March 7, 2015

At many hospitals, 30-50% of clinical engineering (CE) costs are hidden within other departments, making it impossible to track expenses — let alone find ways to save — without auditing each department’s expenses line by line.

Without an accurate picture of what you’re spending in equipment purchase, maintenance, repair, downtime and more, you’ll just keep pouring money down the drain. You could also be on the hook for regulatory compliance issues.

Effective CE programs should consistently save money, not spend it. And that starts with knowing where to look for hidden costs.

Below are three areas where up to half of CE expenses hide:

1.    Service Contracts
Perhaps the greatest source of CE expenses that evade the control of the CE department are service contracts with the original manufacturer (OEM) when equipment is purchased.

These contracts come at a high cost to the hospital for two reasons: (1) they don’t take into consideration the internal talent, skills and resources you’re already paying for within your clinical engineering staff, and (2) they nickel-and-dime you with additional fees for “extras” like service calls outside of business hours.

Service contracts also tend to create unwarranted dependency where hospital staff immediately calls the OEM for repair and preventive maintenance as their first recourse, rather than your in-house CE staff.

2. Miscoded Expenses in the General Ledger

CE expenses often get coded incorrectly under a different department like radiology or surgery, and misclassified as “Other Med Care Materials” or “Other Expenses” in the general ledger.

In an audit of 14 U.S. hospitals, we found that a significant percentage of medical equipment expenses were miscoded and landed within the following departments with no reference to repair in the description:

  • Surgery/Operating Room: 21% of expenses
  • Services (Dialysis, Gastrointestinal, Cardiac Catheterization): 14% of expenses
  • Radiology: 12% of expenses.

When it comes to service contracts, the general ledger will likely provide visibility into only half of expenses. This is because service contract costs could be attributed incorrectly, coded as pre-paid, or payments may be missing for the year being reviewed. The result is an incomplete, blurry view of your true equipment inventory, value and total cost of ownership.

3. Underdeveloped Clinical Engineering

Centralization of CE costs in the CE department is critical for reducing the total cost of ownership for your capital assets, but not enough. High-performing CE programs are equipped appropriately with the right staff, training and technology to accurately track, manage and report on capital assets at a moment’s notice.

After all, sustainable CE savings hinge on your department’s ability to discern whether you have too little or too much inventory, and to forecast performance, usage and service needs so you make decisions based on data; not hunches or false information.