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HTM ComDoc 9

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Contents

Medical devices that may benefit from PM from a business/ economics viewpoint

(This document was last revised on 10-1-18)


9.1 Introduction

While the primary focus of the regulatory and inspecting agencies with respect to maintenance is on keeping medical equipment safe, healthcare providers will also want to pay close attention to the possible adverse economic impact that over-maintaining or under-maintaining their equipment might have on their cost of doing business.

Until very recently - presumably because of concerns about safety - requirements in the Medicare Conditions of Participation have dictated that hospitals must follow the manufacturer’s recommendations with respect to preventive maintenance. However, a relaxation permitting use of an alternative risk-based approach, recently arranged by The Joint Commission has prompted several authors to advocate some new risk-based or evidence-based guidelines (HTM ComRef 3, HTM ComRef 4).

In HTM ComDoc 3 and HTM ComDoc 4) we gave exclusive consideration to the safety implications of planned maintenance (PM) which consists of traditional preventive maintenance (TPM) supplemented by safety verification testing (SVT). This document extends the analysis to possible business and economic benefits from giving priority to performing planned maintenance for some device types, and eliminating PM for others that can be shown to be non-productive and therefore not cost-effective.

9.2 Three additional risk criteria based on economic considerations

There are three ways in which the failure of certain medical devices can affect the equipment-related operating costs of a healthcare facility.

  • Lower failure rates and less downtime will reduce the disruption of revenue streams associated with prime revenue-generating equipment
  • Lower failure rates will reduce the amount spent on equipment repairs.
  • Lower failure rates can reduce interference with the facility’s ability to fulfill an important part of its mission thus avoiding possible damage to its reputation

Based on this observation we are proposing to add three business-related risk criteria (see A, B and C below) to the two safety-related risk criteria described in HTM ComDoc 3.

A. Potential increased revenue benefit. Can reducing the loss of use of this type of device have a significant positive effect on the facility’s ability to generate the expected level of revenue for the services provided by this particular type of device?

If the answer to this question is Yes, then a short description of how the failure creates a potentially significant adverse outcome should be captured for use in the analysis (see the third column of Table 6) together with an additional judgment in the fourth column of the potential level of the economic impact.

Certain types of device, such as CT and MRI scanners, generate significant amounts of revenue for virtually all hospitals, and when these devices fail – particularly if they are not brought back into service quickly - the level of patient use and the associated revenues may be lost, at least for the current billing period. We characterize devices with the potential to have this kind of adverse economic impact as revenue-generation-critical devices. We provide some examples in Table 6 of a number of devices that we have classified as critical with respect to revenue generation. In this category, devices with higher billing rates and higher utilization rates are potentially the most critical. However, the actual severity of the potentially economic loss will depend on the extent to which there is historical evidence of PM-preventable downtime. The three levels of potential outcome severity (adverse economic impact) used in this analysis are determined primarily by:

  1. The perceived criticality of the equipment-dependent service
  2. The billing and utilization rates, and
  3. The likelihood that the facility will have one or more back-up devices available.

The three levels of severity are:

  • Level 3. Major economic impact - on the facility’s cost of doing business
  • Level 2. Significant economic impact - on the facility’s cost of doing business
  • Level 1. Relatively minor economic impact. - on the facility’s cost of doing business

The analyses reflected in Tables 6, 7 and 8 represent our own initial judgments at this time and they are provided here primarily to illustrate the concept. Each facility should use the judgments of its own staff to address this first question along with the two following questions (labeled B and C below) which are also about equipment-related economic and business risks. The brief notes under the columns headed “Potential Adverse Outcome” and “Potential Mitigating Factors” are offered as placeholder comments and they can be accepted as-is or changed to better represent the judgment of the facility’s staff. Similarly, the three levels of potential outcome severity can be changed if it is determined that a particular type of device should be moved into a different economic risk category.

Although, as we have noted previously, there are between 750 and 1500 different kinds of medical equipment in modern hospitals, the tables address only about 10% of this total. The 71 items listed in the tables represent a subset of those devices that we consider to be the most likely to create a threat to revenue generation if their failure rate should increase because they are not provided with an adequate amount of PM. With respect to the first question, we have judged only 10 device types to have the potential to have a major economic impact on the facility’s revenue-generation capability. Twenty-one of the remaining 61 types of device in the subset are judged to have worst-case failure modes that are capable of having a significant but not major economic impact. We have tried to be conservative in assuming the worst possible outcomes in these initial judgments.

B. Potential reduction in repair costs. Can some of the failures of this type of device be prevented by performing timely preventive maintenance on their non-durable parts thus reducing the total cost of repairing these types of device?

If the answer to this question is Yes, then a short description of the adverse economic result of not doing PM should be captured for use in the analysis (see the third column of Table 7) together with an additional judgment in the fourth column of the potential magnitude of the adverse cost impact.

Some devices have non-durable parts that can be critical in the sense that if they are not replaced or restored before they deteriorate, their deterioration may trigger the premature failure of other components that will then need to be repaired or replaced before they would otherwise. In addition to the resulting increase in the device’s repair rate and the associated downtime, these components may also be particularly expensive to repair or replace. We characterize devices with the potential to have this kind of adverse economic impact as repair-cost-critical devices. One example of a type of device that needs to be given timely preventive maintenance for this reason is a linear accelerator. If the cooling system in most linear accelerators is allowed to deteriorate and the system overheats, this can damage heat-sensitive components that are usually quite expensive to replace. Table 7 shows some other examples of devices that we have judged to be potentially repair-cost-critical. Twelve device types are judged to be the most vulnerable to generating high-cost repairs if they are not given timely preventive maintenance, with another 15 judged capable of potentially seriously increases in their repair costs if they are not subjected to timely PMs. Devices that are dependent on mechanical cooling and that have potentially expensive heat-sensitive parts such as glassware or elaborate circuit boards are the most likely to be considered repair-cost-critical. Again, the actual severity of the potentially adverse outcome will depend on the extent to which there is historical evidence of PM-preventable downtime.

C. Potential to adversely affect the facility’s reputation. Can the complete loss of use of all items of this type of device in the facility’s inventory have an adverse effect on the facility’s reputation?

If the answer to this question is Yes, then a short description of how the complete loss of use of this type of device would affect the facility should be captured for use in the analysis (see the third column of Table 8) together with an additional judgment in the fourth column of the magnitude of the potential economic impact.

If a facility provides a particular service that is a vital part of its basic mission, and that service is dependent on the availability of one, or a small number of devices, and that device fails (or all of the small number of devices are in a failed state simultaneously) then there is a risk that this will have an adverse effect on the reputation of the facility within the local medical community. Care should be taken to keep this potential adverse consequence to a minimum. We characterize devices with the potential to do harm to the mission and, therefore the business of the healthcare facility in this way as reputation-critical devices. In the extreme case when the availability of the device is very important, a reputation for having particularly unreliable equipment can become a significant threat to the business. For example; certain emergency rooms are required to have access to a CT scanner and are required to stop accepting emergency cases when access to that scanner becomes unavailable. For a hospital with a busy ER Department the adverse publicity associated with having to frequently divert emergency patients could be considered to be a serious failure on the part of the facility to fulfill an important part of its basic mission. There are a number of critical services – some clinical and some support services – that are device-dependent; and the extent to which these devices will become mission-critical will depend largely on the extent to which the facility has a back-up device or other back-up capability available. Table 8 shows some more examples of device types that we have classified as potentially reputation-critical.

9.3 Quantifying the economic risks associated with “light maintenance” (zero or user-only PM)

While the decision on whether or not to perform preventive maintenance on various types of the facility’s medical equipment is likely to be driven primarily by the anticipated effect that this would have on the safety of the devices, it will be helpful for healthcare organizations to also be in a position to evaluate the more straightforward question of whether or not the cost of performing PM on their medical equipment is likely to be offset by:

  1. The preservation of revenues that would have been lost because of a lower level of uptime if PM had not been provided, and/ or
  2. A lower level of repair costs. In order to create a process addressing this question, we first need to develop some guidelines for estimating the dollar value of the presumed amount of potentially-lost revenue that might be saved and the level of repair costs that might be avoided.

9.4 Potentially-lost revenues that can be saved by performing traditional preventive maintenance

If the type of device in question has non-durable parts that are required to be periodically refurbished or replaced, failing to perform periodic preventive maintenance will presumably result in an increase in the device’s failure rate, accompanied by the associated device down-time. The magnitude of this effect on the failure rate can be measured directly if the Repair Call Cause Coding system (described in paragraph 4.5 of HTM ComDoc 4.) is in use. If we also make an estimate of the revenue generation potential of this type of device, either from the facility’s own billing records or from some other industry knowledge base, we can make a reasonable projection of the annualized amount of lost revenues that would be saved (LRS) by performing the manufacturer-recommended preventive maintenance.

LRS = B x D x F (dollars)/ yr.

Where:

  • B = the estimated average value of the hourly billing rate when this device is in use;
  • D = the average hours of downtime experienced by this type of device when it fails;
  • F = the projected incremental increase in the device’s annualized failure rate if preventive maintenance is not performed

The classifications shown in Table 6 are based on which devices typically have the highest billing and utilization rates. They are subject to re-allocation and re-ranking based on the facility’s own evidence of PM-preventable downtime.

9.5 Repair costs that can be avoided by performing preventive maintenance

The (presumably) higher failure rate resulting from the periodic deterioration or complete failure of the non-durable parts of the type of device in question can be easily identified if the Repair Call Cause Coding system described in Section 1.4 of HTM ComDoc 1 is in use. If this information is available, the costs of the repair calls attributed to inadequate PM can be readily identified and used to calculate the annualized value of these additional repair costs (ARC).

ARC = S x 12/M (dollars)/ yr.

Where:

  • S = the sum of the cost of all repairs classified as "due to inadequate restoration of a non-durable part" (Category 7) - over a period of M months

The classification shown in Table 7 is based on which devices are typically considered to have expensive heat-sensitive components such as glassware and elaborate circuit boards that are vulnerable to failed cooling systems.

The sum of the lost revenue saved (LRS) and the avoided repair costs (ARC) represents a reasonable estimate of the economic benefit of performing preventive maintenance on each particular type of device. The extent to which this total annualized amount (LRS+ARC) exceeds the cost of providing the PM is then an excellent direct indicator of whether or not choosing to perform PM on this type of device would be a sound business decision.

9.6 Costs associated with a deterioration of the facility’s reputation

Concern about the reliability of the facility’s equipment, as it might be highlighted in publicized reports of excessive failure rates of critical devices - such as a CT scanner supporting the facility’s trauma center or emergency room - is more difficult to quantify. The development of this kind of adverse reputation among the local medical community could certainly have an adverse impact on the facility’s business. However, it seems unlikely that the actual increase in the failure rate of, say, a typical CT scanner that would result from simply not performing timely preventive maintenance could make a significant change to its total failure rate.

The classification shown in Table 8 is based on consensus generalizations on which devices are most likely to contribute to the facility gaining a reputation for having unreliable equipment. As mentioned above, a potentially pivotal variable here is the extent to which the facility has provided potentially critical equipment with an appropriate reserve or back-up capability.

9.7 Which types of devices would benefit the most from PM - from a business economics viewpoint?

In contrast to the two safety-related criteria described in HTM ComDoc 3 the results of applying the three business/ economics-related criteria described above are additive, in the sense that the estimated economic benefits in each of the three areas from performing PM can simply be added together to create a total benefit in terms of a total annualized dollar amount. This estimated amount is then the figure that must be compared against the annualized cost of performing the preventive maintenance; and the bigger the net positive amount, the greater the justification for performing PM - and vice versa.

In the economically-critical rankings shown in Table 9 there are 6 device types that are judged to be potentially economically-critical at the highest severity level (i.e. with the potential to have a major impact on the facility’s business) in all three categories. These are;

  • Cath Labs,
  • CT units,
  • linear accelerators
  • MRI units, and
  • PET & PET/CT & PET/MRI units
  • Special procedures rooms

Four other device types are judged to be potentially economically-critical at the highest level in two of the three classifications. These are;

  • gamma cameras
  • surgical guidance units
  • surgical robots, and
  • brachytherapy units

Being judged as economically-critical at severity Level 1 (the potential to have a major impact on the facility’s business) with respect to multiple criteria obviously enhances the likelihood that there will be a positive economic justification for deciding to perform PM on these particular device types. However, the rankings in these tables are generalizations and somewhat subjective. It will be much more interesting to see how the rankings might change once they are based on numerical values for the “LRS” and “ARC” variables, calculated as described above using as evidence actual data from real-world experiences.


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