Every year, hospitals across the United States spend billions of dollars on equipment and supplies. Becker’s Hospital Review, quoting the American Hospital Association, says average medical supply spending is 10.5 percent of the average hospital budget.
To the clinical department heads responsible for maintaining uninterrupted operations, planning for supplies, equipment upgrades, and consumables, quickly becomes a game of tradeoffs.
Here are four considerations when planning your equipment budget:
Start with the Previous Year’s Budget vs. Expenditure
The best place to start when thinking about equipment planning is by examining the equipment budget and expenses of the previous 1-2 years. Annual budgets are often set using previous year data, and regularly reviewing past expenses can help identify patterns, discrepancies, and oversights that may impact future spending.
To establish a baseline, identify any isolated expenses, such as facility remodels or expansions, during the previous period and factor those anomalies out of the expenditure.
Once the baseline has been established, break the equipment expenses into two categories: replacement and repair/maintenance.
Equipment repairs are considered operational expenses (OpEx), while improvements and replacements are considered capital expenses (CapEx). Understanding this distinction will be important later in the process.
Understand the Facility (or IHN) Growth Rate
The overall growth of your facility or the IHN to which your facility belongs will heavily influence budget allocation for the coming year.
Facilities and IHNs that are rapidly increasing the number of patients treated will likely invest more in annual budgets across the board, while steady-growth IHNs are more prone to keep budgets flat and negative- or no-growth IHNs tend to deprioritize all but the most critical equipment needs.
Knowing the overall growth trajectory of the health system will help you understand and adjust your baseline.
If you are a member of a high-growth health system, push for the highest quality equipment you can during the high-growth season. Premium equipment will cost more up front, but quality equipment will last longer, cost fewer maintenance dollars, and create less frequent operational challenges.
Plus, equipment dollars may not always be as readily available as they are now.
If your health system growth rate is stable or flat, opting for premium equipment still offers the benefit of operating expenses and reduces the risk of unforeseen capital expenses like replacing a unit before the end of its service life, which brings us to the next consideration.
Conduct a Walkthrough Assessment of Current Equipment
After establishing baseline capital expenditure, conduct a walkthrough assessment of the facility or department examining all capital equipment and noting the following:
- Income Generation Status
- Age
- Rated Service Life
- Operating Condition
- Previous Repairs
Use these criteria to create a prioritized replacement schedule for equipment.
Income-generating equipment, or equipment that, through its daily use actively generates income for the hospital (MRIs, CAT Scans, Ultrasound equipment, etc.), will almost always take precedence, followed by critical operational equipment that is currently inoperable or will soon require major maintenance.
Equipment near the end of its rated service life but still operational should be next. New equipment in good operating condition can wait.
A note on rated service life: Two products sharing the same rated service life may provide wildly different levels of reliability. Opt for products with a rated service life that matches your facility’s needs and real-world track record of quality.
Most Helmer Scientific cold storage equipment, for example, carries a rated service life of 10 years, but many of our units have been in service much longer.
Use the CapEx/OpEx Distinction to Your Advantage
Understanding CapEx and OpEx, how each is budgeted, and your facility’s preference for one or the other can help you develop a long-term equipment planning strategy.
Replacement, upgrades, and the purchase of new equipment will typically fall into the capital expense category. Operating expenses will include maintenance, both regularly scheduled and break-fix.
Take the prioritized list of equipment from the facilities walkthrough and allocate budget dollars to replacing those pieces of equipment. A percentage of the capital equipment budget should be in reserve as a contingency in case of unforeseen equipment failure.
Planning for repairs is more challenging due to the unpredictable nature of equipment failure. The amount needed for repairs will be based primarily on age of equipment and maintenance history.
There are a few actions that can help regulate operating expenses due to repairs.
First, conduct regular preventative maintenance. Most manufacturers include a regular preventative maintenance schedule in their operator’s manualm and many manufacturers, including Helmer, have service teams that can augment biomed teams by conducting preventative maintenance to help pre-empt maintenance problems.
Additionally, Helmer offers custom service contracts, which can help remove risk and volatility by covering agreed-upon maintenance and repairs that can help stretch the service life of key pieces of equipment, helping you make the most of your equipment planning budget.
OTHER BLOGS YOU MAY BE INTERESTED IN...
- A Case Study in Hospital Cold Storage Planning
- Effective Clean Room Design and Equipment Placement
- Why Service Matters in the Healthcare Space: A Conversation with Wes Peik
- Why Service Matters in the Healthcare Space: Part 2
Equipment Planning with Helmer
Whatever your budget, Helmer can help you get more for your dollar with premium quality, reliable, equipment. Our GX Solutions cold storage units are available in specialized configurations for pharmacy, clinical lab, and blood bank. Our Pro Platelet Incubators have been the industry gold standard for more than 20 years.
We also have custom-service contracts available to help you get the most out of your equipment so you can budget accordingly. To inquire about a custom service contract, contact your Helmer representative or visit our website for more information.
