Service sells equipment: contract negotiation insights for providers

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Service sells equipment: contract negotiation insights for providers

John W. Mitchell, Senior Correspondent | August 06, 2018
Parts And Service

He said this includes such details as providing service around the hours of operations, not during it. But the service needs for inpatient and outpatient imaging operations might differ, depending on the hours.

“If you have an imaging center operating 8-4:30, you might not need a Cadillac, gold service plan – it won't hurt if you need to shut down for three or four hours occasionally to perform PMs," said Bailey.

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Bailey thinks that OEMs are getting more competitive on multi-year service contracts. They are, he said, working to create a value-added differentiation between themselves and third-party service providers. He thinks this value-added attitude by OEMs is a promising trend. Such considerations are especially important for high end, specialty equipment – such as a metal artifact reduction CT scanner, for example - for which only the OEM can provide a very expensive replacement tube.

Roger Johnson
This doesn’t mean the discussion has to be adversarial, Bailey stressed. Creating good working relationships around honest service is important – it "helps the vendor help me." Above all, he maintained, a service contract is a type of insurance.

“You cannot afford to be without insurance on a million-dollar piece of equipment,” said Bailey.

But even with such protection, the length of warranty/service coverage on parts is also an important consideration. Bailey recalled how he arrived at a facility as a new radiology manager and was presented a vendor invoice for $47,000 for a tube on a fairly new CT machine.

The prior director had not realized that the one-year warranty did not extend to the tube, which was only covered for 90 days. Unfortunately, the tube failed at six months, so the hospital was liable for the replacement cost.

Good service contracts help the bottom line
For Roger Johnson, co-founder and owner, Ivy Ventures, attention to good service contracts is essential in reducing the total cost of ownership. It’s worth the effort, he said, as imaging is usually one of the top three profit centers for the average hospital.

Ivy helps its hospital clients with growth solutions, primarily around performing as well as the stand-alone outpatient centers against which hospitals often compete poorly. The company has worked with dozens of health systems and hospitals to improve outpatient imaging service since its founding in 2003.

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