Many hospitals choose to run their in-house biomedical programs as separate businesses, often selling their services outside of the facility. We look at some successful programs and get tips on how these programs can be implemented.

Many hospitals choose to run their in-house biomedical programs like businesses, recognizing their unique value to the facilities and to the hospitals’ missions. A small percentage of in-house biomed programs sell their services outside of the facility and are run as cost and profit centers.

“The department is run as though it is a separate entity,” explains Jennifer C. Ott, MSBME, director of clinical engineering at Saint Louis University Hospital in St Louis. “There are salaries, expenses, and revenues. By utilizing the hospital budget information and departmental billing, a complete picture can be developed. There must be a mission for the department and a business plan that delineates the activities the department supports and the flow of work and information throughout the department. Work expenses must be accurately tracked in order to compile billing statements and monthly reports. The best advice is to treat the department money as if it were your own checkbook. This allows you to really scrutinize how things are accomplished.”

Others agree that the program should be run as a business.

“To me, running an in-house biomed program like a business means using recognized and successful practices that well-run businesses use, including what I think are the two most important items: understanding the finances of your clinical/biomedical engineering department well enough to explain and justify them to senior management and making sure you listen to and understand your customers,” explains Robert Stiefel, MS, CCE, director of clinical engineering services at Johns Hopkins Hospital in Baltimore.

Yadin David, director of the biomedical engineering and television services department at Texas Children’s Hospital in Houston, believes that running a biomed program as a business means “administering a program where the input of people, assets, and structure is measurable against quantifiable outputs of consistent performance, improved safety, and strategic program advantage. For me, there is no question that the program should be run like a business.”

The value of the program must be understood in the context of the hospital’s mission and the department’s mission, according to David S. Bell, director of biomedical instrumentation at Thomas Jefferson University Hospital in Philadelphia.

“Within in the framework of the mission of the hospital, it is important to understand the value of your program, which is reflected both quantitatively and qualitatively,” he states. “We have fiscal-management systems that allow us to monitor our expenses daily and on a less-frequent basis compare them to alternative approaches. In short, we expect to generate revenue with our shared services program and to realize savings for the in-house program within the framework of maintaining the quality demanded by the institution of which we are a part, not on the fringe or separate. On the other hand—again based on the mission of the institution—there may be times when saving money is not or should not be the goal. Quality may be overriding.”

Staff has had to make various changes in order to accommodate the needs and tasks of an in-house biomed business. Expectations also change.

“The biggest change is the expectation of customer contact, keeping the customer informed on the status of repairs and inspections. This requires extra effort and the benefits are not readily seen,” says Ott. “In the long run, however, the customer gains an appreciation for all that is involved in the support of the technology. The tracking of accurate charges, including those that may be performed by outside vendors, was difficult to understand in the overall departmental support picture.”

Required changes have not been that significant for Bell’s staff at Thomas Jefferson, but they have struggled with understanding the actual value of the off-site services they provide.

“We are making progress having our specialists understand that they need to be flexible in their definition of biomedical/clinical engineering and the value of using their expertise in various venues. There is still some misunderstanding about the value of our out-of-house activities by the in-house staff, even though they recognize that a revenue stream has been beneficial to the entire staff, with regard to reducing the impact of the financial crunch and affording growth opportunity,” Bell explains.

Financial constraints and challenges often provide a hurdle to change, also.

“Because we do operate like a business, we’re often asked to accept additional work—either tasks that are entirely new, or ones that another department or vendor is doing, but not doing well,” says Stiefel. “[In the past] if a customer [clinical department directors and administrators] wanted us to do something new and was willing to pay us for it, and we felt that it was related to our areas of expertise, we could do it. We were being paid for all work, so when we needed additional resources, we had the money. Unfortunately, our customers weren’t as careful with their budgets as we were. Rather than trying to control our customers, senior management took their clinical engineering budgets away from them, gave us this money, and told us to control the work we did.”

“We’ve always known exactly what it costs to provide service,” explains Stiefel. “We now have some customers who pay for their service, and some who don’t—not our choice, obviously. We have to be competitive to keep our paying customers, but we also have to make a slight profit so that we can continue to provide the necessary service to our nonpaying customers. To be successful, we have to understand our costs and charge for our services accordingly. We also have to make sure that we have satisfied customers through a formal customer satisfaction process. I don’t think that most in-house clinical engineering departments do either.”

“The biggest change for our staff is that sometimes we have to ‘just say no.’ They hate it, our customers hate it, and I hate it, but I’m not willing to go so far over budget that I’ll get fired. We do all of the work that we agree has to be done—that’s enough to usually put us a little over budget—but we have to turn down things that we feel aren’t necessary or that our customers can get from someone else,” says Stiefel.

The negative connotations of outsourcing, especially during the present media attention to our national economic conditions, are less of a barrier to the in-house biomed business.

“There are fields where outsourcing lends itself better than others. The health care delivery system has seen its share of outsourcing of laboratory testing, perfusionist services, housekeeping, laundry, and even some medical services,” notes David. “For the past decade, biomedical and clinical engineering have experienced the impact of the outsourcing craze as well. Some of the leading outsource service providers are no longer around, causing hospitals to turn back to the in-house programs. To change a well-managed, wide scope, in-house program is extremely hard to justify as the value delivered by these programs is high. Program value is normally reflected through very efficient management, very low cost, low staff turnover, and employment of well-trained and competent personnel. The valuable program normally evolves into a highly customized one that meets the individual institution’s needs, is well integrated with the rest of the operations, has good networking with vendors, competitive access to parts and training, and has no need to show—in addition to savings—profits.”

Changes are hard to accept for most people, and biomed staff are no exception. Bell recalls that his staff needed to become more flexible, as they were recruited into the biomed department, rather than a particular location assignment. Expense tracking necessitates extra paperwork, which also tends to meet resistance.

Jennifer C. Ott, MSBME, director of clinical engineering at Saint Louis University Hospital.

“No one likes extra work, and technicians hate paperwork,” states Ott. “The accurate tracking of expenses, including all outside service, was a difficult aspect to grasp. By explaining the equipment service history and the value of that information in the entire equipment life-cycle picture, we were able to lessen resistance. Especially if the expenses are not all within one budget, the necessity to have an accurate picture of equipment service history is even more important. Otherwise you are searching for a needle in a haystack.”

Staff aren’t the only ones who grumble at changes. Customers don’t like to deal with changes, either, and good communication is perhaps the first and foremost way to effectively handle program changes.

“Customers didn’t like the idea that they were no longer calling the shots, we didn’t like the idea that customers were no longer calling the shots. And, we didn’t like having to occasionally tell a customer that we couldn’t do what they asked,” recalls Stiefel. “So I prepared a written description of how our service would be provided. After this transition, I met with each department that was going to be affected and discussed how we could best handle this change.”

“Be forthright about the direction of the department and why [it is taking it], Bell explains. As specialized positions, such as x-ray, MRI, CT, linear accelerators, sterilizers, ultrasound, become available, promote from within. This not only creates a career path, but also recruits those who already have an understanding of the department and its need for creativity and flexibility.”

David emphasizes “clear and continuous communication, both ways, with employees and with superiors, about the program’s direction and how well it is doing. Create an organizational chart, post guiding program principles, and highlight success stories. If a change was made in the way we ordered a part, for example, and that change was effective and cost-saving, I post information about it for everyone to see.”

Ott provided administrators with concrete examples of how the service history and departmental information was utilized to make accurate purchase and future support decisions. These examples showed how the information in the program’s database contributed to the overall hospital procurement process.

Bell thinks his staff better understands its relationship to other departments and is learning how to utilize the in-house expertise of others, which is a good business practice.

“The major change in our program since I began managing it about 20 years ago has been the assumption of the ever-growing accountability of biomedical professionals for the program’s outcomes,” explains David. “The acceptance by my staff that we need to be much more proactive in taking technology-related solutions all the way through successful implementation resulted in growing dependence of the organization on the quality and innovation of our staff.”

As the biomed department or program changes, its relationship with the health care facility also may change, making it more viable and integrated into the facility itself.

“As a department, we are much more visible in all aspects of patient care,” says Ott. “Various members participate on committees and planning sessions for equipment procurement, installation, and removal. We have also had to work diligently to focus on our core responsibilities and eliminate extraneous work. By utilizing performance improvement procedures we have been able to significantly reduce preventive maintenance inspections and reallocate that time to equipment repair, installations, and, most important, the patient-safety aspect of the services we provide. From a business aspect, we have tracked the monthly expenses by department or cost center since I started. I added a monthly summary report, an annual report, and various details to the monthly departmental reports to provide the necessary information at a glance. We also began to service university departments on a charge basis. This is tracked through a mutual agreement between the hospital and the medical school.”

What Makes a For-Profit Biomed Program Stand Out From the Crowd?
The ability to accurately track expenses by department or equipment is very beneficial, says Ott. Comparing service-contract costs to actual service expenses allows future expense and purchase decisions to be made intelligently.

“I have an exact responsibility,” says David. “I look at how productive my personnel are, how competent they are, how many parts have been ordered, and how many service calls are not being resolved on the first call. These all indicate where we should be concerned, with regard to customers. Our program is being judged by others. We measure many quantifiable aspects of the program to determine how well we are performing and if we are improving.”

Bell is astounded that many departments will pass on opportunities because there is a hiring freeze.

“This shows that perhaps there is an inability or unwillingness to appreciate the economics behind an in-house support program,” he states.

Words of Wisdom
“Start small. Look at the core business and the way expenses are tracked. Improve that process first,” advises Ott. “Then start with any items under contract. Work with vendors for monthly or annual summary logs, compare to the actual service reports. Obtain vendor expense charts for hourly, overtime, holiday, and travel. Begin to enter that information directly to the equipment history. Enter items that are covered time and material to the equipment history as well. Develop a monthly department-specific work summary and overall monthly summary report. Share this information with the departments and the clinical engineering staff. Utilize sound business practices and the monthly reports to develop an annual report to be shared with your administration.”

Bell advises anyone interested in changing their facility’s biomedical program to become familiar with the details of the hospital, not just the biomedical department. What is the equipment inventory? How is equipment maintained? What opportunities exist beyond the “traditional” biomedical? How about entertainment systems, PC support, sterilizers, and “high-end” clinical equipment?

“It takes a lot of effort to add business management tasks to a technical support manager’s duties, both because it is a skill that [she] didn’t learn in school, and because [she] probably doesn’t have a lot of spare time at work. It requires a personal commitment to wanting to be a better manager so you’ll have a better department, and ultimately a better hospital,” explains Stiefel.

The paybacks of making changes in a biomed program are varied, but all agree that respect is a nice bonus.

“The biggest [payback] is respect,” Ott states. “The hospital is a business and if you run your department as one, you can gain the access of administration, especially the CEO, COO, and the CFO. If anything, [program improvement] improves your knowledge so you can converse in their language.”

There is a need to develop a specific program’s characteristics, according to David. “You must demonstrate expertise that is important to the organization. The easiest way to do that is through the four C’s: competency, consistency, control, and customer care,” he advises.

Bell agrees that respect is a satisfactory payback.

“You can more easily identify and justify needs and programs, and you have a clearer direction of overall programs with fewer sudden changes in direction. Respect also gives you protection against vendors who will try to sell you the moon,” he says.

Job satisfaction is another reward for a job well done, according to Stiefel.

“There’s some satisfaction when you know that your department is doing a better job, in terms of quality and price, than anyone else could possibly do for your customers,” Stiefel notes. “Maybe you can keep your job for another year and not lose it to an outsourced provider.”

Laura Gater is a freelance writer for 24x7.