In-house vs. Out-sourced Clinical Engineering

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In-house vs. Out-sourced Clinical Engineering

• David M. Dickey, CHC, CCE
• Corporate Director, McLaren Health Care Clinical
  Engineering Services

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Disclaimer/Transparency

• I do have a biased opinion!
• 30 years managing in-house clinical engineering
  programs
• Currently Corporate Director CE McLaren Health
  Care
• 15 years clinical engineering consulting
  (Medical Technology Management., Inc.)
  www.mtminc.org
• 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

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I do agree

• Out-sourced programs may make sense for smaller
  hospitals, lt 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
• Quality and education of the staff
• Resources
• Administrative support
• Fix it shop vs. a professional servicewhat
  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

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Top Ten Differences
In-House Out-Sourced
Services provided at cost, no mark up Services provided at cost margin
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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!
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Top Ten Differences
In-House Out-Sourced
COSR on a well developed program run at 4- 5 COSR can be at 7-15
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Top Ten Differences
In-House Out-Sourced
Cost savings as a result of parts shopping and negotiated discounts lower CE program budget Cost savings as a result of parts shopping and negotiated discounts improve vendor profit margin
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Top Ten Differences
In-House Out-Sourced
CE staff committed to one organization CE staff need to be committed to two organizations
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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
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Top Ten Differences
In-House Out-Sourced
Software and data owned by hospital Software and data may be owned by vendor
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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
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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 failure rates or not in use.
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Top Ten Differences
In-House Out-Sourced
No conflict of interest Potential conflict of interest if the provider also sells equipment
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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.
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Top Ten Differences
In-House Out-Sourced
Every 100k in savings offsets need to collect 100 on 3.3 m in patient charges, if hospitals net operating margin is 3 Every 100k in savings contributes to profit margin of the provider
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Example of cash impact if you outsource

• If inventory is 290,000,000
• 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 hospitals 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!

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Top Ten Differences
In-House Out-Sourced
Hospital maintains control over staffing levels and assignments Provider maintains control over staffing levels and assignments
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Top Ten Differences
In-house Out-Sourced
Expansion of duties provides endless opportunities to add value and save (i.e., IT clinical system systems management) Expansion of duties provides endless opportunities for additional revenue
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Top Ten Differences
In-House Out-sourced
Hospital fully responsible and liable for negative outcomes and related damages, if any Hospital fully responsible and liable for negative outcomes and related damages, if any, but at least now has someone else to share the blame
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Issues of concern when converting to in-house
from out-sourced program

• Software CMMS and data conversions
• Test equipment and tools
• Manuals
• Over due PMs and CMs 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

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In order to convert to an in-house model

• Develop a business plan (three years), based on
  cost and quality
• Set realistic goals and expectations
• Consolidate all service budgets into one
• Include contract/vendor management services
• Start with general biomedical equipment support
• Plan for expansion into service of ultrasound
  sterilization imaging cath lab clinical lab
  radiation oncology surgical instrument mgt.

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If you have an out-sourced program

• 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 PMs not done on time
• Obtain quarterly downloads (Excel format) of
  inventory and work histories
• Consider getting helpcall me when you are ready
  to save money!
• 
  (daved_at_mtminc.org)