Show Us the Money
Confronting real or exaggerated budget competition from IT, designated 'tech assessors' take the guesswork and emotion out of medical equipment buying decisions.
U.S. healthcare providers now spend more than $100 billion on medical equipment each year. That figure dwarfs the estimated $40 billion laid out for health IT wares in 2011, but the latter market is outpacing the former at a jaw-dropping clip. The market research firm RNCOS projects growth of 24 percent in the U.S. health IT market by 2014, while various industry watchers say sales of patient care devices are growing by single-digit percentages and may be slowing.
That's just the view from the supply side. Inside hospitals and healthcare systems, where reimbursement is falling and operational costs are rising, the shift often plays out as a delicate balance between competing priorities.
"My opinion is that hospitals need to invest scarce resources in information systems," says Bonnie B. Blanchfield, CPA, a Boston-based health policy and finance consultant who previously worked as a senior scientist at Massachusetts General Hospital's Institute of Technology Assessment. Capital equipment purchases show quicker returns on investment, she points out, but investment in one IT package alone—the EHR—"improves quality of care, reduces medical errors and enables more seamless care management. You're able to conduct population health studies and measure quality, which will reap benefits in the long run because pay-for-performance is the way reimbursement is going" as Meaningful Use incentives continue and when noncompliance penalties kick in in three years.
No hospital worth its accreditation would let one service line starve while another is feasting. According to some business-progressive providers, it's a clear case of "both-and" rather than "either-or." The trick, they say, is not to shop less in the capital equipment aisle but to shop smarter.
Hence the rise in C-suite respect for, and institutional influence of, technology assessment specialists who focus on discovering—and presenting—hard data, enlightening insights and irrefutable cost-benefit analyses. At their most capable and efficient, these professionals steer clinical departments away from costly capital mistakes and toward buying decisions that cleanly mesh with the parent institution's strategic, operational and clinical missions.
When duly heeded, these advisors also can help end users untangle complex regulatory considerations around cutting-edge technologies. "We've had some experiences where certain pieces of equipment were marketed to our clinical departments for one particular therapy or treatment and then, when we looked at the vendor's 510(k) and premarket approval documents, we saw that they hadn't formally documented their product claims with the FDA," says Izabella Gieras, MBA, MS, director of clinical technology at 625-bed Huntington Memorial Hospital in Pasadena, Calif. "The regulatory piece is very big for us and, of course, that includes looking into any recalls, hazards or alerts."
The "us" Gieras refers to is Huntington's capital review committee. Chaired by a representative of the chief financial officer, the group collates input from such disparate departments as nursing, finance, construction, IT, risk management, purchasing, plant operations and safety and security.
A customized database provides hard predictive statistics and two director-level RNs supply strong clinical opinions. The result is firm guidance, says Gieras. "Our clinical representatives can be pretty vocal," she says. "That's a good thing, because they raise good questions so we don't make snap decisions. Sometimes their objections cause delays, but the end decision is usually better for it."
The group's methodology involves soliciting and reviewing "wish lists" from clinical departments, then putting each item through a forced-ranking process. This allows the group to objectively weigh the requisitions against various criteria set by the hospital's senior leadership. The bottom line is whether or not the desired buy makes sound business sense and meets a clear patient care need.
All recommendations are subject to an inert formula, so there's little room for argument. Still, it's sometimes necessary for Gieras and the committee's clinical reps to meet with the director of a requesting department.
The administrator "may have put in for 10 items and labeled all of them urgent," explains Gieras. "At that point, we have to push back." Her team helps the department director prioritize the wish list based on true need. What is the business case for each of these 10 items? Is your existing equipment failing, causing a lot of downtime or running up repair bills? In most cases, the applied capital review process reveals its wisdom even to determined skeptics.
Another important element in the charter governing Huntington's capital review committee is heading off the need for major emergency purchases throughout the fiscal year. All green-lighted projects pushing $20,000 have to invite bids from at least three vendors, spurring an RFP process that provides a buffer against pricey surprises, but so far no foolproof financial firewall has materialized. "We still have [acquisition] emergencies. I don't think you can ever avoid those situations altogether," says Gieras. "But they have definitely gotten fewer and much smaller dollar-wise" as the committee has tweaked and fine-tuned its methodology.
Gieras is quick to point out that the committee isn't shy about shelling out for top-of-the-line options when the numbers make the case. She offers, as a recent example, the committee's evaluation of available sequential compression sleeves, which are devices used to reduce the risk of deep vein thrombosis and pulmonary embolism in bedridden patients.
The team whittled the selections down to two finalists, trialed both with stakeholding clinicians and actual patients—and went with the one that was "considerably more expensive," she recalls. "We looked not just at user functionality but also the interface, patient comfort, how the clinicians interacted with the equipment." Were the team to get into the habit of fixating on price, she adds, "we would just always choose the cheapest option. What would be the point of a capital review process?"
The 10-state, 49-hospital Trinity Health system, based in Novi, Mich., has been grappling with the pros, cons and adaptability of various emerging technologies. Charles Torrens, one of two full-time technology assessment managers executing the process from the corporate office of the clinical engineering department, sees his discipline as a science that some mistake as an art.
"Seventy-seven percent of what we do is based on clinical considerations," says Torrens. "When we sit down with our department directors, we need to understand what kinds of patient cases they're seeing, what kind of volumes and what modes are on the equipment they've been using."
Trinity's scoring system resembles the process used in competitively judged sports that factor in degree of difficulty. Technology assessors formulate profiles of medical devices under consideration by, in part, assigning each a "replacement index." This represents the sum of numerous factors, each of which carries a maximum value. For example, the "probable financial impact" factor, calculated by considering likely revenues compared with likely costs, carries a maximum value of 16 points. The 14-point-max "technology level" factor grades a repairable device against comparable new technologies on the market. The higher the replacement index, the more urgent the need.
The protocol calls for projecting needs in three-year windows because, says Torrens, "anything older than that is not going to survive today's technology world."
As for emerging technologies, Torrens points to the hybrid OR as a standout example. "It's the new kid on the block and everybody wants one." He and his team are working on a template that will outline the criteria for installing one. "We're exploring the kinds of cases it would see, how it could be built more universally so it is functional for more than just a few cases," he says, adding that one underlying aim is making sure that "our hybrid ORs don't sit empty for a majority of the time like many others are doing right now."
At a cost of approximately $5 million to build a hybrid OR, the space "is probably the most expensive real estate in a hospital that has one," he says. "You have to be careful."
Torrens says his department's job is not to say yes or no to any given requisition but to provide a tool for administrators—one that gives them, among other advantages, leverage for dealing with powerful people bearing strong opinions. "Physicians, for example, can be pretty demanding." They might threaten to move their practice across town if their requests are denied, he says. "We have to understand that aspect without getting in the middle of it. If we were to insert ourselves into those politics, we wouldn't get a good cross-section of the facts. And that's what administrators really need to make good capital equipment decisions. They need facts."
Gieras and Torrens both say the tech assessment process is likely to broaden to include smaller buys over the next few years. Both also hope to link together, if not meld into one, their inventory and assessment databases. That's more difficult than it sounds, as inventory information is stored in a sophisticated maintenance management system, while assessment intelligence goes into a modified but still much simpler record.
Torrens also hopes to add a project manager to concentrate on the assessment aspects of construction and refurbishment, emerging technologies and device integration with the EHR.
And he agrees with Blanchfield: "The money that's being distributed back to hospitals for complying with Meaningful Use should be used on IT projects that contribute to efficiency, cost control and patient safety."
"We have allocated a budget to get our EMR up, running and stable by 2015," says Gieras, "and we still have a separate budget dedicated to capital medical equipment." Her organization could delay some equipment projects in favor of the EHR project, she says, "but there are cases where it wouldn't make sense to delay replacement too long or reverse an approved capital-review decision."
In other words, it's "both-and" rather than "either-or" until at least 2015.
U.S. healthcare providers now spend more than $100 billion on medical equipment each year. That figure dwarfs the estimated $40 billion laid out for health IT wares in 2011, but the latter market is outpacing the former at a jaw-dropping clip. The market research firm RNCOS projects growth of 24 percent in the U.S. health IT market by 2014, while various industry watchers say sales of patient care devices are growing by single-digit percentages and may be slowing.
That's just the view from the supply side. Inside hospitals and healthcare systems, where reimbursement is falling and operational costs are rising, the shift often plays out as a delicate balance between competing priorities.
"My opinion is that hospitals need to invest scarce resources in information systems," says Bonnie B. Blanchfield, CPA, a Boston-based health policy and finance consultant who previously worked as a senior scientist at Massachusetts General Hospital's Institute of Technology Assessment. Capital equipment purchases show quicker returns on investment, she points out, but investment in one IT package alone—the EHR—"improves quality of care, reduces medical errors and enables more seamless care management. You're able to conduct population health studies and measure quality, which will reap benefits in the long run because pay-for-performance is the way reimbursement is going" as Meaningful Use incentives continue and when noncompliance penalties kick in in three years.
No hospital worth its accreditation would let one service line starve while another is feasting. According to some business-progressive providers, it's a clear case of "both-and" rather than "either-or." The trick, they say, is not to shop less in the capital equipment aisle but to shop smarter.
Hence the rise in C-suite respect for, and institutional influence of, technology assessment specialists who focus on discovering—and presenting—hard data, enlightening insights and irrefutable cost-benefit analyses. At their most capable and efficient, these professionals steer clinical departments away from costly capital mistakes and toward buying decisions that cleanly mesh with the parent institution's strategic, operational and clinical missions.
De-fanged Debates
When duly heeded, these advisors also can help end users untangle complex regulatory considerations around cutting-edge technologies. "We've had some experiences where certain pieces of equipment were marketed to our clinical departments for one particular therapy or treatment and then, when we looked at the vendor's 510(k) and premarket approval documents, we saw that they hadn't formally documented their product claims with the FDA," says Izabella Gieras, MBA, MS, director of clinical technology at 625-bed Huntington Memorial Hospital in Pasadena, Calif. "The regulatory piece is very big for us and, of course, that includes looking into any recalls, hazards or alerts." The "us" Gieras refers to is Huntington's capital review committee. Chaired by a representative of the chief financial officer, the group collates input from such disparate departments as nursing, finance, construction, IT, risk management, purchasing, plant operations and safety and security.
A customized database provides hard predictive statistics and two director-level RNs supply strong clinical opinions. The result is firm guidance, says Gieras. "Our clinical representatives can be pretty vocal," she says. "That's a good thing, because they raise good questions so we don't make snap decisions. Sometimes their objections cause delays, but the end decision is usually better for it."
The group's methodology involves soliciting and reviewing "wish lists" from clinical departments, then putting each item through a forced-ranking process. This allows the group to objectively weigh the requisitions against various criteria set by the hospital's senior leadership. The bottom line is whether or not the desired buy makes sound business sense and meets a clear patient care need.
All recommendations are subject to an inert formula, so there's little room for argument. Still, it's sometimes necessary for Gieras and the committee's clinical reps to meet with the director of a requesting department.
The administrator "may have put in for 10 items and labeled all of them urgent," explains Gieras. "At that point, we have to push back." Her team helps the department director prioritize the wish list based on true need. What is the business case for each of these 10 items? Is your existing equipment failing, causing a lot of downtime or running up repair bills? In most cases, the applied capital review process reveals its wisdom even to determined skeptics.
Another important element in the charter governing Huntington's capital review committee is heading off the need for major emergency purchases throughout the fiscal year. All green-lighted projects pushing $20,000 have to invite bids from at least three vendors, spurring an RFP process that provides a buffer against pricey surprises, but so far no foolproof financial firewall has materialized. "We still have [acquisition] emergencies. I don't think you can ever avoid those situations altogether," says Gieras. "But they have definitely gotten fewer and much smaller dollar-wise" as the committee has tweaked and fine-tuned its methodology.
Gieras is quick to point out that the committee isn't shy about shelling out for top-of-the-line options when the numbers make the case. She offers, as a recent example, the committee's evaluation of available sequential compression sleeves, which are devices used to reduce the risk of deep vein thrombosis and pulmonary embolism in bedridden patients.
The team whittled the selections down to two finalists, trialed both with stakeholding clinicians and actual patients—and went with the one that was "considerably more expensive," she recalls. "We looked not just at user functionality but also the interface, patient comfort, how the clinicians interacted with the equipment." Were the team to get into the habit of fixating on price, she adds, "we would just always choose the cheapest option. What would be the point of a capital review process?"
Repair Or Replace?
The 10-state, 49-hospital Trinity Health system, based in Novi, Mich., has been grappling with the pros, cons and adaptability of various emerging technologies. Charles Torrens, one of two full-time technology assessment managers executing the process from the corporate office of the clinical engineering department, sees his discipline as a science that some mistake as an art. "Seventy-seven percent of what we do is based on clinical considerations," says Torrens. "When we sit down with our department directors, we need to understand what kinds of patient cases they're seeing, what kind of volumes and what modes are on the equipment they've been using."
Trinity's scoring system resembles the process used in competitively judged sports that factor in degree of difficulty. Technology assessors formulate profiles of medical devices under consideration by, in part, assigning each a "replacement index." This represents the sum of numerous factors, each of which carries a maximum value. For example, the "probable financial impact" factor, calculated by considering likely revenues compared with likely costs, carries a maximum value of 16 points. The 14-point-max "technology level" factor grades a repairable device against comparable new technologies on the market. The higher the replacement index, the more urgent the need.
The protocol calls for projecting needs in three-year windows because, says Torrens, "anything older than that is not going to survive today's technology world."
As for emerging technologies, Torrens points to the hybrid OR as a standout example. "It's the new kid on the block and everybody wants one." He and his team are working on a template that will outline the criteria for installing one. "We're exploring the kinds of cases it would see, how it could be built more universally so it is functional for more than just a few cases," he says, adding that one underlying aim is making sure that "our hybrid ORs don't sit empty for a majority of the time like many others are doing right now."
At a cost of approximately $5 million to build a hybrid OR, the space "is probably the most expensive real estate in a hospital that has one," he says. "You have to be careful."
Torrens says his department's job is not to say yes or no to any given requisition but to provide a tool for administrators—one that gives them, among other advantages, leverage for dealing with powerful people bearing strong opinions. "Physicians, for example, can be pretty demanding." They might threaten to move their practice across town if their requests are denied, he says. "We have to understand that aspect without getting in the middle of it. If we were to insert ourselves into those politics, we wouldn't get a good cross-section of the facts. And that's what administrators really need to make good capital equipment decisions. They need facts."
Integrating Efforts
Gieras and Torrens both say the tech assessment process is likely to broaden to include smaller buys over the next few years. Both also hope to link together, if not meld into one, their inventory and assessment databases. That's more difficult than it sounds, as inventory information is stored in a sophisticated maintenance management system, while assessment intelligence goes into a modified but still much simpler record. Torrens also hopes to add a project manager to concentrate on the assessment aspects of construction and refurbishment, emerging technologies and device integration with the EHR.
And he agrees with Blanchfield: "The money that's being distributed back to hospitals for complying with Meaningful Use should be used on IT projects that contribute to efficiency, cost control and patient safety."
"We have allocated a budget to get our EMR up, running and stable by 2015," says Gieras, "and we still have a separate budget dedicated to capital medical equipment." Her organization could delay some equipment projects in favor of the EHR project, she says, "but there are cases where it wouldn't make sense to delay replacement too long or reverse an approved capital-review decision."
In other words, it's "both-and" rather than "either-or" until at least 2015.
Dave P. has worked in journalism, marketing and public relations for more than 30 years, frequently concentrating on hospitals, healthcare technology and Catholic communications. He has also specialized in fundraising communications, ghostwriting for CEOs of local, national and global charities, nonprofits and foundations.