Making a playbook for capital purchases

Hospitals and other healthcare facilities may rely on a diverse set of criteria to use to evaluate and select the equipment they need for the services and specialties they offer – before and after construction or renovation projects. Supplier and provider executives offer some clear recommendations on establishing selection criteria and communicating those criteria to the multidisciplinary committee making the decisions.

Establishing the criteria

“Supply chain leadership should align equipment purchases to the key criteria of Cost, Quality and Outcomes. Aligning clinical stakeholders, IT and clinical engineering is key for any high-dollar equipment purchases. Clinical preference must be accounted for, and IT compatibility and service costs must be known during the negotiation phase. It is the job of Supply Chain to know which suppliers meet the core CQO criteria for an equipment need.

“Supply Chain must have an efficient way to expand their pool of suppliers. Hitting Cost, Quality and Outcome requirements while adhering to the constraints of a construction project require the ability to know exactly what products are available from the 2,000+ equipment suppliers selling to U.S. hospitals. Supply Chain leaders don’t have the time to keep using the evolving product portfolios of all of these suppliers, nor do they have the time to develop relationships with all of those sales reps. They need to think out of the box and find a scalable, web-based way to quickly search for products, get quotes and buy.”

Tom Derrick, Senior Vice President and Co-Founder, OpenMarkets, a Chicago-based software-driven marketplace for healthcare equipment

“This can vary based on the department and the use of the equipment but, for a critical support space like central sterile, the criteria should hold clinical efficacy as the priority. Since the equipment must perform and downtime minimized, quality should be next. Being that the central sterile space is traditionally difficult to work in and staff strain a common issue, it is important that the equipment minimizes physical exertion and user errors. Workflow and throughput are essential. The proposed solution must meet the demands from surgical services, include inservice support and involve total cost of ownership in the decision-making process.”

Steve Sutton, Director, Planning and Design Group, Belimed Inc., North Charleston, SC 

“Sourcing capital is always a challenge for Supply Chain executives, in particular the very large and expensive medical imaging and lab processing type machinery. In order to manage this well and get the best equipment at the best price, either purchasing negotiators need to be involved from the outset of sourcing the devices or the clinical department must be trained on how to best manage the entire sourcing timeline. At CHKD, we use third-party price comparison data through GPO database, ECRI SelectPlus, MD Buyline, etc. Some of our clinical leaders use the same comparison tool as they source large equipment for their respective departments and some prefer we do that in the supply chain area.

“The challenges seem to happen at the point a clinical leader decides a single manufacturer is ‘best’ and communicates that information to the preferred vendor prior to using all available information to get the best price. We help avoid that through education and training, and, unfortunately, we occasionally deal with this on a trial-and-error basis. The key is to get all the information in front of the clinical leader long before any commitments – casual commitments or otherwise – take place.

“I find it useful to have facilities construction to get a general estimation for the rough pricing from third-party comparison tools without triggering the vendor community of such activity. When the time comes for sourcing and purchasing the final piece of equipment, Supply Chain together with the clinical leader will best negotiate with all manufactures who meet certain criteria, either through RFP or quote solicitation.”

Danny Blount, Director of Supply Chain at the Children’s Hospital of the Kings Daughter, Norfolk, VA

“Hospitals and healthcare networks need to be careful when selecting equipment to not cut corners that can compromise their level of care. For every great product that can enhance a patient’s stay, there are multiple knock-offs that won’t deliver the same value. Making a decision with price as the leading factor is dangerous for patients.”

Bryce Stuckenshneider Vice President, Marketing, Clarus Glassboards

“Hospitals should evaluate storage equipment not only based on how much product can be stored within a particular footprint, but whether or not that storage device provides other benefits, such as improved ergonomics and productivity. Also, it should be able to interface with existing hospital ERP/EMS systems to provide asset tracking benefits to both SPD and Supply Chain. In today’s environment of reduced reimbursements and pressure to keep surgery schedules full, it is imperative to provide a storage solution that can truly work within the Lean Six Sigma model.”

Amy Flynn, OR/CS Market Manager, Hänel Storage Systems

“1. Function: First and foremost, the equipment selected must meet the necessary clinical and operational requirements.

2. Cost: The facility must evaluate both the cost of acquisition and installation or relocation, and the total cost of ownership, including supplies, service contracts, utilities costs and life cycle. The cost of medical equipment is a major factor in all projects. If the hospital or healthcare facility is associated with a GPO, they should consult the GPO-associated vendors for the best pricing possible. If they do not belong to a GPO, the facility should evaluate which items can be purchased from the same vendor. Vendors typically offer a bulk order discount, which can equal huge savings.
3. Standards: Consider current facility standards, why these standardization decisions were made and if should they continue to be applied.
4. Service: Equipment uptime is critical. Consider vendors that can provide the service needed on a consistent basis. The level of clinician/owner satisfaction is often directly related to vendor service. If clinicians are unhappy, they should first verify that their issue is unresolvable. For example, if central sterile has an issue with a sterilizer, verify that service was requested and performed. Preventive maintenance is a very valuable tool that is often underutilized. If the issue is unresolvable, determine the best alternative is for the situation.
5. Life Cycle: The facility will want to ensure the equipment selected will maintain its usefulness. Verify if the equipment is upgradable, and if the upgrades and improvements can be easily incorporated after the initial purchase. This is especially important for imaging systems.”

Christena Fournier, Technology Consultant, Mazzetti+GBA, a global provider of healthcare mechanical-electrical-plumbing engineering design and technology/information technology consulting

“When selecting equipment for new or renovated spaces, the clinical/administrative staff will qualify the selection with a multidiscipline matrix, including: Life cycle, power and data requirements, cost to benefit for competing technologies, and future replacement versus upgrades. Though these selections are often made to solve an immediate need with the administration’s understanding of patient demographics and the clinicians’ knowledge of potential new service lines on the horizon, a powerful decision matrix can ultimately scope the architecture to support the current/future services provided with the new/future equipment.”

Michael Compton, AIA, LEED AP, EDAC Healthcare Architect, RS&H

“Whether the equipment meets the minimum clinical requirements is a vital part. Along that same line, knowing the ability to scale or upgrade the equipment from a technology perspective is something that should always be considered so that maximum value for the purchase can be achieved. Total cost of ownership, including installation, service and parts costs, preventive maintenance expense, training and any software upgrades should be a part of the evaluation criteria at the very least, if not a full blown financial pro forma, depending on the cost of the equipment and the project overall. Finally, an in-depth and objective technology assessment comparing the equipment to other systems/equipment in the market is a piece that should not be ignored.”

William Stitt, CMRP, FAHRMM, CHFP, Chief, Supply Chain Management at University of Mississippi Medical Center, and Principal and Chief Operating Officer, Credibility Healthcare LLC

“If you’re offering a new service, it’s essential that everyone and anyone associated with providing direct or indirect support are involved in discussing the workflow. So if you’re talking about imaging, you need to involve the transporters to determine, for example, how they are expected to bring the in-patient population to imaging, to lab, to patient registration, to EVS.  Although not always a standing member of a ‘design team,’ they are critical to providing input on what they need to be able to do their jobs in support of the new area. Last minute ‘Oh by the way, we’re opening up a new ED tomorrow and need your help’ doesn’t work without planning appropriately.”

Ric Goodhue, CMRP, Equipment Planner and Capital Coordinator, CaroMont Health, Gaston, NC

“Evaluate every piece of equipment and process change using a ‘zero-based’ mentality.  In other words, use a value-based set of criteria for all significant decisions.

• Continue to think about ‘WHY’ something needs to be purchased or changed rather than ‘when.’
• What is the ‘value-added’ equation for the decision?
• Always understand and identify both ‘hard and soft’ issues and openly discuss them with all interested parties in the project.
• The real issue is to get Stakeholders to buy into their commitments, and even more importantly, acknowledge their personal commitments. These should be made in a formal fashion, and followed up to ensure they are achieved.
• The ‘Economic Payback Period’ should be well known by all Stakeholders, and should be based on the issue and risk/reward at hand.”

James Dickow, President, Dickow Consulting Services LLC, Milwaukee

“Selecting the right equipment for your space requires a trusted partner to help you identify potential issues, and those challenges are best addressed by involving vendors early on – in the design phase instead of the RFP phase. This can help health networks look at a problem from a really high level – beyond specific equipment – and identify the right design for the space that will be the most productive, not just look the best. New technology or equipment is less effective if the design doesn’t support its integration, so it’s important to look at both elements in tandem.

Our customers have the best success when their decision-making teams involve not only supply chain representatives, but also actual users of the equipment and staff members responsible for elements like ergonomics, infection prevention and process improvement. This helps to ensure that the group is looking at a holistic solution.

For example, an exam chair with integrated scale may cost more when compared only on features to similar products. But, if that exam chair enables having vitals measured in the exam room vs. a hallway, or if it is connected to an EMR that reduces manual errors, you not only save conveyance time, but mitigate the risk of errors caused by manual data entry. Without involving a full group to think through that process, it could be easy to overlook all the benefits that justify a more expensive upfront cost. Knowing the desired state and what steps are needed to get there helps to make sure the full group can help the construction/renovation be really impactful.

Michael Couch, Marketing Manager, Medical Casework, Seating & Care Exchange Products, Midmark

Communicating the criteria

“Supply chain should lead that committee! Further, a proper process will head off concerns. The right way to plan for equipment purchases – whether in a construction/renovation project or not – is for a set of criteria to be established up front and signed off on by the proper teammates in a transparent setting. IT, Supply Chain, Finance, clinical teams and clinical engineering all need to okay major equipment purchases in both the budgetary and the requisitioning phases.   

“I recommend Supply Chain pitches their ability to be an efficient administrator of a multi-disciplinary committee. Let Finance, Operations or Strategy serve as the chairman of the group, but if a Supply Chain leader is providing the administrative elements, then he or she will influence the process, gain respect and trust and ensure a seat at the table. The latter is all too often missing. If a Supply Chain leader is concerned about the administrative burden of running a capital planning committee, there are solutions to automate this.”

Tom Derrick, Senior Vice President and Co-Founder, OpenMarkets, a Chicago-based software-driven marketplace for healthcare equipment

“When dealing with complex construction projects with multiple decision makers with potentially conflicting interests it helps to provide examples of how certain decisions may affect the end result of the project. Here are a few examples.

1. Clinical Efficacy: Washer A only achieves an A₀ value of 600 but, Hepatitis B and TB are heat-resistant and can survive the thermal disinfection process. Because the staff handles the instrumentation in the clean assembly area, they could potentially be exposed to Hepatitis B and TB from contaminated surgical instruments. Washer B achieves an A₀ value of 3,000 and thus neutralizes the heat resistant viruses, minimizing the risk to staff.
2. Quality: Sterilizer A uses solenoid valves to control steam during the cycle. These solenoid valves lack finite control of usage and need to be rebuilt often causing risking unplanned downtime. Sterilizer B uses pneumatic valves that allow greater control of the cycle and are more reliable.
3. Ease of Use:  Sterilizer A’s lowest shelf is 12 inches above the floor. Because the heaviest trays should be loaded on the lowest shelf, the staff will have to bend down to load heavy instruments. Sterilizer B’s lowest shelf is 36 inches above the floor, minimizing staff exertion thus being easier to use.
4. Workflow/Throughput:  Solution A proposes only three washers. However, the daily throughput of the equipment only allows for processing of 75 percent of the total daily demand from the OR. The consequence of this is either an increase in overtime or staffing with additional surgical inventory to compensate for the lack of throughput. Solution B proposed four washers with space for an additional one to accommodate the eventual surgical growth.
5. In-service Support:  What kind of training will the staff receive once the equipment is installed? Are there online modules to train new staff and refresh existing staff? How much time will the vendor spend on-site after go-live?
6. Total Cost of Ownership:   Capital expense is the first number everyone sees, but when looking at operational cost and service cost, this number can be quickly dwarfed by your total cost of ownership. Most vendors can help you calculate this using your specific usage rates. We always recommend to trust, but verify.”

Steve Sutton, Director, Planning and Design Group, Belimed Inc., North Charleston, SC 

“My health system has found using a highly visual requisition tool, OpenMarkets, to be invaluable at helping the multidisciplinary planning group see what is being requested, by whom, for what project and when it is expected to be placed in service. Without some automation in place, sourcing sometimes happens in silos and without multidisciplinary oversight. Furthermore, not having a highly visual requisition system and still attempting to communicate to all that need to know will cause a very long – and most often unacceptable – time lag.”

Danny Blount, Director of Supply Chain at the Children’s Hospital of the Kings Daughter, Norfolk, VA

“A selection scorecard is a useful tool when multiple people are evaluating decisions. That way a team can make a decision based off the blend of aesthetics, safety, performance, longevity and price.”

Bryce Stuckenshneider Vice President, Marketing, Clarus Glassboards

“An effective sterile storage solution impacts all aspects of surgery – from SPD storage to picking case carts and communicating PAR levels and expiration dates to supply chain/materials management. Supply Chain, SPD, OR, Infection Control and IT are all typically involved in the purchase of a comprehensive storage solution, and should be brought into the decision-making process as early as possible.”

Amy Flynn, OR/CS Market Manager, Hänel Storage Systems

“Ideally, the design team and Supply Chain will work together to identify current standards and preferred vendors and determine any new standardizations or vendor relationships the hospital wants to establish. This teamwork should begin as early as possible and continue throughout the design and planning of the project and into procurement.

“Including Supply Chain as a member of the design process is important because procurement decisions can impact the overall cost of a construction project. If an item outside of the hospital standards is requested, the team should work together to address the need and resolve any issue. As with anything team related, communication is key. Whether face-to-face or via email or submittal, the input from Supply Chain is invaluable to the multidisciplinary planning committee.”

Christena Fournier, Technology Consultant, Mazzetti+GBA, a global provider of healthcare mechanical-electrical-plumbing engineering design and technology/information technology consulting

“Frequent Meetings: Regularly scheduled meetings with standing agenda items concerning technology decisions and associated impact are discussed. Minutes, action items, and responsible party assignments are critically important as well.

“Intranet/VPN: This is especially important to communicate those topics needing attention between scheduled meetings. It’s also useful to provide updates on action items from meeting minutes.”

Mike Reid, Vice President, Construction, Capital and Facilities, Intalere

“Open and transparent communication with all parties is the easiest way to eliminate misunderstandings or insufficient equipment/space. A statement of conditions followed by proposed additions with a question and answer session will yield the desired result and more coordinated delivery of space.”

Michael Compton, AIA, LEED AP, EDAC Healthcare Architect, RS&H

“Ideally, Supply Chain should be part of the planning committee/process. As experts in procurement, logistics and operations, when decisions like this happen without those individuals at the table, there is an inherent risk of the right questions not being asked. In the absence of that, established formal criteria can be included via a formal technology assessment process imbedded in the capital and equipment planning function, which is also a good tool, even with Supply Chain involvement.”

William Stitt, CMRP, FAHRMM, CHFP, Chief, Supply Chain Management at University of Mississippi Medical Center, and Principal and Chief Operating Officer, Credibility Healthcare LLC

“Simple. Be at the table when the planning starts. Although it’s easy to say, it’s oftentimes more difficult to achieve. Communication, collaboration and coordination are all key elements of any plan. Applying those principles on a day-to-day basis is essential. Supply Chain executives are typically part of the organization’s senior management team. As soon as discussions surface about potential projects, they need to ensure they – or a designated representative – has a seat at the table. How best to do this? Supply Chain needs to make itself a necessary part of any project by adding value to the planning process. This will include not only budgeting for equipment, but also providing insight into new technology for the various service lines. Supply Chain isn’t just about price. It’s about bringing new technology that meets the needs of the organization for the best value. Providing alternatives from one supplier to another, as long as it’s clinically acceptable, is important. Most of us in Supply Chain for a while have heard, ‘You’re not going to tell me how to treat my patients! before. We’ve never wanted to do that. Instead, our desire is to provide the best technology today – and for some time in the future – at the best price. We want to help strategically plan and build for the future, while effectively and efficiently reducing the cost.”

Ric Goodhue, CMRP, Equipment Planner and Capital Coordinator, CaroMont Health, Gaston, NC

“The Supply Chain Management area should conduct a comprehensive review and evaluation of the affected operational areas early in the planning process.  As a general rule, this is the best time to consider making significant and progressive changes to supply methodologies.  A Strategic Operational Plan should be formulated, and presented to the Multidisciplinary Planning Committee for their approval.

“This review should consider all related factors and facility issues. In addition, the analysis should include both fixed and incrementally variable aspects of both facility and operational topics. All stakeholders and affected parties should be included in the process. Tradeoffs should be discussed and risks and rewards identified. The economic impact should be identified for review and consideration of senior leadership.”

James Dickow, President, Dickow Consulting Services LLC, Milwaukee

“One method we’ve seen be really successful are simulated environments. By involving more team members from different backgrounds in the decision-making process early on, there is more ownership from the planning committee when it comes to capital equipment. Most planning committees and architects work with the users to understand current struggles in the rooms and look to solve those issues in the new building/remodel. If all partners were offered an opportunity to speak to those issues before the final design and see some of those concerns in action, it would help the planning committee validate their design without making costly assumptions.”

Michael Couch, Marketing Manager, Medical Casework, Seating & Care Exchange Products, Midmark