Understanding the Total Cost of Capital Medical Equipment Ownership

Investing in capital medical equipment is a major decision for hospitals and ambulatory surgery centers (ASCs). While the purchase price often has the most attention, the full cost of ownership extends far beyond the price.

The total cost of ownership (TCO) model is a comprehensive tool that can help healthcare facilities make financially sound healthcare equipment decisions that support long-term operational efficiency and patient care.

TCO looks beyond the initial acquisition cost to every expense associated with an asset throughout its entire lifecycle. Neglecting to factor in these sometimes-hidden costs can lead to budget overruns, unexpected downtime, and even compromise the quality of care.

Let’s take a deeper look at:

• Why TCO Matters
• Key TCO Considerations
  
  

Why Total Cost of Ownership Matters for Capital Medical Equipment Acquisition

Hospitals and ASCs can realize significant cost advantages by looking beyond the purchase price and evaluating the total cost of ownership (TCO), before investing in capital medical equipment.

The following points highlight the key benefits of considering TCO:

Optimize Budgeting & Financial Planning: TCO projections support long-range financial planning and can help avoid unexpected expenditures.

Improve Capital Allocation: By comparing TCO across different equipment options, administrators can make strategic investments that have the potential of delivering better value over time.

Negotiate Better Deals: A detailed TCO analysis strengthens your position for negotiation with data you can use to advocate for better service contracts, consumable pricing, and comprehensive support.

Support Patient Care: Reliable, well-maintained equipment directly contributes to the delivery of high-quality, safe, and efficient patient care.

While these benefits highlight why TCO matters, realizing these advantages requires a carefully constructed TCO model.

Key Total Cost of Ownership Considerations for Capital Medical Equipment

A thorough understanding of total cost of ownership gives hospitals and ASCs a clear picture of the long-term financial and operational impact of capital equipment decisions.  

To capture the full picture, imagine the purchase price of capital medical equipment as the tip of an iceberg. Expenses and costs lurking beneath the surface are often the most substantial and impactful considerations.

Here’s a breakdown of important considerations:

Acquisition Costs: While seemingly straightforward, even the initial acquisition can have layers beyond the list price.

• Purchase Price: The advertised cost of the equipment.
  
  
• Shipping & Installation: The expense of transporting the equipment to your facility and getting it operational. This can vary significantly based on size and complexity.
  
  
• Customization & Integration: Costs associated with tailoring the equipment to your specific needs and integrating it with existing IT systems, EHRs, or other devices.
  
  
• Initial Training: While some vendors include basic training, extensive or specialized training for multiple shifts and departments can be an additional expense.
  
  
• Financing Costs: Interest payments and fees if the equipment is financed or leased.
  
  

Learn more about how Specialized Medical Equipment Delivery Can Save Money

Operational Costs: These are the day-to-day expenses that keep the equipment running and departments functioning.

• Consumables & Disposables: Many pieces of medical equipment require proprietary or specific consumables (e.g., reagents, specialized probes, single-use instruments). These costs can accumulate rapidly.
  
  
• Utilities: Power consumption, water, or specialized gas requirements.
  
  
• Staffing & Labor: The cost of the personnel operating, maintaining, and managing the equipment. This can include specialized technicians or additional training for existing staff.
  
  
• Software Licenses & Subscriptions: Many new devices rely on software that requires ongoing licensing fees or subscription models for updates and functionality.
  
  

Maintenance & Support Costs: Often overlooked, these costs are vital for ensuring equipment longevity and uptime.

• Preventative Maintenance (PM) Contracts: Regularly scheduled maintenance to prevent breakdowns and extend the life of the equipment.
  
  
• Corrective Maintenance (Repairs): The cost of parts and labor for unexpected repairs. Without a PM contract, these can be exceptionally high.
  
  
• Calibration & Testing: Required for many devices to ensure accuracy and compliance with regulatory standards.
  
  
• Replacement Parts: The availability and cost of spare parts over the equipment's lifespan.
  
  
• Service Contracts: Beyond PM, these can offer faster response times, guaranteed uptime, and comprehensive coverage for repairs.
  
  

Learn more about Biomedical Maintenance Services

Downtime & Productivity Loss Costs: These are often indirect but can be profoundly impactful.

• Lost Revenue: If critical equipment is down, scheduled procedures may need to be postponed or canceled, directly impacting revenue.
  
  
• Patient Dissatisfaction: Delays and cancellations can lead to frustrated patients and potential negative impact on your facility's reputation.
  
  
• Staff Inefficiency: Staff may be idle or forced to use less efficient workarounds during downtime.
  
  
• Alternative Solutions: Costs associated with renting temporary equipment or transferring patients to other facilities.
  
  

Decommissioning & Disposal Costs: Even at the end of its life, equipment can incur costs.

• Removal & Disposal: Specialized disposal methods may be required for certain medical devices due to hazardous materials or data security concerns.
  
  
• Data Archiving & Migration: Costs associated with ensuring patient data is securely transferred and archived when old equipment is replaced.
  
  

By thoroughly analyzing each cost component, healthcare administrators can develop a comprehensive plan for acquiring capital medical equipment. This strategic approach ensures not only fiscal responsibility but also supports long-term operational success and, ultimately, delivery of care.

Partner with CME Corp. for Capital Medical Equipment

CME Corp is the nation’s premier specialty distribution partner for healthcare and life sciences capital equipment.

In addition to our equipment expertise, we distinguish ourselves in the industry with a full suite of services – including project management, CAD-based design, warehousing, logistics, direct-to-site delivery, installation, and biomedical technical services. With long-standing manufacturer relationships and access to more than 2 million products from over 2,000 vendors, CME uniquely provides tailored solutions to fit the needs of every customer.

Our 25 strategically located facilities make us readily accessible nationwide. We are committed to helping healthcare systems, laboratories, pharmacies, and research centers lower the cost of equipment acquisition, simplify delivery and installation, and keep projects on time - whether launching, renovating, or expanding critical facilities.

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About CME: CME Corp is the nation’s premier source for healthcare equipment, turnkey logistics, and biomedical services, representing 2 million+ products from more than 2,000 manufacturers. With two corporate offices and 35+ service centers, our mission is to help healthcare facilities nationwide reduce the cost of the equipment they purchase, make their equipment specification, delivery, installation, and maintenance processes more efficient, and help them seamlessly launch, renovate and expand on schedule.