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Time to upgrade: Practical approaches to medical technology capital planning

Insight Article

Strategic Planning

Business Operations Technology

Patient Care Technology

Chris Harrop
Medical technology in a healthcare organization often is viewed in the future tense: Something will do what we want it to do, sometime and somewhere down the road.

Consider Martec’s Law: Technology generally evolves faster than organizations,1 and there’s nothing medical groups can do to slow technological advances to allow them to catch up.

While it’s a constant challenge to keep up with these advances, there are capital strategies an organization’s C-suite can embrace to become more agile and hew closer to the leading edge, according to Ilir Kullolli, MS, director of clinical technology and biomedical engineering, Stanford Children’s Health, Palo Alto, Calif.; and Chris Gutmann, MS, information technology system director, Yale New Haven Health System, New Haven, Conn.

Kullolli and Gutmann, speaking Feb. 14 at the HIMSS19 Global Conference & Exhibition in Orlando, Fla., noted that when it comes to key issues in remaining current on technological advances in healthcare, a future-focused plan still requires a strong sense of where an organization is today.

“You can’t get too far ahead — you can’t start buying technologies that are half baked, and you don’t want to just be focusing all your time on … [existing] technology that’s there and it’s going to be there forever,” Gutmann said.

Technology challenges

Kullolli outlined a range of challenges related to managing capital planning for technology in a healthcare organization beyond the usual economic forces and government regulations, such as:
  • Technological advances: An ultrasound machine may be made obsolete in a matter of years by a smaller device that may be much cheaper.
  • New technologies: Telehealth and imaging technologies have presented unique hurdles to long-term planning for technology capital needs in recent years.
  • Shifts in where care is delivered: Expansion of care in clinical and home settings outside of large hospitals has fundamentally reshaped where medical technology dollars are devoted for the next 10 years.
  • Complex technologies: Equipment integration for transmitting EHR and medical record data is needed while maintaining cybersecurity and regulatory compliance across networks and devices.
For technology directors and chief information officers, the challenge beyond identifying these needs is prioritization: Data security, device integration/interoperability and internet of things (IoT) issues largely are near-term challenges, while areas such as 3D bio-printing, augmented/virtual reality care and aspects of telemedicine often are viewed as longer-term innovations.

From a clinical engineering perspective, Kullolli says that a longer-term challenge will be developing models to help determine when medical devices and technologies will need fixing. “We’re looking more and more at predictive maintenance rather than preventive maintenance,” he said. “How can we predict home devices are going to fail?” He pointed to reviewing existing service records to shift from a preventive maintenance work schedule to an anticipatory one, more in line with when devices tend to need maintenance.

A similar approach is very useful for equipment purchasing for capital planning. Anecdotal drivers, such as safety incidents, may alter how an organization looks at stratification of equipment, but Gutmann suggested implementing plans for purchases at:
  • 250% of device life expectancy in primary care
  • 150% of device life expectancy in surgical/ICU/high-value care settings
  • 75% of device life expectancy in translational medicine 

Assessment and planning: An executive strategy

An organization’s executives will build capital strategy and set expectations on the long-term objectives of the group or system, which makes it important for IT and/or clinical engineering planning to recognize the support aspects of each service line to deliver on the broader goals.

“Whenever it comes down to capital planning, I think we always have to think first about people and process,” Gutmann said. Managing a range of devices in an organization must be mastered “before we can even worry about the capital plan,” he noted.

Gutmann said that executive strategies for capital and medical technology will need to bridge the macro-economics of the full organization and the transactional nature of finding specific machines and integration points. This makes setting expectations between an executive team and a technology team crucial, especially when a broken piece of equipment plays a major role in delivering not just on economic goals for the organization but also socioeconomic programs with the community, such as a telehealth program that helps serve rural hospitals and other providers hundreds of miles from your main facility. 
Simplifying technological needs can help interaction between IT and an organization’s executive team to set a strategy that’s aligned with existing cash flow issues, carryover from previous years, strain of growth and other issues that all organizations face. Gutmann recommends three key areas of focus:
  1. Replacement: Areas of need related to patient safety and liability, or a need to consolidate vendors
  2. Growth: With new construction or acquisitions comes needs to expand technology, as well as technologies associated with new service lines, such as telehealth
  3. Strategy: Technology that assists in meeting government compliance efforts or in physician recruitment efforts over a longer period of time.
Additionally, establishing a business case of modernizing technology in an organization should also factor in patient experience, Gutmann said.

Establishing scope

An executive team working with their clinical engineering or IT team(s) also should establish total cost of ownership — a yearly service cost multiplied by life expectancy plus acquisition cost — for technology within the practice, including:
  • Equipment costs
  • Resources to operate
  • Licensing (especially with databases and interfaces)
  • Data center virtualization or physical server needs
  • EHR workstation and mobile EHR access.
One unique aspect to the resource cost is an assessment of medical device security, Gutmann said, as threats to health information exist across a system in both physical and logical movement of patient information. An IT team will need to identify and mitigate risks relating to:
  • Operating system age
  • Peripheral ports on devices
  • New consumer device platforms
  • Firmware/configuration files
  • Software updates.
There are also financial burdens for updating older systems/devices and ensuring security on new devices that should be noted for capital planning purposes.

With these numbers in hand, a summary of significant investments for clinical technology modernization can be assembled by equipment type — such as vital sign monitors, procedure scopes, infusion pumps, CT scanners, etc. — and detailed by the service line(s) operating each type and an annual total cost built on the replacement and maintenance strategies previously developed.

Transactions or partnerships

As many original equipment manufacturers have business markets across multiple clinical service lines, healthcare organizations should look for vendors truly aligned with their multidisciplinary needs. Partnering with a vendor that can serve numerous areas — imaging, diagnostics, advanced therapies and more — may yield crossover benefits in areas such as IT infrastructure and analytics.

In addition to having clear understanding of total cost of ownership and a cost of service ratio for equipment (yearly service cost divided by acquisition cost), organizations need to understand the tipping points for a longer-term partnership with a technological vendor, Gutmann said. A crucial piece of that equation is clinical alignment and understanding of what clinicians need to meet the goals of the organization’s broader mission. “Do you have clinicians that are asking for you to be partners with that organization, are the clinicians loving the education they’re getting from the organization?” Gutmann said. “If not, you’re forcing something that probably isn’t there because you really need that clinical partner to be driving the adoption of technology.”

Along with recognizing the clinical support for technological updates, committees can be developed to review the identified capital needs in the coming years and create a list of “must-do” and “nice-to-do” priorities to fit within the finite capital and implementation resources at the organization’s disposal. 

Note:

  1. Brinker S. “Martec’s Law: the greatest management challenge of the 21st century.” ChiefMartec.com. Nov. 6, 2016. Available from: https://chiefmartec.com/2016/11/martecs-law-great-management-challenge-21st-century/.

About the Author

Chris Harrop
Chris Harrop
Senior Editorial Manager MGMA

Chris Harrop is senior editorial manager for Medical Group Management Association. In this role, he serves as editor of MGMA's flagship print publication, MGMA Connection magazine, and oversees the publications team that produces the MGMA Member newsletter, Executive View, Student newsletter. Prior to joining MGMA, Chris was managing editor of multiple community news organizations in the Denver metropolitan area. Email Chris Harrop.

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