In-house vs. Out-sourced
Clinical Engineering
David M. Dickey, CHC, CCE
Corporate Director, McLaren Health
Care Clinical Engineering Services
Disclaimer/Transparency
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I do have a biased opinion!
30+ years managing in-house clinical engineering
programs
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15+ years clinical engineering consulting (Medical
Technology Management., Inc.) www.mtminc.org
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Currently Corporate Director CE McLaren Health Care
Practice area focus is in creating and/or expansion of CE programs
Conversion of out-sourced programs to in-house
Having been in this profession for my entire career, I know
a lot of CE professionals that have ‘gone both ways’,
switching back and forth as needed
I do agree
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Out-sourced programs may make sense for smaller
hospitals, < 100-150 beds, especially if they are not part of a
larger system with internal CE resources
Not all in-house, or out-sourced, programs are created
equal
Common factors that impact degree of success
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Quality and education of the staff
Resources
Administrative support
‘Fix it’ shop vs. a ‘professional service’…what are the needs?
Either type of program is doomed for failure if the program
delivered does not fit the needs and expectations of the
organization!
Neither are free
Top Ten+ Differences
In-House
Out-Sourced
Services provided at cost, no mark
up
Services provided at cost +
margin
Top Ten+ Differences
In-House
Out-Sourced
Parts credits contribute to
hospital's bottom line
Parts credits contribute to
vendor's bottom line*
*if the hospital purchased the
asset, then, technically, the
parts credit belongs to them!
Top Ten+ Differences
In-House
Out-Sourced
COSR on a well developed
program run at 4- 5%
COSR can be at 7-15% +
Top Ten+ Differences
In-House
Cost savings as a result of parts
shopping and negotiated
discounts lower CE program
budget
Out-Sourced
Cost savings as a result of
parts shopping and
negotiated discounts improve
vendor profit margin
Top Ten+ Differences
In-House
Out-Sourced
CE staff committed to one
organization
CE staff need to be committed
to two organizations
Top Ten+ Differences
In-House
Out-Sourced
Added value services, such as
projects, done at cost
Added value services, such as
projects, may be provided at
additional cost
Top Ten+ Differences
In-House
Out-Sourced
Software and data owned by
hospital
Software and data may be
owned by vendor
Top Ten+ Differences
In-House
Out-Sourced
Hospital in charge of cash flow to
the vendors
Vendor in charge of cash flow
to the vendors
Top Ten+ Differences
In-House
Out-Sourced
Concerning the variable portion of
program budget, the hospital only
pays for equipment that actually
gets services (parts and vendor
services)
Hospital pays full amount of
variable expense throughout
the year, regardless of when/if
device fails. Vendor makes
extra margin on equipment
with low failure rates or not in
use.
Top Ten+ Differences
In-House
Out-Sourced
No conflict of interest
Potential conflict of interest if
the provider also sells
equipment
Top Ten+ Differences
In-House
Out-Sourced
Hospital in control over parts and
labor sources, and can easily
switch if quality becomes an
issue.
Provider in control over parts
and labor sources. Hospital
have to fight for change.
Top Ten+ Differences
In-House
Out-Sourced
Every $100k in savings offsets
need to collect 100% on $3.3 m
in patient charges, if hospitals net
operating margin is 3#
Every $100k in savings
contributes to profit margin of
the provider
Example of cash impact if you
outsource
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If inventory is $290,000,000
COSR = 4.7%
Budget is then $13,630,000
Outsource to a provide that has 20% profit margin,
cost now becomes $16,356,000 (COSR now 5.6%)
If hospital’s net annual operating margin is 2%, the
additional $’s paid needs to be made up by the hospital
collection of 100% on $13,630,000 of patient charges!
Top Ten+ Differences
In-House
Out-Sourced
Hospital maintains control over
staffing levels and assignments
Provider maintains control
over staffing levels and
assignments
Top Ten+ Differences
In-house
Out-Sourced
Expansion of duties provides
endless opportunities to add
value and save $ (i.e., IT clinical
system systems management)
Expansion of duties provides
endless opportunities for
additional revenue
Top Ten+ Differences
In-House
Hospital fully responsible and
liable for negative outcomes
and related damages, if any
Out-sourced
Hospital fully responsible and
liable for negative outcomes and
related damages, if any, but at
least now has someone else to
share the blame
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Issues of concern when converting
to in-house from out-sourced
program
Software CMMS and data conversions
Test equipment and tools
Manuals
Over due PMs and CM’s wip credits
Staffing and ability to hire providers staff
Contracts and OEM discounts
Policies and procedures
Clerical and call center support
Clinical engineering expertise
Three to six months lead time
In order to convert to an in-house
model
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Develop a business plan (three years), based on
cost and quality
Set realistic goals and expectations
Consolidate all service budgets into one
Include contract/vendor management services
Start with general biomedical equipment support
Plan for expansion into service of ultrasound;
sterilization; imaging; cath lab; clinical lab;
radiation oncology; surgical instrument mgt.
If you have an out-sourced program
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Perform bi-annual assessment of equipment actually serviced, PM or
CM, and remove from inventory items never seen, to lower your
program contract cost
Read your contract and verify deliverables are being delivered
Negotiate the margin, full disclosure of all costs
If vendor gets credits for parts returned, it should be credited back to
the hospital
Mandate full staffing levels. If not met, get credit
Mandate credits for PM’s not done on time
Obtain quarterly downloads (Excel format) of inventory and work
histories
Consider getting help…call me when you are ready to save money!
(daved@mtminc.org)