Hospitals can save millions of dollars with MES contracts

Hospitals can save millions of dollars with MES contracts

Lauren Dubinsky, Senior Reporter | August 29, 2016
Parts And Service
From the August 2016 issue of HealthCare Business News magazine


In Canada there is a single-payer system and signing long-term contracts requires the funders to understand the logic behind the deal. In the case of Mackenzie Health, the $300 million contract was the biggest the funders have ever signed.

“It was a large thing to understand, and to understand the benefit of what a longer-term relationship meant,” says Stationwala.

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But ultimately, the value proposition was presented to the funders and the deal was signed.

“I think the biggest selling point [for our board and the government] was that there was going to be less coordination for us as a hospital because we would have a single point of accountability for all of our big pieces of equipment,” says Stationwala.

Georgia Regents two years later
Philips announced in July 2013 that it signed a $300 million, 15-year contract with Georgia Regents Medical Center. Almost two years later, the health system experienced $7 million in savings and a 35 percent reduction in technology spending.

As part of the contract, Philips is responsible for selecting, installing, providing training for, managing, maintaining and replacing all of the Philips and non-Philips imaging equipment, patient monitors, and respiratory therapy technology, as well as a large PACS platform.

As of April 2015, 525 monitoring devices, 800 imaging and care devices and other technologies have been replaced and upgraded at Georgia Regents.

“The same scope of scale we can get from one technology provider, they can see a range of benefits over a life cycle of each piece of medical equipment, to really look at reducing costs throughout the 7- to 10-year life cycle,” says Bierbaum.

Philips sits on the hospital’s quality boards and management teams, and is involved in its technology planning, broader capital asset planning and budgeting process.

Philips also helped Georgia Regents redesign its clinical workflows and the way the clinicians interface with patients. The physicians are now able to make real-time evaluations at the patient’s bedside with new digital technology.

Hospitals can save money on medical equipment by bundling, but these MES contracts focus on reducing the total cost of ownership.

“There you start moving from saving a few percentage points from negotiating a contract to really being able to move the dial by optimizing medical equipment,” says Bierbaum. “We are really looking at how to reduce the total cost of ownership through these types of arrangements.”

European market
Philips is dominating the U.S. market, but Siemens has a strong presence in Europe with approximately 30 contracts. GE also has deals on the continent.

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