Procuring a MRI, CT or PET/CT Unit
An imaging leader’s mission is to oversee a sustainable radiology program. This program must offer value, quality and a seamless patient continuum. Simultaneously, it needs to be optimized for maximum yield in today’s competitive healthcare landscape. If this happens to be your mission, keep reading. Leading this charge means that each decision made paves the way towards better patient outcomes, stronger margins and a healthier radiology business. If you’re determined to reach your goals, let’s talk about the first order of business: equipment procurement.
Often times the initial launching point for any Manager, Director or Radiology Leader is to recognize the need for a new or expanded modality, or to simply combat an aging asset issue. When you find yourself here and as you begin debating a manufacturer of choice—be it GE, Philips, Siemens, Canon or Hitachi—hit pause. The focus at this juncture should be to consider the cost benefits of purchasing versus renting.
Equipment procurement is one of the most critical decisions that a radiology business can make when planning for future imaging access and patient care. It’s also expensive. Weighing the pros and cons of the decision to rent or buy can be fraught with benefits and pitfalls, depending on the chosen path. With your institution’s financial health, patient satisfaction and reputation on the line, there are three factors that should be measured when considering next steps.
1. The Cost of Owning vs. Renting Imaging Equipment
When decision makers embark on an imaging equipment procurement mission, cost has a way of topping the list of priorities. Rightfully so; operating a profitable radiology service line in today’s environment of high-deductible health plans, declining HOPD imaging volumes, healthcare reform and intense payer scrutiny demands for an adaptable and price sensitive mindset. However, given radiology’s status as one of the most profitable and high-growth outpatient services, owning a piece of medical imaging equipment becomes more than just considering the purchase price or the rental fee. Selection of imaging equipment can translate to methodically capitalizing on the estimated 35% that a radiology department returns to the bottom line for many hospitals.
Whether you buy new or used, the total cost of owning and maintaining radiology equipment can vary significantly depending on the modality, construction requirements, annual service requirements, facility leases and so on. Rod Stoner, manager of medical equipment contracts at Ministry Health, estimated that although imaging makes up only ~3% of the equipment he oversees, maintaining imaging equipment makes up 55% of his entire budget. Also, included in the total cost of ownership is the operation of the equipment, personnel and ongoing training.
Not to be dismayed, if a hospital or practice has the bandwidth and ability to drive the needed volume to substantiate the large capital outlay of owning imaging equipment, then the high risk could carry forth the high reward from ownership. With thoughtful and deliberate capital planning and asset preservation measures, many hospitals and physician groups have created in-house programs that overcome the traditional institutional barriers that stymie performance and profitability.
On the flipside, renting radiology equipment usually means little to no capital outlay aside from the agreed upon service fee. When evaluating an imaging provider, the service fee should be a factor in the decision, not the solitary requisite, otherwise you risk overlooking the value/lack-of-value and likely return on your investment. Take special caution here because it might be enticing to choose the provider with the lowest contract fee. Keep the old adage in mind about getting what you pay for and consider the real costs to your business if the rented MRI, CT or PET/CT unit is not able to scan for one day, one week or even a month.
It’s worth repeating that the radiology service line is one of the most valuable gateways to future downstream revenue. Renting radiology equipment from a provider based on lowest cost alone could have devastating consequences to the health of your larger clinical programs. Patients receiving scans rarely realize if the service has been outsourced or not and thus a poor experience could negatively impact a hospital’s reputation in the eyes of patients and their referring providers. The Imaging Manager or Director is usually the first on the ground to receive stakeholder feedback that the lowest cost provider they selected is hamstringing the larger interests of the organization.
A few tried-and-true questions to ask when exploring an imaging provider to rent from:
- How long has this company served as an established diagnostic radiology rental provider, and what does their tenure demonstrate about their success?
- In the event you need backup equipment or would like to expand services, how likely and quickly will this company be able to respond to your needs? Fleet size will be key here.
- In many cases staffing can be a real challenge and delay operations for lengths of time. Will this company be able to prioritize your staffing needs and expedite support with certified, top-performing technologists?
- Can this company provide referrals from current and past customers? A company can always speak favorably about themselves, but hearing a customer’s honest experience can be most telling.
- Is this company able to provide patient satisfaction scores that reflect quality service performance?
These and many other components will greatly affect your ability to hit your scan completion goals – or not. At the end of the day, the cost proposed by a rental provider is often directly tied to the return you’ll be guaranteed in the contract.
2. The Contract Structure
Many organizations view ownership as a means of avoiding tying into a contract for a service they may decide to provide in-house. However, flexibility, risk mitigation, cost savings and convenience are actually several key benefits to outsourcing PET/CT or MRI. Whether you require access to only the equipment—or you need it fully staffed—the right rental provider should tailor the support to your terms.
When evaluating any contract, the structure and duration should afford you several options. These options should include the ability to expand your services with scalability and lower overall project costs compared to what you’d incur going it alone. The margins and return to your overall business should be clearly mapped out and backed by market specific benchmarks. There should be transparency in how the service provider will interface with your team, who your channels of support will be and what the mutual obligations under the partnership provide for.
Finally, in comparing contracts, be sure to question how a rental provider will hold themselves accountable to the partnership agreement. Ask how they will consistently report on patient experience, volume, referral pattern and the critical levers in your market that are driving the success of your contracted modality.
In sum, evaluate the many quality metrics your institution gauges to measure success. Then make sure the contract structure meets those needs and the partnership feels authentically invested in the near and long-term growth of your organization, up-to and including eventual equipment ownership, if that’s the end goal.
3. The Plan for Growth
Your cost has been reviewed. You’ve evaluated contract options for the rental path, or you’ve considered how to maintain and sustain purchased equipment. You’re thinking about a launch date. Next, consider growth and how you’ll:
- Introduce your imaging service to the referring community and provide clinical information
- Pinpoint challenges and opportunities in your market that support or stifle growth
- Educate patients and market the service(s) using compelling collateral, public relations and advertising tactics
- Optimize your patient preparation and scheduling and prior authorization services to maximize scan completion rates
At this stage of your mission, you should now have the confidence to make the selection to buy or rent. Either you’ve discovered that your in-house team will be able maintain the operational wheelhouse and grow the volumes on the equipment you’ve procured – or a vendor will. The final litmus test will be your hospital’s eventual performance and profitability.
Still Can’t Decide Whether to Rent or Buy?
If you like the idea of owning, but would enjoy the many benefits that come with renting, consider another alternative: a Joint Venture partnership. An economically aligned relationship with an established imaging services provider can provide you access to the required operational resources and capital.
Speak with a seasoned radiology solutions architect today to discover more options.
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