10 ways for hospitals to strengthen insourcing of med-device services (Part 1 of 2)

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They came to help set up the smart pumps and stayed for the chance to make connections, scout out inefficiencies and, eventually, take over the entire clinical engineering program. They succeeded on all four scores. Jobs vanished. Friendships faded.

“They,” of course, are no one third-party service organization in particular but, rather, a composite of every one of their kind that has ever displaced a vulnerable in-house clinical engineering (CE) operation. But don’t hate these sharp outsiders for being good at what they do. Appreciate them for keeping your thriving in-house CE department on its toes. After all, without a little fear to help bring out the best in yourself and your people, you could get outsourced too. 

Here are 10 things healthcare technology managers can do to avoid elimination by outsourcing—and to increase their departments’ chances for long-term survival regardless of what changes the reform age brings to healthcare economics.

1. Act like an entrepreneur. The CE director or healthcare technology manager concerned that his or her department may come under the outsourcing microscope would be wise to think like the head of an independent service organization (ISO) and, if necessary, take action. “If an outsource company’s reps were to come and meet with the C-suite, what language would they use? What would they say they could do better and more cost-effectively than you and your group? You need to think those questions through”—and consider making a pre-emptive presentation, says David Dickey, corporate director of clinical engineering for McLaren Health in Flint, Mich. As president of Clarkston, Mich.-based Medical Technology Management, he has consulted with numerous in-house CE departments outside Michigan on how to stay in-house or bring outsourced work back inside.

“In all the outsourcing and maintenance-insurance programs I’ve ever seen, the model is based on the premise that the vendor is going to force consolidation of all the clinical departments’ budgets,” adds Dickey. “In theory, the hospital will then only have to write one check for medical equipment service. Your in-house CE program can do the same thing” by centralizing costs within one budget. Under a consolidated, self-insured CE model, says Dickey, the in-house program can have the advantage because it can provide services at cost—parts and labor, straight up. “An outsource program has that same cost plus a margin, and I’ve seen markups as high as 100 percent over cost.”

2. Ask yourself and your team: How low can we go? In times when cash is king, like now, healthcare technology leaders agree that the gold standard for cost of service ratio is five percent or less. This means the in-house CE department’s budget “should be less than 5 percent of the total acquisition value of your inventory, and that 5 percent includes all service costs related to medical equipment, including service contracts,” explains Douglas Dreps, CE director for the Eastern region of the Chesterfield, Mo.-based Mercy Health System, which operates 31 hospitals in four states.

Meanwhile, in-house departments “should be recommending annual replacements and taking part in the capital review process. We can forecast two, three, four or five years out, but capital dollars are so short right now that we keep deferring items that we needed to replace last year or the year before. It’s become much harder to forecast out.” Dreps believes the increased degree of difficulty only buttresses CE’s standing as the best-qualified group for the task.

3. Transform your staff into integration experts. “We are definitely now looked to not just as the repair shop for medical devices. We’re certainly the entity that’s there to do the maintenance and repair, but also to provide total solutions, including integration,” says Jennifer Jackson, director of clinical engineering and device integration at Cedars-Sinai Medical Center in Los Angeles. Supervising a growing group of integration specialists along with the CE team, she’s found herself in the role of an integration evangelist, encouraging the CE staff to understand not only how the devices work on their own but also how they are connected so they can transmit data to the EHR.

“How do the data appear in the flow sheet? What is the clinician’s workflow in respect to that medical device and the EHR? What are the critical failure points in an integrated system?” says Jackson before noting that,