Capital medical equipment, equipment that is neither disposable nor consumable, is used daily in the diagnosis and treatment of medical conditions.
It is a significant investment. It is considered an asset. It contributes to the long-term profitability of healthcare facilities.
Choosing and vetting capital medical equipment can be stressful and all consuming, but it does not need to be.
This article will discuss ways to manage the buying process to minimize stress on the people involved and set the stage for smooth, efficient procurement of vitally important capital medical equipment.
We will explore:
- What is Capital Medical Equipment?
- Importance of Selecting the Right Equipment
- Key Factors to Consider When Buying Capital Medical Equipment
- Tips for a Successful Purchase
- Procuring Capital Medical Equipment with CME Corp.
- Capital Medical Equipment FAQs
What is Capital Medical Equipment?
Capital medical equipment is defined as medical equipment purchased with the intent of generating a profit and which will benefit the organization beyond one year.
To be defined as capital medical equipment five attributes must be satisfied.
Acquisition Cost
Purchases must fall within the cost parameters set by the medical organization. This threshold for capital medical equipment purchases will vary across medical facilities and is most often based on the size of the medical organization. Acquisition costs include the price of the medical equipment as well as delivery, and setup costs.
Not Disposable or Consumable
Regardless of whether a purchase meets the cost threshold to be considered a capital purchase, if what is being purchased is consumable, meaning it is used frequently and inventory is depleted quickly, then it is not considered capital medical equipment.
Stand Alone
Medical equipment that can be used by itself is considered capital medical equipment. Grouping components of equipment together properly allows each piece to be valued and recorded with the primary equipment as a capital purchase.
Service Life of One Year or More
Equipment with a useful life of less than one year will most often be identified as consumable by standard accounting practices.
Qualifies a Tangible Property
Tangible property is defined as any property that can be touched, physically moved, and integral to the operation of the organization.
Importance of Selecting the Right Capital Medical Equipment
Choosing the right capital medical equipment has far reaching effects throughout a healthcare facility. Most importantly, carefully selected equipment improves the quality of patient care.
Additionally, capital medical equipment can:
- Allow facilities to deliver precise diagnoses and effective treatment to patients.
- Help reduce the risk of error or complications with built-in safety features.
- Increase efficiency and productivity with automation features.
- Help attract and retain healthcare professionals.
- Help facilities realize long-term cost savings by reducing the time required for procedures and increasing staff efficiency.
Key Factors to Consider When Buying Capital Medical Equipment
Medical equipment buyers face a healthcare landscape challenged by the increasing cost of medical equipment and associated delivery and setup fees.
To help make the daunting task of capital medical equipment procurement more manageable here are some key factors to consider before beginning the purchasing process.
Clinical Requirements and Compatibility
Although an obvious consideration, identify the capital medical equipment that will benefit the greatest number of patients within the scope of care offered by the facility. Consultation with medical staff about salient features required will help ensure (or improve) efficient and smooth workflows as well as patient safety. Consider the compatibility of new equipment with existing equipment, connectivity with electronic medical records (EMR), for example.
Budget and Total Cost of Ownership
While purchase price is the focus of capital medical equipment procurement there are additional up-front costs that should be investigated before preparing the requisition.
Here are three areas of additional costs to consider.
Delivery charges and what is covered by those charges.
Asking clarifying questions can prevent unexpected costs. Here are some examples:
- Is the delivery listed as FOB (freight on board) at the manufacturer’s location, at a local warehouse, or to the hospital itself?
- Does the delivery charge cover transportation and delivery all the way to the end use area of the facility?
- Does the delivery charge include the cost of returning the equipment if there's a problem?
- If the manufacturer or distributor uses a delivery service, will that cost be passed on to you?
- Is the delivery schedule clear and known to the facility? The need for additional staff or staff working outside normal hours could trigger more unplanned costs.
Assembly or Installation
Consider the following questions to account for costs hiding in the background of the purchase.
- Will the new capital medical equipment need to be assembled or installed?
- If the new equipment requires electrical, HVAC, or structural changes to the location are these costs included in the price?
- Will the equipment be tested by an in-house biomedical team or require testing from another source?
Disposal of Replaced Equipment or Shipping Materials
Asking disposal questions may not always be top of mind but the answers can have an impact on the total cost of capital medical equipment procurement.
- Determine how medical equipment being replaced will be removed and disposed of to identify associated costs.
- Ask the medical equipment distributor or manufacturer if they use recyclable or reusable packing and shipping materials to identify potential disposal costs associated with delivery.
Indirect costs to consider for a comprehensive cost analysis include:
- the cost of disposal at end of life,
- sustainability of the construction materials,
- the cost of downtime should equipment become unusable,
- And unfortunately, the costs associated with a staff member (or worse, a patient) sustaining injury because of the equipment.
Fun fact, hidden costs can represent 8-12 percent, if not more, of the total acquisition cost of new capital medical equipment.
CME can manage logistics, delivery, and installation of your capital medical purchases to minimize these and other often hidden costs.
Vendor Reputation and Support
The reputation of the capital medical equipment distributors and the vendors they do business with is important.
Reputable medical equipment distributors
- are highly likely to source medical equipment from leading manufacturers in the medical equipment supply chain,
- have long term relationships with their vendors,
- may be in a better position to offer more competitive pricing,
- offer additional services, such as delivery or repair and maintenance,
- and provide prompt and excellent customer support.
Reputable manufacturers
- provide reliable and quality equipment,
- design equipment compliant with regulatory standards
- can produce product testing reports,
- honor delivery schedules,
- Offer generous warranties.
It is well worth the time required to learn as much as possible about capital medical equipment distributors and the manufacturers they do business with. Not all medical equipment distributors are created equal.
Lifecycle Planning and Technology Upgrades
Lifecycle planning, the strategic management of medical equipment from procurement to disposal, is important to consider before investing in capital medical equipment. A lifecycle plan should include details relevant to activities associated with
- Acquisition
- Installation and Testing
- Staff Training and Education
- Scheduled Maintenance and Performance Checks
- Technology Related Upgrades
- Disposal
Discussing the feasibility of future technological upgrades can offer insight into how long the medical equipment can remain in service before it becomes obsolete.
Technology is evolving at exponential rates. The prevalence of telehealth today versus four years ago, electronic health records (EHR), and the emerging use of image recognition algorithms powered by AI in radiology are examples of new and rapidly evolving medical technology.
Regulatory Compliance and Safety
Regulatory agencies overseeing the healthcare industry have established certification and safety standards for the physical facility as well as all the equipment used by the facility.
Compliance with mandated and voluntary regulations can result in healthcare facilities receiving the maximum in insurance reimbursements as well as commanding a better local reputation. Noncompliance can result in fines, loss of accreditation, or the closure of the facility.
Next to the Federal Drug Administration (FDA), The Joint Commission is one of the best-known regulatory agencies. Although compliance is voluntary, approximately 85%* US hospitals are accredited by The Joint Commission.
Unannounced medical equipment inspections by The Joint Commission can happen at any time, making it imperative that medical staff be familiar with the standards for medical equipment they use regularly.
Visit The Joint Commission website for compliance resources.
Other common U.S. agencies regulating medical equipment include:
- The Centers for Medicare and Medicaid Services (CMS)
- State Health Departments
It is important for healthcare facilities to be aware of and comply with guidelines and regulations relevant to all capital medical equipment.
*https://www.jointcommission.org/resources/news-and-multimedia/fact-sheets/facts-about-hospital-accreditation/#:~:text=Approximately%2080%25%20of%20the%20nation's,accredited%20by%20The%20Joint%20Commission.
Staff Training and Integration
Training medical staff to properly operate upgraded or new capital medical equipment is critical for several reasons.
- Required and thorough training enables medical staff to understand the function, features, and limitations of the equipment. Understanding these elements increases the likelihood that the equipment will be used efficiently and safely.
- Full understanding also helps healthcare professionals capitalize on the benefits of the equipment, increases efficiency and the quality of patient care.
- In the event of a malfunction, staff who thoroughly understand the function and features of the equipment may be in a better position to troubleshoot the issue or elevate the problem for technical help. Addressing issues quickly can help minimize downtime and disruption to patient care.
- Generally, the replacement of, or addition of, capital medical equipment is associated with a need for more efficiency with an eye to increased profitability. A comprehensive understanding of the equipment promotes a smoother integration into existing workflows and systems such as EHRs.
- Regulatory agencies frequently require medical staff to receive capital medical equipment training as part of continued accreditation.
Consider adding training for capital medical equipment procurement to the procurement timeline.
Flexibility and Scaling
The Affordable Care Act, which requires affordable health insurance be available to all people in the United States, has contributed to an increase in people seeking medical care. For hospitals this means increased pressure to contain costs while continuing to provide quality care.
Capital medical equipment that can perform multiple functions or be scaled to accommodate more patients is critical, especially in a period of record high equipment costs. Consider working with medical equipment distributors to source medical equipment that is flexible, scalable, and able to keep pace with rapidly evolving technology with minimal cost.
Tips for a Successful Capital Equipment Purchase
Purchasing capital medical equipment is an inescapable necessity for healthcare providers. In today’s landscape of increasing operational expenses and costs of medical equipment, keeping costs low while continuing to improve the quality of care can be a challenge.
After considering all the aspects of capital medical equipment procurement and asking the questions consider these ten quick tips before preparing that PO:
Smart Financing. While paying cash can be attractive, it has the drawback of cutting into your working capital that you may need for other expenditures. Strict leases are a good choice for lowering the upfront costs associated with the equipment and protecting your organization from future tech discoveries that may make the new equipment soon-to-be obsolete.Loans are another good choice, but both lease and loans include interest rates that increase the item's final cost. In lieu of both, consider capitalizing equipment costs over time and recording equipment as an asset to be expensed in future periods. These capitalized costs can include all the logistics costs associated with getting the equipment into the new facility.
Go for the Warranty. Many healthcare vendors offer maintenance services and warranty contracts for their equipment. Read through the contract, but in most cases these warranties are well worth the minimal added fees.
Plan for Space and Development. Every room in a healthcare organization, whether it's a patient room or a clinical laboratory, has its own unique demands. So, before you assign a label to a room, ensure its design undergoes collaborative brainstorming between design experts, contractors, and healthcare personnel for efficient spaces that enhance patient satisfaction, utilization, and even revenues.
Collaborate with an Equipment Planner. A medical equipment planner has the knowledge and experience to help evaluate your organization's needs along with the total ownership costs of medical equipment, as well as ensuring everything conforms to local regulations.
Equipment Delivery Process. Research vendors and distributors and select one that offers direct-to-site services with an excellent track record. A good vendor will ensure that everything is properly labeled, and that equipment gets delivered on time and to the desired end-room.
Checking Regulations. Every healthcare-oriented facility has its own regulations regarding local building codes, federal and state legislature, and industry standards that it must conform to. During the planning process, identify with regulations that will apply to your purchases and how you can follow them.
Anticipate Shipping and Receiving. Plan and work with your vendor to avoid premature deliveries of your medical equipment. This will prevent potential damage and the costs associated with storage until the equipment can be delivered to its end site. Conversely, equipment that is delivered too late can interrupt your patient care and cause expensive workflow delays.
Prevent Patient/Workflow Interruptions. This point bears repeating; ensure that the delivery and set-up of all medical equipment purchases are timed effectively. Ideally, you'll have this done just before opening or closing or other downtime periods when there is a minimal number of patients in the building.
Involve the Appropriate Departments. Any department that will be regularly interacting with the new equipment should participate in the entire capital equipment procurement process. This will protect your group from purchasing equipment with expensive, unneeded features or functions, as well as getting you the appropriate feedback for future options.
Inspect and Test Before Ownership Transfer. Before signing the final papers, have your Biomedical Engineering technicians inspect the equipment. They should do an electrical safety inspection as well as testing for operations before they give the final affirmation.
Procuring Capital Medical Equipment with CME Corp.
Procuring capital medical equipment is not for the faint of heart. Taking the time to consider the many aspects of the task and ask questions is well worth the time investment. In the long run it can have a positive effect on the capital equipment budget, staff efficiency and satisfaction, and patient care.
- Prepare a Cost Saving Analysis
- Order the Right Equipment
- Manage the Logistics of the Order(s)
- Effectively use our Direct-to-Site services to receive and store your order until delivery.
- Schedule Delivery and Installation
- Schedule Annual Maintenance with CME Biomedical Technicians
Click CHAT to start a conversation around your capital medical equipment needs.
Capital Medical Equipment FAQs
Are annual maintenance contracts necessary for capital medical equipment?
Annual maintenance contracts are not required but are highly recommended to extend the life of capital medical equipment and prevent costly downtime associated with malfunctioning or underperforming equipment.
How do you dispose of capital medical equipment?
Depending on the age and condition of surplus medical equipment it may be sold, donated, recycled, or simply sent to an appropriate disposal facility.
How is capital medical equipment delivered?
Delivery of capital medical equipment is governed by the needs and physical logistics of the healthcare facility. In most cases it will arrive at the facility in a truck and depending on the purchase agreement, it may already be assembled.
What does the process of buying capital medical equipment look like?
In very simple terms the process of buying capital medical equipment is a multi-step process beginning with an identification of what is needed, followed by a thorough cost assessment, preparation of a purchase order, and concluding with the delivery and installation of the capital medical equipment.
About CME: With two corporate offices and 35+ service centers, CME Corp is the nation’s only equipment focused medical equipment distributer. We are the premier source for more than 2 million healthcare equipment products, from more than 2,000 manufacturers.
Our Turnkey logistics and biomedical services allow us to help healthcare facilities nationwide reduce the cost of the equipment they purchase, make their equipment selection, and schedule delivery, installation, and maintenance without impacting patient care. From medical equipment purchases to renovations and new facility construction CME Corp is your partner for seamless capital medical equipment purchases, delivered on time and in budget.
