Franklin, Tennessee, November 2011 - Brian Baker, president of the Franklin, Tenn.-based Regents Health Resources, says that meaningful use requirements are only one of several reasons – including workflow and functionality – that legacy equipment is up for replacement in many clinical settings.
As life becomes more complex, both socially and biologically, everything in the health care world follows suit. Stakes are climbing in every aspect of the industry, including expectations of performance improvement, budget metrics and patient satisfaction – and the hammer is clearly in the hands of OEMs as ISOs struggle to keep pace.
The tension inherent in this relationship has never been more clearly illustrated than in the divide between the sales and service of bleeding-edge, top-of-the-line equipment and the workhorses of the aftermarket that doggedly keep pace. It’s commonly described as a digital gap, but that game of infinite catch-up sustains its own rhythm that reverberates on in the hallways of hospitals and patient centers everywhere.
Now with meaningful use requirements tying Medicare and Medicaid reimbursement rates with patient satisfaction and outcomes, the approach that aftermarket device sales, service and parts vendors take to improving their competitiveness must change with it.
Privacy, Security and Deeper Questions
Brian Maloney is the Managing Director of Imaginary Landscape, a web design business based in Chicago, Ill. Maloney says that the intersection of the health care and digital worlds hinges on the accumulation and transfer of data – namely, how to do it securely. Surprisingly, he says, there’s still a knowledge barrier on what that implies throughout many organizations.
“There’s a lack of understanding and somewhat carelessness when it comes to data, and there’s more scrutiny being put on it,” Maloney says. “You have to be very careful about how you assign personally identifiable information.”
Individually, an e-mail address, phone number or a detail from a personal health record may not be of any significance, “but when there’s a connection between the two, all hell breaks loose.” Understanding the capacity of a device to store information, for whatever convenient purpose, now mandates an implicit understanding of whether that device also has safeguards that protect it from unintentionally disclosing that information.
A relative furor emerged last summer when businesses across the country learned that the hard drives on their discarded faxes, copiers and scanners might be retaining electronic data unexpectedly. (In one example, digital office equipment resold by the police and government of the city of Buffalo, N.Y., inadvertently exposed sensitive municipal and legal information.) HIPAA regulations are increasing in their stringency, even to the point that individual employees may now be personally liable to the tune of thousands of dollars for an information breach.
“You’re looking at risk and reward from a hospital’s point of view,” Maloney says. “They’ll spend more money, perhaps lots more money, for the safety and security of dealing with a larger vendor as opposed to a small one. Even though the majority of relationships are event-free, and saving money is important, you know the specter of something happening is what the big guys are selling on.”
To compete, Maloney says, smaller ISOs will have to establish their personal reputations in a marketplace where customers are at once looking to conserve their budgets and sign up with a trusted (read: bigger) player.
“It goes back to the adage that no one ever gets fired for doing business with IBM,” Maloney says. “Understanding the psychology, the agony of defeat, is far deeper than the thrill of saving a couple dollars.
Smaller ISOs “have to know the kind of language we’re speaking” when talking with a director of IT or a chief privacy officer,” Maloney says. Often the best way to demonstrate the ability to go “several questions deep” with representatives from a variety of departments within a potential client is to self-publish whitepapers on topics of relevant interest to their concerns.
“Now I can come to the table as a mom-and-pop to these large vendors and say, ‘I’m very well versed in these issues, and would you like to see this article I wrote?’” he says.
“You rely on the people who you buy from to help you manage the meta-systems, the systems that keep track of the systems,” Maloney says. “No one, particularly in a purchasing environment, can know everything about everything that they need to know it about. That’s why it’s important to get out in front of it and know where it might intersect with other people in your organization.”
Alternatively, Maloney says, the equalizer for smaller businesses is often the ability to personally troubleshoot the most severe problems. In a 14-person business like Imaginary Landscape, the 3 a.m. problems fall on his shoulders, and he gladly addresses them.
“It’s well worth the three times a year that we personally get it,” he says. “I don’t mind getting awakened at 3:30 in the morning if something’s wrong. People don’t call for trivial reasons. When they do call, you have a tremendous opportunity to say this is why you chose us.”
Infrastructure Compatibility for the Future
Although device security is still the watchword for health care customers, Sabine Duffy Sandstrom, Vice President of Business Management – Refurbished Systems at Siemens, says that purchasers of pre-owned equipment gear want to know most of all that they’re buying something that’s compatible with other (newer) back-end devices.
“Everybody’s customers are obviously incentivized to do more with less,” Duffy-Sandstrom says. “This is why customers are more inclined to look at refurbished systems then they ever were before – proven systems at a lesser price.”
Duffy-Sandstrom says that as customers begin to expect the same product life spans out of their pre-owned equipment, service contracts have become a differentiator for Siemens. The company’s pre-owned equipment is compatible with the advanced uptime functions of its latter-day gear, including remote diagnostics, PM monitoring and scheduling, and service alerts.
Furthermore, she says, pre-owned Siemens gear that is supported by the company’s service contracts can be integrated with advancing hospital patient information systems because the device software is consistently updated from the manufacturer.
“You don’t want to have a standalone system,” she says. “It has to connect with the rest of your world. Whether we bring a refurbished system to the market or a new system to the market, we make sure from a connectivity perspective that it connects with the existing Siemens infrastructure.
“IT will only continue to be on the forefront, so as you offer a cost-effective solution, you need to keep up. You cannot separate the two; they need to walk hand-in-hand,” Duffy-Sandstrom says.
When Siemens rolled out a tiered refurbishment purchasing plan for its imaging gear in the beginning of 2011, it was aimed at offering customers price-point choices to match their expectations of their pre-owned equipment. As that program has proven, Duffy-Sandstrom says, buying behavior is changing.
“What we are also now discovering is that the customizable approach also swaps over into when people choose their service maintenance contract,” she says. “It’s that path of upgradability.”
Duffy-Sandstrom also says that the ability to upgrade aftermarket devices to interface with patient-focused software applications is going to only be more important as Medicare and Medicaid reimbursement rates hinge more on patient experience.
“If you look at how Medicare and Medicaid are planning on incentivizing the reimbursement when it comes to customer satisfaction and customer experience, it opens up a whole new realm of how the hospitals and diagnostic imaging centers will focus on that, and how they choose what they’re buying,” she says.
Duffy-Sandstrom also agrees that applications will become increasingly portable in the future, especially as some Siemens software is now designed to run on Apple iPads and iPhones. That always-on, mobile technology suite is something that not only affects the back end of information exchange, but also is the environment in which the patients of the future are increasingly accustomed to operating.
A parent of device-savvy teenagers, she says, “I think they are a more demanding generation in the sense of the technology they have grown up with. As the next generation of patients coming up, they will be even more demanding about how they access their health information at any given point in time. That’s the generation that’s used to accessing all that information digitally. It’s going to be very different.”
Meaningful Use and Risk/Reward Calculus
Brian Baker, president of the Franklin, Tenn.-based Regents Health Resources, says that meaningful use requirements are only one of several reasons – including workflow and functionality – that legacy equipment is up for replacement in many clinical settings.
“Since these sites first purchased these systems 10 to 12 years ago, these things have matured,” Baker says. “Many locations have RIS/PACS systems that aren’t five years old but that are going to have to be replaced wholesale in order to meet meaningful use requirements. If you don’t meet those criteria by 2015, you’re going to get [financially] penalized.”
The difference, Baker says, is clearly device connectivity. Whether caused by outdated imaging gear, software version differences, or a general need for connectivity, providers are either going to have to re-write their service contracts or eat the costs of bringing their gear up to date.
“Many manufacturers are enabling more and more behind-the-scenes connectivity with their equipment,” Baker says. “It’s possible now to track your equipment status almost real-time with the right tools and a connection to the manufacturers.
“They’re building their own electronic service access so that the equipment reports on itself and can a lot of times be fixed electronically. The engineer calls the technologist and says ‘your tube is spitting, and I’ve ordered one for you. When’s good time to install it?’”
Baker’s firm performed an in-depth risk analysis of service usage for Intermountain Healthcare, a Utah-based provider. By developing an algorithm that calculates the likelihood of downtime a device may experience, they scored each device from one to 10 that ranks its availability for clinical use. That derivation became valuable across modalities, vendors – even software revision levels – and is influencing Intermountain’s equipment purchasing and servicing decisions.
“I believe this is the next step as we use data to learn from ourselves and our equipment,” Baker says. “Now a picture becomes visible in front of you about what works and what doesn’t work. It would shock you how many pieces of equipment it does not make sense to maintain a full service contract on.”
Furthermore, Baker says, although many OEMs tout the advantages of software upgrades with their service contracts, these often apply exclusively to safety protocols and not usability.
“That’s something that the aftermarket has been fighting for a long time, and it continues to happen,” he says.
The challenge for ISOs is to maintain their competitiveness as these devices become increasingly sophisticated, Baker says.
“The bigger companies have deeper pockets; broader resources,” he says. “Unless an ISO has a really smart program decompiler locked up in the back room somewhere, OEMs continue to use that as a lever to sell service.”
Vendors of some aftermarket devices “are never going to go away,” Baker says, “but as a rule, you’ll see some dramatic swings back and forth.” Companies that may have put up their own shingles after years of OEM tech support or distribution are now being vertically integrated back into the big vendors’ networks as efforts to expand their footprints increase. In response, that system of dynamic equilibrium also yields “an awful lot of smaller companies,” he says.
“There’s an awful lot of equipment manufacturers that are struggling,” Baker says. “I think we’ve got a pretty good supply for the next couple of years of aftermarket equipment that may not be all that old. That equipment will become available or be sold to third-party brokers or ISOs for parting out.
For most vendors, Baker says, finding their niche in that realm will be the difference between surviving and flourishing. As for which way he thinks the market will swing:
“We see declines in everything except tech, in which we have double-digit increases.”
Matthew N. Skoufalos is the contributing writer for Medical Dealer.