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.