Keeping equipment up and running depends on a biomed department's ability to source parts.

One of the purest measures of how well an in-house service group does its job is its ability to keep equipment up and running. In the eyes of doctors, nurses, and, especially, hospital administrators, uptime is key.

A fundamental component of maintaining a good reputation for this and having what one needs to be able to handle the inevitable breakdowns is the ability to source parts effectively.

The adage “time is money” is true in this area of biomedical and radiological equipment service. A machine can be down for a period only such that it does not impact the health care institution’s ability to treat and evaluate patients. Money gets steep when time is not a luxury one has and a part needs to be sourced as soon as possible. The relationship between the two can be tweaked only by biomeds who have well-thought-out plans for acquiring parts based on device and situation.

As in many areas of equipment service, in-house folks are looking for alternatives to the primary and historically most expensive source—namely, the device’s original manufacturer. Oddly enough, the strategies that people have been employing over the years have brought manufacturers back into the fold of consideration when in-house biomeds are looking for parts. All sides playing against the others, parts-sourcing companies bringing buying power to the equation, larger hospitals steadfastly seeking competitive bids for parts, and manufacturers realizing where the business is going all point to increased savings and a quicker turnaround when a hospital needs parts.

A Healthy Slice of the Pie
The cost of supplying parts over the course of a year is not the leading cost factor in a service group’s budget, but it is a big enough percentage to warrant paying more attention to the issue. One person who has spent a great deal of time examining just what that cost amounts to is Ray Dalton, who started a multivendor parts-sourcing company called PartsSource (Twinsburg, Ohio) 2 years ago. As he was putting his business plan together, he took a hard look at the experiences of device failure, parts costs, and the time it takes to get those parts. It convinced him absolutely that he was on the right track.

“It’s a phenomenal business with…unique characteristics,” he says. “It’s the next layer of the onion.”

As Dalton prepared his business plan, he reviewed numerous studies on parts and did a few of his own. According to one, there were 3.8 billion repair parts purchased in 1999. On average, a typical acute care hospital in the United States spent between $800 and $1,000 per bed, per year, on parts. This is about 21% of a clinical engineering department’s total budget.

“In-house shops are becoming much more aware of the true costs of buying equipment,” Dalton says. “Twenty percent to 25% are numbers they have to start paying attention to.”

Dalton says the average time a biomedical technician or field-service person spends looking for a part is 3.8 hours. Of the companies contacted that might have what a biomed needs, only 7% to 10% call back within 4 hours. Even then, fewer than 25% of those who do call back have the part they need.

The way service departments operate, it is possible that some of the hunting and searching could be repeated. Dalton studied 1.8 million devices in 22 locations, and he observed that the mean time between failures on a typical device is 3.2 months. The problem is that the same technician often was not called when that device next failed, and on average it took three more breakdown cycles, 9.6 months, before the same technician dealt with that particular device. Without a good department-wide plan or system to obtain parts, the two technicians who worked on the device after the first one may have wasted valuable time banging the phones or picking through Web pages trying to find what they needed.

Dalton based his business on the potential size of the parts market, a possible lack of a parts-buying strategy for an in-house group, and a flat-out lack of buying power for many hospitals. In a 20,000-square-foot facility, he and the 28 employees under his wing process parts orders all day, spending the necessary time to learn where to source parts and how to get them to the customer as quickly as possible.

Of course, technology changes very quickly, and knowing which parts may be acceptable to which devices requires a great commitment to keeping up with new devices. Adding to this is the fact that many manufacturers use different part numbers for each generation of a particular device, even though many of the internal components may be identical to those used in an earlier version. Dalton estimates that there are 2,500 different makes and models of medical devices with 8.5 million to 8.8 million line items of replacement parts available for all those machines.

“Take the AMX4 and AMX4+. A number of the parts are interchangeable, but from GE’s [General Electric Medical Systems] standpoint, they are different catalog items,” he says.

On the West Coast, Ira Lapides, president of Replacement Parts Industries Inc (RPI of Chatsworth, Calif), says he sees the same thing in the device industry. The interchangeability of some parts across product revisions has been a reality for many years. Given that his company, which was founded 32 years ago by his father, takes devices apart regularly to reverse-engineer replacement parts, he has firsthand knowledge of this.

“My guess is technology doesn’t take significant steps from one model to the next,” he says, noting that it would be very costly for manufacturers to significantly change designs such that a major retooling of their production lines would be needed with each revision. “It’s like in a car, the parts in a Toyota Camry have been more or less the same for the last 7 years. One could say that probably applies in the medical-device business.”

Knowledge Is Buying Power
Understanding the ins and outs of the parts business enables in-house biomeds to start taking advantage of the savings available when they source their own parts. In Philadelphia, the technicians at Thomas Jefferson University Hospital, which services about 50,000 devices at multiple institutions in the Jefferson Health System, have made a major investment in that knowledge. The hospital employs at least one full-time position dedicated to the sourcing of parts. When asked if that strategy has been cost-effective, Ira S. Tackel, director of the hospital’s department of biomedical instrumentation, says, “Unequivocally, yes.”

Savings in excess of 30% to 50% of the full list price of a part from a device manufacturer are not uncommon in Tackel’s department. The big savings naturally come with the higher-end equipment—mostly in radiology. In the case of buying x-ray tubes, the list price from an OEM may be in the neighborhood of $15,000 to $20,000.

“If I can second-source that tube from an original equipment company such as Varian Interay [North Charleston, SC], Dunlee [Aurora, Ill], or Richardson [New Albany, Ind], I can probably save a good third or even more,” Tackel says. “Even if it takes me a day, or 2 to 3 days of a full-time equivalent to help identify that part—and it never takes that long—you may be looking at $490 a day, and in 2 days that $1,000 is more than made up in the savings. It adds up very quickly, so it behooves us to have someone look at alternative sources of parts.”

Other big-ticket items are ultrasound probes. Their replacement cost at $14,000 to $16,000 each has driven Jody Marz, manager of biomedical engineering at Wenatchee Valley Clinic, Wenatchee, Wash, to aggressively source parts himself. He has been doing so for the last 6 years and routinely pays only one half the full manufacturer’s price. He advises people to buy only from ISO 9002–certified companies, to use a credit card in cases where fraud may be a concern, and to hold back on a portion of payment until the device is installed and running.

“I’m really busy all day long looking at the opportunity to buy used or second-source parts,” he says.

Marz has had some unique experiences, too, and has learned that the skills and ingenuity biomeds possess can solve a parts problem. One time a table motor failed on an x-ray machine, and the entire gear box would have been very costly to purchase. Instead, Marz tore apart the gear box, took it to a machine shop, and had two broken gears fabricated—at a paltry cost of $250 for the first gear and $35 for the second.

Tackel notes how 8 or 9 years ago his department chose to service and support sterilizers in-house and cast aside a labor-only contract that had parts costing extra. He quickly realized that many of the machines were built with traditional plumbing and steam-fitting pipes that he could find from a variety of sources. He guessed that he saved 30% or more on the labor cost of the contract and more than 50% on the cost of the parts by not purchasing from the manufacturer.

“When you outsource those functions to a third party or a vendor, you don’t typically garner the savings,” he says. “They pick up those savings as profit.”

Strength in Numbers
Tackel also is fortunate because the size of his institution affords him unique bargaining power. Companies like Dalton can source parts from companies at reduced costs because of the great volume they plan to buy over a given time. Tackel, too, has been able to negotiate favorable parts contracts with second-source companies and manufacturers because of the buying power he brings to the table with those 50,000 devices. Having the OEMs budge on price is something that has been most surprising to him.

“Second-sourcing parts is driving business away from the manufacturers, and that message gets across,” he says. “Manufacturers have been making good money on service and support, and I think they’re getting the message that there are alternatives available to in-house programs. The only way for them to maintain some of those profits is to alter their plans.

Steve Trachtenberg (left), who is responsible for parts sourcing at Thomas Jefferson Hospital, confers with Ira S. Tackel.

“One of those manufacturers that years ago would not move is GE,” he adds. “In the last year and a half, we’ve been able to sit down with them and negotiate a very, very different relationship, and it’s saving us significant dollars. If someone had said that a couple of years ago, I would have said no way.”

Tackel says that even with having a person on his watch just sourcing parts, he would not rule out using a company like Dalton or another parts provider. Such things may require a case-by-case analysis, but for many items, especially lower-priced items, it simply makes sense to use a parts-sourcing company.

“I won’t make as much of a savings, so it’s not worth my time and effort,” he says.

When dealing with used parts, there can be tremendous time and effort involved. Marz says he has seen things that look fine on the outside, but when he cracks the case, he finds old, dusty parts inside. He had a tissue processor he bought used and ended up rebuilding the entire thing, batteries, O-rings, valves, pump, and more.

“It was still worth it,” he says. “Usually, with used equipment, it’s $0.50 on the dollar, and for a monitor that cost $10,000, you do the math.”

Tackel notes that the big savings expected from sourcing parts in-house are expected each year—so much so that they are built into the budget. The constant squeeze on health care to trim costs has eaten up any “extra” money he might have to use elsewhere to help run his department.

“If I had to return the program to contracts, I’d probably double my budget. I can’t afford to do that,” he says. “The gun is to everyone’s head to reduce costs, and it’s more palatable to think about doing it this way [through sourcing parts] than reducing bodies. To me, those bodies are absolutely key to maintaining costs. If I don’t have the people to second-source parts, I’d be right back at square one.”

Charles St. Martin is a contributing writer for 24x7.