work histories Consider getting help…call me when you are ready to save money! ([email protected] org )