In-house vs.

Out-sourced InOutClinical Engineering

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

Disclaimer/Transparency
 

I do have a biased opinion! 30+ years managing in-house clinical engineering inprograms


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 outin-

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

I do agree


 

OutOut-sourced programs may make sense for smaller hospitals, < 100-150 beds, especially if they are not part of a 100larger system with internal CE resources Not all in-house, or out-sourced, programs are created inoutequal 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

Top Ten+ Differences

In-House Out-Sourced

Services provided at cost, no mark up

Services provided at cost + margin

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!

Top Ten+ Differences

In-House Out-Sourced

COSR on a well developed program run at 4- 5%

COSR can be at 7-15% +

Top Ten+ Differences

In-House Cost savings as a result of parts shopping and negotiated discounts lower CE program budget Out-Sourced Cost savings as a result of parts shopping and negotiated discounts improve vendor profit margin

Top Ten+ Differences

In-House Out-Sourced

CE staff committed to one organization

CE staff need to be committed to two organizations

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

Top Ten+ Differences

In-House Out-Sourced

Software and data owned by hospital

Software and data may be owned by vendor

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

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.

Top Ten+ Differences

In-House Out-Sourced

No conflict of interest

Potential conflict of interest if the provider also sells equipment

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.

Top Ten+ Differences

In-House Every $100k in savings offsets need to collect 100% on $3.3 m in patient charges, if hospitals net operating margin is 3# Out-Sourced Every $100k in savings contributes to profit margin of the provider

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!

Top Ten+ Differences

In-House Hospital maintains control over staffing levels and assignments Out-Sourced Provider maintains control over staffing levels and assignments

Top Ten+ Differences

In-house Expansion of duties provides endless opportunities to add value and save $ (i.e., IT clinical system systems management) Out-Sourced Expansion of duties provides endless opportunities for additional revenue

Top Ten+ Differences

In-House Hospital fully responsible and liable for negative outcomes and related damages, if any Out-sourced Hospital fully responsible and liable for negative outcomes and related damages, if any, but at least now has someone else to share the blame

Issues of concern when converting to in-house from out-sourced program inout         

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

In order to convert to an in-house inmodel

     

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.

If you have an out-sourced program out

      

Perform bi-annual assessment of equipment actually serviced, PM or biCM, 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@mtminc.org)