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How to Evaluate New Technology and MakeRational Decisions When Purchasing New EquipmentJohn P. Abenstein, M.D. Rochester, Minnesota

114Page 1

Introduction

Procedural suites, including operating rooms, and intensive care units are some of the most cost intensiveenvironments in a medical facility. The inefficient use of personnel and resources can turn what is traditionally arevenue center into a cost center. Technology is a major cost driver within these locations and the practice of anesthesiology, like much of procedure-based medicine, is highly dependent on advanced technology. Carefulevaluation of new equipment can assist a practice in making rational purchasing decisions. Not only will this process help to lower costs, it can also improve the quality of care.As medical reimbursement continues to decline, the capital available to purchase new equipment decreases. Everydollar spent on technology that is overpriced, doesn’t work, or is not needed is a dollar that can’t be spent on patientcare. Therefore, it is vital that the evaluation process be carefully thought out, be consistent with the process withinthe medical center, and have the support of institutional leadership and departmental members. Strategies may differ from department to department, but those with a defined evaluation process are able to hold down costs and avoid purchasing technologies that do not meet practice needs.

Institutional Issues

Before developing a departmental strategy for equipment evaluation it is important to understand how equipmentrequests are reviewed and approved within a medical facility. In some practices all the equipment is purchaseddirectly by either individual physicians or the anesthesiology department. More commonly though, capitalequipment is purchased at the institutional level, usually with an annual budget. In these environments, theDepartment of Anesthesiology is competing with other departments for these capital dollars and equipment requestshave to be well documented and justified. These are formalized processes requiring a specific documentation. For very large purchases (e.g. > $1,000,000) many institutions require purchase requests to be first analyzed byaccountants to determine the broad fiscal implications the purchase will have on the organization. Understandingthis process is a key element for successful technology acquisition and management.Institutions often place constraints on departmental decision making. The facility may be part of a buying group andequipment purchases are restricted to what products are on the buying group’s price list. There may bestandardization agreements restricting a class of equipment to only one vendor. Information technology can be acritical part of the decision making process. For example, is interfacing required after the new technology arrives? Not only is cabling required, but data transfer must be compatible with existing databases, or an interface will haveto be developed and maintained. Our experience shows that each new interface costs $50-100,000. Projects that areconsistent with the technology infrastructure of the institution, from purchasing to maintenance to interfacing,improve the quality and success of the procurement process.It is also important to understand the people involved in the process. It is well worth the time to learn the history of medical technology within the institution. Who’s gotten burned in the past, by what vendor, and what’s been theconsequence? Who’s working with what company, either in a research or consulting role? Who has an ax to grind,either with a vendor, another department, or between individuals? When motivations are difficult to figure out – follow the money.

Consideration of New Equipment

There are a number of ways that the purchasing process for new equipment is triggered. These fall into two basiccategories: maintenance purchases and new technology acquisitions. Both have unique issues that must beaddressed.

114Page 2Maintenance purchases are those that replace existing, established technology with new devices that provide thesame basic functionality. Reasons for replacement include: equipment is at the end of its useful life, does not meetregulatory or safety standards, frequency of failure is increasing, spare parts are difficult to procure, or the device isno long supported by the manufacturer. It is important to confirm that the stated reasons for replacement are true, bychecking maintenance logs, speaking with the manufacturer, and reviewing regulatory and safety requirements. Adepartment’s technology base must not be allowed to fall into disrepair and obsolescence which put patients at risk and lead to staff frustration. The ASA’s recent statement on anesthesia machine obsolescence is a good example of how to determine when equipment needs to be replaced(http://www.asahq.org/publicationsAndServices/machineobsolescense.pdf).Acquisition of new technology can be initiated a number of ways. Department members return from a meetingwhere they heard a talk or attended a vendor presentation on the use of a new device. Salespeople visit thedepartment showing a new piece of equipment or lending it to a physician to try. Scientific papers introduce newequipment to the medical community at large or identify patient safety issues with a technology. Unfortunately, acommon approach to new technology is a belief that “if it’s new it must be better”. Experience and the literatureshow this not to be true. A more rational approach is needed.The need for new or replacement equipment should be determined by a prospectively developed evaluation andapproval process. This process should consider not only what impact the technology will have on the capital andoperational budget of the facility, but its impact on the patient care, operational efficiencies, and downstream effectson the rest of the institution.

Equipment Evaluation and Management

A useful first step is to identify one physician in the department as the equipment chair, usually an individual with atechnology background and experience with industrial relations. Depending on the size of the enterprise, a fullmanagement group is often useful. The equipment team should include non physicians that also use the equipment, biomedical technicians that maintain the devices, and support from purchasing and accounting. This group should be responsible for evaluating and recommending new technology and managing an equipment budget, but shouldnot be empowered to make purchasing decisions. The equipment team should forward their recommendations to thedepartmental leadership for purchasing approvals greater than a predetermined dollar amount. This creates avalidating step in the decision making process from a more disinterested perspective.Before examining new technologies, policies should be in place defining the process for equipment evaluation. For example, will “equipment fairs” be used by the department? Will technology be tried in the clinical setting on real patients? If so, who uses the trial equipment, for how long, and how is success determined?It is suggested that equipment fairs be rarely if ever used, since they usually only identify who brought the best bagels. It is reasonable to use technology in the clinical setting, but only after criteria for evaluation has beendeveloped, and for a limited period of time. It is not appropriate to have a vendor representative in the clinicalsetting during the evaluation period. Written feedback should be required by all individuals who use the equipment.If a large purchase is being considered, (e.g. replacement of all the anesthesia machines or monitors), a visit to themanufacturing facility should be considered, but only if the department pays the cost of travel and lodging.Administrative considerations must be included as part of any evaluation. The purchasing department should be brought into the process as early as possible. Once a vendor has been told their technology has been selected, theability to negotiate pricing or support essentially disappears. An attempt must be made to determine the cost-of-ownership of the proposed device. The cost of a maintenance contract can be a good proxy for the cost-of-ownership, since companies rarely lose money on these contracts. Reliability, cost of spare parts, upgrade paths,and experience in other medical centers are all information that can assist in decision making. Including biomedicaltechnicians in the process can assist in gathering this information, and if they conclude that the device appears to beunreliable in design, will be expensive to maintain, or impossible to upgrade it is well advised to heed this adviceand consider another manufacturer.

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Vendor Issues

Vendors have one fundamental function and that is to transfer money from your institution to their company. Often, but not always, this in the context of providing a needed product. Most departments have store rooms with unusedtechnology that were purchased with high hopes of improving quality of care or efficiency, but turned out to be of little use. For example, processed EEG’s, triple index monitors, and noninvasive cardiac output devices have been purchased in the past, at significant expense, and today are gathering dust. Salespeople are trained to convince physicians and nurses that their product must be used in order to deliver high-quality medical care. At times thesecompany representatives attempt to play the role of an expert physician explaining how one can improve their practice by introducing the technology into their practice. Vendors are often not objective and don’t always haveyour best interests in mind.A key step in managing equipment evaluation is to control vendor access. Although many department membersenjoy the free food, pens, and attention, unfettered vendor access leads to poor decision making. Even beforestarting an evaluation process the department would be best served by limiting vendor access. It is better to havevendors interact with only a small number of individuals and develop departmental rules to significantly limitvendor access to department members. No company displays should be allowed in the facility, no mailbox stuffing,no equipment fairs, no food, no gifts and no company funded “CME” even if they are “just” providing a physicianspeaker. These recommendations are consistent with the Department of Health and Human Services ComplianceProgram Guidance for Pharmaceutical Manufactures. Some physicians resent these restrictions as an attack on their autonomy. The department’s and institution’s interest in carefully expending capital dollars supersedes physicianautonomy.

Technology Assessment

Formal technology assessment is often done by large organizations, particularly third party payers. There are also anumber of organizations that do their own technology assessments which are available by subscription. TheEmergency Care Research Institute, (ECRI, www.ecri.org) is one such organization. Subscribing to these servicescan be useful, not only for the technology reports but also to gain an understanding of how new medicaltechnologies and therapies are evaluated. Although, formal technology assessment is impractical at thedepartmental level, the basic principles of this process can be a useful guide for decision making.The Blue Cross Blue Shield Insurance Companies have medical advisory committees which are made up of physicians and community members that make recommendations to Blue Cross as to whether a medical interventionis accepted medical practice and should be reimbursed. In order for a new technology to meet this standard it must be shown that:• The technology must have final approval from the appropriate government regulatory bodies• The scientific evidence must permit conclusions concerning the effect of the technology on healthoutcomes• The technology must improve health outcomes• The technology must be as beneficial as any established alternatives• The improvement must be attainable outside the investigational settingUnless a new technology, or a new use for an accepted technology, meets all five criteria it is not deemed acceptedmedical practice.A less complex way to think about introducing new technology is to determine what the expected patient outcomesare. A new technology can be expected to improve, worsen, or not change clinical outcomes. The technology willincrease, decrease, or not change net resource expenditures, (i.e. cost, efficiency, personnel). If the new practiceimproves outcomes for the same or less expense the change is considered to be cost-effective. Conversely, if thechange worsens outcomes for the same or greater cost, it clearly is not cost-effective. Although there are nine possible consequences of a practice change, most commonly it will increase costs and, at times, improve outcomes.This relationship is seen in Figure 1.

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Upload Date:	01/24/2008
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