What does the U.S. health care industry have to do to survive?
October 28, 2014
The U.S. health care system is going to be put under a tremendous amount of pressure in the years to come.
One fact staring us in the face is that the U.S. Census Bureau estimates the number of Americans today over age 62 now stands at 46 million. The government believes that number will be 82 million by the year 2030. That sounds like a long time, but that is only 15 years from now
Obviously older people are the ones who are going to need the most health care — so everybody can connect the dots for themselves: more services will be required for more people.
Over the past few years, we have seen a real trend going toward IDNs trying to gain a better handle on controlling their operating expenses. This holds true for all expenses, and especially big-ticket equipment maintenance costs associated with CT or MR service.
More than ever, we are seeing IDNs seeking alternative service options for some high-cost assets. These options can include some lower cost models from the OEMs, alternative service companies like independent service organizations, OEM Multi-vendor service organizations, or even in-house clinical engineering teams. These are all various service options IDNs and hospitals now are carefully considering.
For many years, our industry accepted apractice of actually paying as much, if not more, for equipment maintenance of an asset over its lifetime than its original purchase price.
If you look at a Total Cost of Ownership model on a high end imaging modality, such as an MR system or a CT system, it is not unusual to see an IDN actually doing just that. They pay more to maintain it than they did to buy it.
I think most people would agree that the average consumer would never accept that kind of an ownership model for the products they buy. You would not buy a refrigerator for $2,000 and expect to pay $2,000 in maintenance expenses over the course of its lifetime. You would probably just go buy another one. And for higher ticket items like an automobile, you would not buy a $50,000 automobile and expect to pay $50,000 in maintenance expenses over the course of the seven or eight years that you own it.
That is an economic model the average consumer would not tolerate.
Now in fairness, high end DI assets are revenue generating, and a different TCO model can be acceptable as part of a comprehensive business plan. But IDNs and hospitals did not have alternative service options that were very well-established in the past. In recent years however, those alternative options have become readily available and very viable. Choices exist today that can reduce expenses without compromising patient care or clinical uptime.
The other realization that hospitals and IDNs are coming to understand is that not all of their major capital assets have to be treated equally when it comes to equipment maintenance and level of care. The service level that you might need for an acute care 64-slice CT system that is located in your emergency department might be totally different from the level of service maintenance that you would need for a 16-slice system that is located in your diagnostic imaging department because they are used very differently and relied upon differently.
I think that as health care continues to look at operating cost efficiencies, we are going to see the trend of hospitals and IDNs seeking alternative service and really taking a much more aggressive management approach towards the assets they own and operate. The asset management model is really beginning to prevail. Today, there are a growing number of companies that specialize strictly in helping IDNs with asset management, and those companies will continue to help provide benefit from economy of scale.
The bottom line is that as a society, we will be forced to provide a tremendous amount of additional health care with a disproportionate amount of funding. High end equipment maintenance choices will need to be carefully considered to fit the new economic model, while providing quality diagnostic exams with no increased risk to the patient or the Provider
About the author: Tom Spees is a 30+ year Healthcare Industry veteran having held numerous executive positions in marketing and sales. He has experience relating to sales and service of diagnostic imaging capital equipment, digital radiography, PACS, as well as extensive background in imaging components. He is the Director of Sales, North America, for the GTC Division of Philips Healthcare, known commercially as Dunlee.