Tuesday, November 24, 2015

This No Longer Best Practice is Now Getting Old

Trading-in older medical equipment for new medical device, is an aging and unfruitful practice of a Healthcare Supply Chain.  Healthcare systems that separate these two acts have a financial advantage because they can
  1. Resell older equipment at market price, rather than nominal price paid by OEM 
  2. Calculate true cost of equipment ownership
  3. Maintain leverage in negotiating best price for the new device
Acts of procurement and trade-in are like “bride and groom,” it appears one cannot exist without the other.  But in reality, it is a poor marriage of incompatible entities, destined for cataclysm from the beginning. 
Trading-in equipment only complicates an already arduous process of procuring new medical device.  Among many dissatisfactions shared, the single, most frequent frustration expressed by 100% of Healthcare systems surveyed on this topic was
"Receiving substantially less than the Fair Market Price for trade-in equipment from OEM"
There are a multitude of reasons behind low prices paid by OEM for trade-in equipment but the most common one is due to OEM Trading Desk process.  Most OEMs have a Trading Desk that is responsible for collecting trade-in equipment details from all sales reps. 
These details are than distributed mostly to OEM-only contracted vendors who bid on available trade-in equipment.  Vendor with the best offer gets awarded the equipment. 
Of course, this is an oversimplified glimpse of what actually takes place.  But, without getting into semantics of the bidding process and how much of the vendor’s received offer is in fact given to the Healthcare system, this process devalues trade-in equipment at least twice from its fair market price.
Knowing about the general Trading Desk process, is the first step in recognizing that the relationship between procurement and trade-in acts is toxic. 
By separating these two acts into independent tasks, Healthcare systems can
  1. Maintain an advantage during purchase negotiations for new device while
  2. Retaining full control over resale of older equipment  
While it may not always be possible to divorce these two acts due to prior contractual obligations, it is certainly advisable and financially advantageous (in most cases) to explore and establish a formal, internal process going forward.  
In the past, trading-in older equipment was customary.  Today, in the age of value-based healthcare, continuing this aging practice is equivalent to mishandling organizational capital assets and funds. 
Managing and controlling resale of older equipment earmarked for OEM trade-in, is one of the simplest and guaranteed ways of creating additional revenue from an already existing and owned resources.

Friday, November 13, 2015

Reflection and Few Words of Gratitude

Yesterday was a very special day for my family.  It was my son's second birthday.  Yes, he was born on 11.12.13 and as he grows up, his friends and those who learn of his birthday will likely think that it is the coolest birth date ever. 

However, two years ago today, instead of celebrating his birth, we were praying for his survival because shortly after being born, his left lung collapsed and he was intubated. 

That was the hardest time of my life and I do not want to relive it.  However, I do want to express my deepest gratitude to doctors and nurses that went above and beyond the call of their profession to care around the clock for my son.  Within ten long and painful days, they nursed him to perfect health and he was able to come home. 

I cannot articulate the gratitude and appreciation I feel each day when I look at my little boy.  Words also cannot express the honor and exuberance I felt when I found out that EcoMed was retained for a project by the same hospital that saved my son's life.  

"As we express our gratitude, we must never forget that the highest appreciation is not to utter words but to live by them"
~ John F. Kennedy
 
It was bittersweet to walk through the main entrance of this hospital for the first time since two years ago.  And, although I didn't have to be on the second level, I couldn't help but take the East elevator up and stand in front of the NICU hoping that all the babies that are there now can follow my son's journey and go home. 
 As my mind drifted away to that breezy and sunny November of 2013, I quickly forced myself to regain composure because this time I was here for a different purpose.  There was a monumental task at hand and it required concentration and undivided attention.   
 
I took the elevator to the ground level and reunited with my crew in Radiology Department.  As always, expertly and with scientific precision they were already dismantling one of the imaging systems that had served its purpose.  With great ease, they swiftly worked with simple tools and within hours parted out an imaging table, a gantry and removed overhead ceiling rails. 
 
Dismantled parts were laying in several meticulously arranged piles on the floor.  Later, each pile will be taken to an appropriate recycling plant where it will be stripped of oils, harsh metals and reprocessed.  But now, the hallways were buzzing with patient traffic and my crew had to work around these piles.  It wasn't until 8pm that a first handmade dolly made its way out of the hospital carrying all the dismantled parts of a system that once was used for patient diagnosis.    
 
I mention simple tools and handmade dolly for a reason.  Certainly, not because I would want anyone to think that my crew operates with cavemen technology, but because I want everyone to know that we carefully choose where and how we allocate resources.  While our tools may not be as shiny and new, they function extremely well. 

It is not the tools that do the job, but the crew who expertly know how to use them.  In a race to have the latest and greatest technology, simple facts such as this one are often forgotten.  I firmly believe the reason we were awarded this project is not because of my patient experience or because my crew had the latest technology but simply because we were able to provide quality, value, timely service and deliver significant savings. 
 
After two, grueling eleven-hour days, phase one of the project was completed.  I was left alone, standing in an empty hospital hallway overwhelmed with a business sense of accomplishment and an authentic, human feeling of gratitude.  I am convinced that those who have found their true calling in life, strive to execute it with meticulous precision and the last 24 hours proved that I was on the right path. 
 
The gift of working on a project for a hospital that saved my son's life was nothing short of a blessing.  I always inspire EcoMed team to take ownership and responsibility in everything they do, but for this project in particular, I aspired to supersede even my own expectations.  I'm overjoyed to say that it was a privilege to help and improve a hospital that saved my son and I could not have done it without the help of EcoMed family.      

Friday, November 6, 2015

Friday Success Story: It Feels SO GOOD When Everything Works Out!

Few weeks ago, we received a request from our client to sell a highly specialized, mobile oncology system.  This client was part of a large health care network and due to consolidation of their services, use of this system was being discontinued. 

This system was unique in both, its design and application.  That being said, it was in pristine condition - clean, working and complete.  You could definitely tell it was loved and cared for by those who used it. 
 
As with all projects, our first step is to establish a market value that is in line with our client's expectations.  Preliminary research indicated there were less than 40 of these systems used by US health care providers.  Not a single system identical to this one was available for sale on the secondary market.  There were no records of these systems being sold or advertised within the last 3 years.  Naturally, these findings made it very difficult to establish a market value and raised a lot of questions.  

This was intriguing because this FDA approved system was highly regarded in the oncology world.  At the same time, oncology equipment is always highly thought after by many medical equipment buyers and resellers.  What gives?  Of course, the answer was right in front of us.  And of course, the dollar sign was the culprit.  Too many zeros were needed to buy it and not enough zeros were returned in reimbursements.  Now it made sense.   

It quickly became apparent that selling this system in US was fruitless.  There were not enough providers offering this type of therapy and too many medical equipment resellers offering to take this system off our hands. 

That's right, free of charge, they offered to pick up the system and pay for transporting it to their location.  This proposal was unacceptable because this system was portable, did not require de-installation labor and frankly, our client wasn't looking to give it away.
 
Given these bleak scenarios, we decided to engage the European and Middle East markets.  The reason we initially excluded them was due to high cost of transport.  This system was not big enough to occupy an entire container.  It was highly specialized and needed a custom crate.  Historically and practically speaking, when custom crating is required for just one item the overall cost of transportation becomes prohibitive.  

Nevertheless, we proceeded and within a few days located five prospective buyers.  One of whom was an authorized European distributor for the manufacturer.  The distributor had a relationship with an oncology clinic that offered several types of treatment therapies.  The clinic entertained the idea of purchasing this specific system for several years, however budgetary restraints always prevailed
 
In this instance, due to system being pre-owned and price tag being substantially more palatable, the clinic immediately agreed to a price requested by our client.  Yes, our client set the price for this system and did NOT entertain the "Best Price" option!

Funds were wired, payment processed and we began to coordinate and arrange transportation.  We did rely on our client to gather all system accessories but other than that, it was business as usual for them. 

Our crew arrived on the day of the pickup and ensured the system and all components were securely packed and crated.  It was a very exhausting and long day but incredibly rewarding.

Overall, this project took a few weeks, but in the end our client was very pleased with the monetary value and service they received.  My team was elated because it was a joint effort to locate a serious buyer, overcome language barriers and coordinate all logistical aspects of this transaction.   

And finally, I am ecstatic not just because everyone is happy and I get to go home and enjoy a celebratory glass of wine, but because we
  • Delivered what we promised to our client
  • Fulfilled our commitment to help health care providers with limited financial means
  • Increased our portfolio of international buyers by adding a new relationship based in Turkey 
Happy Friday and Cheers!

Wednesday, November 4, 2015

Health Care Providers: You Need a Managed Medical Equipment Decommission Program

The Time is Now

 
For many health care systems the new fiscal year is just around the corner. By now, capital budgets are locked and funds are allocated for new capital equipment. Cheers to that!

Like children during holidays, clinicians are excitedly awaiting arrival of new equipment and looking forward to getting rid of old toys they no longer want to play with. If your organization does not have a plan for disposing these old toys, then you should create it now. Because if you don't, these old toys, including goodies equivalent to an American Girl Doll and Apple electronics will either be returned to their maker, sold at a flea market or locked up in a storage.

 

Fair Market Price Decoded

 
The following three steps illustrate the fastest and simplest way to design a Decommission Plan for end-of-use medical devices.  These steps should be used as template to get started.
 
FIRST step in designing a Decommission Plan involves gathering information on all equipment that will be retiring over the next 12 months. This should be easy because each user department will have these details at their fingertips.

SECOND step is more involved, but very critical for your plan to be successful. You need to get a fair market price for each retiring device, or group of devices (of course, this has to be worth the time, but more eTIPs on that later).

 
eTIP: Fair Market Price IS NOT the same as the trade-in value

Fair market price of used medical equipment is on average 25-55% greater than its trade-in value. It is also driven by factors such as:

  1. Market supply of the same type of equipment
  2. End-user demand NOT manufacturer's demand
  3. Technical configuration
  4. Season - YES! For example, infusion pump price increases by 40% during flu season!
  5. Availability of parts

I Have To Do What?

The best way to get fair market price is to obtain 3-5 quotes for same type of equipment as being retired from reputable sources that distribute this type of equipment on the secondary market.
 
eTIP: When requesting a quote, specify it is for equipment in "as-is, working condition"
(assuming retired equipment works & in good physical shape)


THIRD step involves in establishing a sales goal.  This part is important if you want this program to be profitable (Note: not cost-neutral but PROFITABLE).  Relying on best offers or intuition that a device is worthless is not a prudent way of executing any program or realizing Savings Initiatives of your organization. Even at the flea markets, sellers know what they want to receive for their junk... sorry, merchandise.
 
eTIP: Quotes are a good starting point in establishing sales goal, but other factors such as transportation, storage and timeline should also be incorporated in the final number

Decommission Method

Finally, the decommission method! The right method will help you meet your sales goal.  The wrong one will cause frustration and waste your time.  Here are a few questions to ponder about equipment before making this decision:
  1. Is it owned or leased?
  2. Are there any contractual limitations?
  3. Should it be sold on the internet or on site?
  4. Is it a good candidate for an online auction?
  5. If fair market price is $0, is it best to recycle or donate it?

eTIP: Whatever decommission method you select, make sure it is actionable.  Do not leave equipment in storage.  It will age and lose residual value.
 
Once you decide on an appropriate method, do state your expected resale price per device.  It may seem counter-intuitive to name your price, but remember, you are no longer blindly selling medical equipment. 

You are executing a calculated strategy supported by real market data.  Medical equipment decommission is no longer a convoluted task with an intent to clear up space, get the best offer from a vendor who serviced it or put a checkmark next to "portion of initial investment has been recovered". 
 
Medical equipment decommission deserves just as much attention as its procurement.  Managed programs enact standards and transparency.  They help to narrow funding and reimbursement gaps.  By the way, aren't all funds allocated from the same sandbox? 

Bottom line, managed practice of decommissioning end-of-use medical devices stretches the value of capital dollar and definitely makes you feel good for improving aging supply chain practices.