Are You Achieving Return on Investment for Your Medical Devices?

Are the medical devices you invest in delivering the value they should? A simple question, with a not-so-obvious answer.

Put plainly, healthcare purchasers have their work cut out for them – they must do an exceptional job of balancing quality of care and profitability. No easy feat, by any stretch of the imagination.

It’s why providers do not have clear-cut answers for what is beneficial for their organization, like say a software company would.

Take for example an implantable cardioverter-defibrillator. Touted to be a life-saving technology, yet the Journal of the American College of Cardiology says 90% of ICDs will never save a life. At upwards of $30,000 per unit, that’s quite an underperforming asset.

Healthcare providers, administrators, and purchasers today struggle to identify two things:

(1) what equipment to buy

(2) how much to spend on it

And that’s where an evaluation of return on investment (ROI) can be instrumental.

Assessing ROI is NOT just about saving money – it can have a real impact on quality of care and patient outcomes too.

How to Determine What Medical Devices Your Healthcare Facility Needs

Different healthcare facilities have different equipment requirements, which can be categorized broadly into:

  • Equipment that may not be revenue-generating, but may have vital caregiving benefits – For instance, examination tables, instruments, and decontamination units.
  • Essential equipment and staff that supports productivity – For instance, an EHR system, surgical headlights, and reception staff.
  • Specialized equipment for the practice – For instance, a urodynamics system for urology, or a fetal doppler for obstetrics.

In that context, an assessment of ROI can be very beneficial for healthcare providers to understand if a certain piece of equipment should be acquired; and which brand or option offers the best value (more on how to calculate this later).

What is Return on Investment and How Should You Calculate It?

With hospitals and clinics running on scalpel-thin margins, examining the anticipated financial outcomes of investment can help shed light on how to prioritize resources. However, an improper ROI assessment could lead to:

  • Under- or over-estimating how your purchase will impact costs and revenue
  • Delivering subpar quality care and degraded financial performance
  • The investment never reaching the break-even point (or profitability)

The Agency for Healthcare Research and Quality provides a straightforward formula for calculating ROI: 

ROI = Net financial returns from improvement actions / Financial investment in improvement actions

There are three key inputs to an ROI calculation for medical equipment:

  1. Upfront cost
  2. Recurring cost
  3. Utilization rate

Assess the variety of costs you must include for an accurate ROI calculation.

Medical Devices ROI

Source: BHN

1. Upfront Cost

Upfront costs capture the complete capital expenditure on acquiring the specific equipment. That includes:

  • Equipment price
  • Administrative costs
  • Training time
  • Testing time
  • Additional support costs

Upfront costs are often not calculated correctly today, especially when it comes to factoring in less obvious costs. Items such as training and administrative costs are ignored.

In larger institutions, it’s not uncommon for administrative time and paperwork to amount to thousands of dollars (assessing offers, deliberating cost vs. utility, etc.). It’s also not uncommon for the savings from a ‘cheaper’ capital purchase to be undermined by the additional time that must be allocated to train staff for a harder-to-use product.

2. Recurring Costs

Recurring costs include the per-use costs and other expenses required to keep the equipment operational. These can include:

  • Cost per use
  • Staffing costs
  • Maintenance and replacement costs
  • Energy consumption

Again, recurring expenses are often not appreciated fully, causing the operations costs of the equipment to be underestimated. For instance, a surgical light source with xenon bulbs may be cheaper than an LED surgical light source but it will require expensive bulb replacements (and cause downtime) every few months.

3. Utilization Rate

The utilization rate is an estimation of how much the equipment will be used and whether it justifies its rate of return. Overestimating how often the equipment will be used can lead to a negative ROI (where you are spending more on the equipment than you are earning from it).

In a fast-changing healthcare environment, the utilization rate is one hardest to project because of the risks of:

Medical Devices

Importance of Buying Quality Equipment

Hopefully, the three factors for calculating ROI will get you thinking about how you purchase equipment. At the very least, it will help you make a more informed decision about the medical equipment you purchase for your facility.

One of the biggest motivators today is ‘buying cheap’; but what’s the cost of that low sticker price over the long haul? 

Cheaper equipment may appear attractive for its seemingly lower upfront cost – but will it be able to stand up to the rigours of your practice? How many times can you decontaminate it before it starts to show wear and tear? What are the increased recurring maintenance costs?

Quality equipment may have a higher upfront cost, but, it can offer greater ROI as a result of:

  • Better patient outcomes and higher satisfaction ratings
  • Ease of use that minimizes training time
  • Less downtime for maintenance
  • Greater energy efficiency
  • More durable materials that reduce replacement costs

A Medical Device That Actually Achieves Return on Investment

BFW is the preferred medical headlight brand in the USA and around the world, with more than 25,000 surgical headlights and video imaging systems in use.

Our headlights are the preferred light sources for surgeons and physicians alike for their ergonomic design and uniform lighting, which reduces fatigue and eye strain. And it’s not just the lighting that’s unparalleled in the industry, our solutions offer exceptional ROI with:

  • Durable, long-lasting materials
  • An easy-to-clean design
  • Minimal maintenance
  • Readily replaceable parts

Discover the exceptional ROI BFW headlights will offer your healthcare facility. Get your free trial unit today.

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