From the August 2014 issue of HealthCare Business News magazine
- OEM: This is the most costly service option but also has the lowest level of risk and is often the most convenient. OEM contracts generally offer quicker repairs but multiyear agreements can limit leverage in the future. In addition, costs are not always completely capped. Facilities that utilize OEM contracts are encouraged to have in-house maintenance personnel monitor and record all service.
- Multi-Vendor Programs: Multi-vendor contracts have one vendor servicing multiple brands of equipment. Bundling can lead to lower costs and simplified contract management, however, this can lead to shortened equipment life and longer repair times.
- Time & Materials: Choosing a T&M option requires knowing which equipment is “high risk” and better maintained under a contract. This option allows hospitals to choose the best service provider for each service event. However, the “pay as you go” model can make it difficult to budget for the cost of parts and labor.
- BMEs (In-House) Training: This option is practical for large facilities that have multiple types of the same equipment and suitably trained BMEs. In-house service provides immediate onsite support and potential cost savings. In some cases, however, the expense to train BMEs can be higher than the cost of a full service contract.
- ISO Local or regional independent service organizations can provide many of the same options as an OEM. ISOs often cost less than the OEM option and their personnel may be located closer than the OEM’s service representatives. However, ISO personnel may not be adequately trained to service certain models or types of equipment and may have difficulty obtaining parts available only from OEMs.
Style of coverage
Additional details to consider include hours of service and preventative maintenance. Hours of service typically run from 8 a.m. to 5 p.m.; extended hours to 9 p.m. or even 24/7 coverage. For a hospital with backup systems, the typical coverage time is sufficient.
Preventive maintenance can significantly reduce the likelihood of mechanical failure. PM should be built into the service contract and should not interfere with patient schedules. Typically, most contracts include one to four PM visits per year; however technologies like CT and MR can require PM monthly.
Important contract language
You want the contract to protect your facility. Below are some important issues to consider:
- Multi-Year Service Contracts: These contracts are typically priced lower. You should negotiate paying on a yearly basis. The option to modify the contract or renegotiate price depending on the service quality should be included.
Steven Ford
cancellation
August 12, 2014 05:51
You correctly note that longer term contracts are cheaper than short term contracts. And then you note that there should be a penalty-free termination clause "that allows you to void the entire agreement or specific items within the contract."
Which is it? A long term contract that one party can cancel at any time is not a long term contract.
Our company offers multi year contracts that cost less than a one year contract, but we do expect the customer to pay the whole contract. That's how we balance risk. In almost every contract, the cash outflow is highly uneven, and we pay for the bad days by collecting money over a lot of good days.
Have you ever seen a contract that permitted the customer to unilaterally cancel, unless there are unusual circumstances such as the machine not being in use any longer?
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