Flashback to the 1990s and you would find imaging providers paying upward of $180,000 annually for MR service contracts without batting an eye. In the hands of OEM multi-vendor service divisions, these contracts could be reduced to the tune of approximately $150,000.

Today, the costs of these service agreements have plummeted, with MVS divisions putting out margins of $60-$70,000 in order to make themselves viable for hospitals, networks, and clinics struggling to stay afloat on constrained budgets and declining reimbursements.

These financial challenges have had a direct impact on the consolidation of third-party providers, who have spent the last several years merging with or acquiring one another to grow their footprint and remain competitive with the OEMs by being able to service multiple modalities made by various manufacturers.

For OEMs and third-parties alike, success in the medical equipment service market means being able to accommodate providers with a high level of flexibility and a competitive range of expertise.

“We need to be prepared to respond to those market changes and adapt and do whatever we need to do to have a real strong presence there,” John Barbati, senior director in service business management at Siemens Healthineers, responsible for enterprise services, told HealthCare Business News.

The main instigators behind these changes within the MVS and ISO communities, however, are the end users themselves, who in the face of financial hardships have been forced to reassess the types of services they require on the limited resources at their disposal.

The make versus buy debate
Today very few providers are 100 percent in-house and 100 percent outsource, but instead a mixture of both.

“It’s typically a blend of those things that offer the best price quality and overall service solution,” Steve Inacker, president and COO of Avante Health Solutions, said. “You’re starting to see many more institutions start to evaluate that make versus buy decision, or even potentially shift from more in-house to more outsource and vice-versa depending on what they have as their current mix today.”

Such decisions come down to the types of equipment that require servicing with some providers only wanting their diagnostic imaging systems looked at, while others desire the same services to be applied to their biomedical equipment and laboratory diagnostic machinery in addition to their diagnostic imaging equipment.

“Hospitals are, more and more, choosing to go down the path of bidding everything, meaning that it’s going to be a biomed and imaging combined RFP (request for proposal) or tender versus maybe ten years ago when they would split it up,” James Salmons, vice president for Multivendor Services and All Parts Medical at Philips, said. “Maybe then they were perhaps more comfortable with one provider for biomed and a different provider for imaging, or even multiple providers for imaging. Today, there’s an apparent tendency at times to pick one winner.”

Companies that understand the unique needs of individual providers are the ones that are most likely to win those contracts, according to Sheila O’Donnell, VP of Crothall Healthcare’s Technical Resources Group.

“Customers are looking to optimize their assets and the value we bring. For instance, total life cycle cost is important to our clients,” she said. “Understanding where a customer has underutilized equipment or a need to standardize equipment is valuable information. We see more and more interest in our capital planning capabilities.”

A trend toward versatility and wide-ranging expertise
Back in the 1980s, X-ray was the one and only area for non-manufacturer imaging service agreements. That is not the case today.

“It’s evolved to where ISOs are now servicing all imaging modalities, including biomedical imaging equipment maintenance in some cases,” said Pat Fitzgerald, executive vice president and general manager at Richardson Healthcare.

The traditional role of the ISO has transformed in the last 30 years from entities specializing and providing services in one specific field to organizations equipped with skills and expertise to tackle problems plaguing multiple modalities from ultrasound to PET/CT. The ability to service equipment is also no longer tied to the specific manufacturer or the ISO’s origins.

“When most independents started, if they were ex-GE guys, then they would focus on GE equipment. Ex-Siemens would focus on Siemens and ex-Philips would focus on Philips,” Randal Walker, senior vice president of imaging equipment sales at Alpha Source Group, said. “When you go to an independent now and have a conversation about ten different pieces of equipment, odds are you have more than one option in the independent space that can handle 70-80 percent of that equipment. That’s a big shift.”

In addition to expanding into specialties, ISOs are increasing their levels of professionalism by tacking on different certifications such as ISO 13485 or ISO 9001, in order to compete with OEMs and bolster their reputations as safe and quality servicers.

Such achievements have come about through mergers and acquisitions between small ISOs, a trend that has afforded them opportunities to cross-train and expand the skills of their staff into new areas.

Manufacturer MVS departments are also pooling their resources with other entities and establishing partnerships with ISOs that allow them to meet service commitments in specialized areas while keeping their focus on the core areas of their service business.

“When the multi-vendors first started, they would jump in and want to control 100 percent of the service. What they realized is that there is a lot of small equipment in hospitals, where there may be tens to thousands of pieces, such as 4000 infusion pumps, for instance. Those are very, very thin margin, occasional touch pieces of equipment that they can use the staff for,” said Walker. “But then they say, ‘That doesn’t make sense. There’s somebody else I can partner with. I’ll give up a bit of margin to not have to deal with that much service.’”

Collaboration has also grown internally with the integration of MVS and OEM services like that of GE. “If you go back 23 years ago, we had different multi-vendor field engineers separate from our OEM field engineers. Today, we have one seamless team for our customers to call for quality support, regardless of the label on the equipment,” said Geoff Hunt, senior director of multi-vendor service operations for GE.

While MVS departments and ISOs are both committed to providing excellent service, Crothall’s O’Donnell points out that there is a fundamental difference in the way these two groups might view the job. “One criterion an OEM considers and measures when it takes on an MVS account is the conversion rate for those MVS sockets to the OEM’s sockets.”

Ultimately, the question of which service type is right for a provider comes down to which one can offer the best deal – and there’s no one right answer.

Advantages and disadvantages
Providers today are more educated and willing to take risks to obtain flexibility, creativity and cost-saving in their equipment service contracts. These desires have led all parties to become more aggressive in their pricing and open-ended in the sale of their service contracts. But it’s the actual services that require assessing for providers, to determine what the best fit is for their needs.

“We’re a 3PL (third-party logistics) organization. That makes it possible for us to get parts and tools to customers much more quickly and much more efficiently than a lot of ISOs would be able to manage, particularly the smaller ones,” said Siemens’ Barbati. “I can’t say this for certain, but I don’t know of any ISO that has a 3PL delivery system.”

This is just one advantage that Siemens and other OEMs possess, according to Barbati, adding that ISOs are more familiar with equipment that has been on the market for a considerable amount of time and therefore, may not be able to service new equipment as well as an MVS.

MVSs may also offer full-training organizations to help customers learn to evaluate and improve their clinical workflow and products, such as Siemens’ Share360, which provides end users with tools and knowledge for servicing equipment themselves, capabilities Barbati contends most ISOs have not developed.

“From the Philips perspective, I have the same set of requirements around how I service competitive products as I service Philips products, both in terms of my day-to-day activities and in how I report it, and the data that I show my customer,” said Salmons. “I think the OEMs collectively have a pretty mature QMS process to help guide us day-to-day in how we deliver multi-vendor services.”

More ISOs, though, according to Ken Smith, senior VP of sales and marketing for Oxford Instruments Healthcare, are becoming better equipped to offer many of the same services provided by MVS divisions at a more competitive cost.

“ISO consolidation has created independent organizations that have the scale and resources to compete with the OEMs, providing the same level of quality, experience and expertise but at a better value-based price because of the lower overhead,” he said.

ISOs may also have a reputation as being more nimble, capable of responding quickly to mitigate issues before they occur and initiate decisions around parts and overtime without necessarily having to consult managers, compared to the bureaucratic and regimented structure of MVS divisions.

“It’s about the ability to understand what the customer is looking for in terms of value and provide that value,” Bill Kollitz, president and chief operating officer of Innovatus, said. “It’s about being able to react quickly and provide solutions that meet the needs of our customer base.”

There is also a tendency to think of ISOs as being small operations, but that is not always the case.

“Crothall is part of Compass Group, North America, and our parent company, Compass Group is one of the largest employers in the world,” said O’Donnell. “We have phenomenal backing and resources. One example of these resources would be including the capital in our client’s proposal to bring our client’s shop up to date, outfitting it with casework and the needed tools and test equipment.”

MVS and ISO organizations look toward the future
Remote diagnostics continues to be a growing field of interest for both MVS divisions and ISOs, with both groups working to enable faster and more efficient troubleshooting of on-site resource calls with the backing of greater preparation and knowledge of what parts are needed.

Greater emphasis of AI, digital services and cloud capabilities are also expected for predictive analysis of equipment and automatic software upgrades, though Walker with Alpha Source warns that while efficient, such technologies may create hurdles for the next generation of service engineers.

“About fifteen to twenty years ago, we went from teaching people entire systems and how they worked to sitting them behind a computer and running software, to the software searching for where the problem is,” he said. “AI is going to push that even farther down, where there will be fewer engineers. Those that are here may not have a real knowledge of how the actual piece of equipment works.”

To Avante’s Inacker, change will come in the form of a more level playing field, with ISOs and MVS divisions sharing equal access to all aspects of equipment to perform full service at manufacturer specifications.

“I think that’s going to come to a head because the regulatory bodies are looking at this and saying every aspect of that piece of OEM equipment should be accessible to the customer and its service organization,” he said. “There’s a strong undercurrent of support for that in the industry.”

Experts agree that both MVS and ISO services will grow in scale and capabilities, keeping one another on their toes. The most successful ones, though, will not grow solely on their resources and capabilities, but in how they listen and respond to the needs of their customers.

“I think the things that are really important today are having tools that are required to service the customer in the way the customer wants to be serviced,” said Barbati. “I think that’s the future for all of us but it’s changing every single day. We just need to stay in front of it.”