AuntMinnie.com is pleased to present the third installment of a three-part chapter titled "Purchasing Capital Equipment" from Radiology Business Practice: How to Succeed, edited by Dr. David Yousem, a professor in the department of radiology at Johns Hopkins Hospital in Baltimore, and Dr. Norman Beauchamp Jr., the chairman of the department of radiology at the University of Washington in Seattle. The book will be published in November by Elsevier. This section of the chapter, authored by Dr. Bob Gayler, addresses equipment assessment, time frame for capital equipment purchases, and the biggest mistakes made in purchasing capital equipment.
Networking is as important in equipment selection as it is in many aspects of professional life. Getting a user list from the vendor can be very helpful, in that you can call several users and talk to them without the vendor being present. You also may know someone at the site. The Klas Organization publishes a "best of" annual list, which can be helpful. There is an organization requiring a membership fee, MD Buyline, which gives pricing and user comments. The annual meeting of the Radiological Society of North America (RSNA) is very helpful in giving an overview but, in my opinion, you shouldn't make your decision there, unless you've done a lot of homework before the meeting. There are too many prospective customers present at a vendor booth to receive in-depth time from the rep, and as well, the trade-show atmosphere may give rise to emotional rather than reasoned decisions.
Time frame for capital equipment
After the vendor receives the specifications for the RFP, they will need between two to three weeks to respond, depending on the complexity on the proposal. If it is unusually complex, they will need additional time.
Internal decision-making: This is under the control of the user. At a minimum, the responses will need to be carefully read by all members of the decision-making team and a flowchart for comparison reviewed. If no site visits are needed, a minimum of two weeks should be set aside for this, however, it may take as long as several months. You should be aware that all of the RFP responses will have a time during which the quote is valid, so if the decision time is longer than the valid time with the quotation, you may need to get fresh quotations.
Paperwork approvals: At our institution, paperwork approvals typically take four weeks for major capital equipment.
Legal review:This typically takes from four to 12 weeks at our hospital. Once the order goes out, the time for delivery from the point of view of the vendor is "after receipt of order," or ARO. This is when the vendor's clock starts. Delivery is usually between 60 and 90 days, which is appropriate when there is no construction. If there is construction, the following timetable is typical for us:
- Planning, four to 12 weeks
- Drawings, four to eight weeks
- Engineering review, two weeks
- Permits, two weeks
- Bid, two weeks
- Construction, one to six months
Thus the total, if no construction is involved, will typically be 20 to 32 weeks from the time the specifications go to the vendor. If construction is involved, the schedule will be from 32 to 52 weeks from the time the vendor receives the specifications. Our experience is that angiographic labs typically take closer to two years. The delays in cath labs are related to site visits, the number of people involved in the decision-making process, and the complexity of the construction planning.
Biggest mistakes in purchasing capital equipment
Confusing the salesperson with the product. It is obviously the goal of any company to have salespeople with good personalities, who are knowledgeable, dress well, and are attractive. The purpose of this is so that you will think that the product they represent will be of the same high quality as the salesperson. There may be some correlation between the quality of the salesperson and the quality of the product, but it is safest to assume that there is no correlation at all.
Failing to check out the local service operation. For this, there is no substitute for word of mouth and local reputation. The quality of service ultimately comes down to the individual service engineer. Service support back at the home office is important for certain essential things, but your uptime will depend more on local service people.
Believing surgeons. A few surgeons understand the economics of imaging equipment; however, these are very few indeed. A few also are concerned about radiation safety. Our local examples of bad economic decisions based on surgeons' recommendations include:
- Fixed fluoroscopic units in the operating room (twice)
- Biplane mobile fluoro unit designed for hip surgery
- Lithotripsy device
- Cysto-table with fluoro
All had very low volumes.
Accepting a beta-level product in an area where you need reliability.
Buying a product near the end of its technical life; it will not be supported.
Getting a product from a company with a different primary focus. For instance, Pfizer, at one point, had an outstanding CT product. They discontinued development. Johnson and Johnson had an excellent MRI product. They sold it.
Assuming that a key feature is standard when it is an extra cost option.
Choosing equipment over the end user's objection. Unless it is perfect, which is impossible, you will get endless complaints.
Buying a good product from an undercapitalized company. This can be a winner, but you have to have tolerance for high risk, because you might get stuck with an unsupported product.
Forgetting that more volume means more supplies, more PACs support, and thus higher overall expenses.
Conclusion
This chapter outlines a general approach to the purchase of capital equipment for a radiology imaging department.
To summarize:
- Maintain a detailed five-year equipment replacement plan and a general 10-year equipment plan.
- Retain current data on inventory of equipment, current exams, and current expenses.
- Keep abreast of technical advances.
- Treat the vendors professionally, not collegially.
- Remember that money spent on equipment requires accountability by serious accountants.
- Include the physicist and engineers as part of the purchasing team.
By Dr. Bob Gayler
AuntMinnie.com contributing writer
October 22, 2007
Dr. Bob Gayler is an associate professor in the department of radiology at Johns Hopkins University in Baltimore.
Related Reading
'Purchasing Capital Equipment,' Part 2 -- Capital budget versus operating budget, October 17, 2007
Equipment maintenance insurance as a strategic financial tool for imaging centers, June 8, 2007
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