When it comes to planning an annual hospital budget, materials managers likely think about the big-ticket items on their wishlist first, such as capital expenditures and major equipment purchases—and not the clinical accessories that support them.
However, clinical accessories contribute to the smooth functioning of lifesaving healthcare equipment and services to keep it operating effectively. The total cost of ownership (TCO) of this equipment factors in not just the piece of the machinery itself but the budget line items for all of the related costs that come with it, including important accessories.
Here is a closer look at TCO and how to navigate clinical accessories in an annual hospital budget for the upcoming fiscal year.
Exploring Total Cost of Ownership
The concept of TCO encourages materials managers to think holistically about how much will be spent over the life of a piece of equipment. Beyond maintenance and upgrades, new technology comes with other "soft costs,"1 such as education and training for hospital staff who have to use the equipment.
Generally, TCO boils down to the following components:
- Acquisition cost. How much did it cost to purchase the equipment? This includes the initial payment—the price before taxes but after any discounts or closing costs.
- Operating cost. How much does it cost to put the equipment to use? This includes recurring costs such as product updates and support services.
- Personnel cost. How much does it cost to keep the equipment running? This includes costs for administrative staff and support personnel.
How each of these categories breaks down in practice varies; however, clinical accessories and add-on components are one of the more common (yet commonly overlooked) operating costs. They can significantly impact the TCO of a purchase; monitoring exhaled Carbon Dioxide (CO2) provides just one example. This mechanism confirms tracheal intubation and recognizes accidental esophageal intubations, among other safety benefits for patients—although it's now a standard of care, the incremental cost of CO2 monitoring was not always a routine budget item for hospitals purchasing monitors. Recognizing the vital nature of monitoring exhaled CO2, regulatory agencies such as the American Society for Anesthesia and the American Heart Association have recommended expanding its use.
However, exhaled CO2 monitoring is still underutilized, likely due in part to the cost burden.2 Along with the capital purchase of a monitor that is separate from a standard bedside monitor or ventilator, the TCO of CO2 monitoring involves repeated purchases of these clinical accessories:
- Airway adapter
- Various cables
The sensors used for CO2 monitoring are often damaged during connection and disconnection, handling, and monitoring. They also carry a risk of contamination due to secretions from the patient. Ultimately, the incremental cost of CO2 monitoring far outpaces the one-time monitor purchase.
Tips for Optimizing Clinical Accessory Purchases
Accessories such as CO2 monitoring sensors, water traps, and disposable surgical instruments require repeated purchases whenever supplies run low. Therefore, it can be difficult to predict at the beginning of a budgeting year how to much to allot to this TCO category. Further, COVID-19 proved that hospitals truly can't know what's around the corner or what might cause a spike in demand for certain supplies, such as personal protective equipment and other single-use accessories.
This creates a moving target for budgets; here are a couple of ways materials managers can hit the mark.
Lower Warehouse Costs with Consignment Programs
Consignment programs3 allow healthcare organizations to retain stock of specific items in order to meet their immediate needs without incurring the cost of purchasing the item until it is actually used. Not only does the supplier own the supplies until the healthcare facility uses them, but they also keep the supplies in a warehouse or operations center chosen by the hospital.
Consignment programs may offer lower costs, because hospitals only pay for what they need rather than placing large orders and not using everything. If a shortage does occur, the hospital-selected warehouse or operations center is likely nearby with excess stock, avoiding the need for emergency shipments and increasing the speed of restocking.
Ask About Large Order Discounts
Not all clinical accessories and healthcare supplies tend to sit around; everyday items such as gloves and surgical gowns that get used up quickly may warrant a large or bulk order discount. It is best for materials managers to approach the vendors they buy from most frequently to discuss discounts for bulk orders; vendors may be more likely to work out a deal with regular customers.
How Clinical Accessories Impact the Standard of Care
Beyond the bottom line, clinical accessories impact patient comfort and satisfaction4. High-volume, low-cost items such as blood pressure cuffs and IV tubing often come in close or direct contact with patients day after day. It's is imperative for them to be durable, safe, reliable, and of the highest quality.
Healthcare organizations don't rely solely on large equipment; medical accessories also play an important role in keeping daily operations running smoothly. Materials managers cannot afford to forget clinical accessories this budgeting year. While not every need is apparent in advance, thorough planning and proper funding can give clinicians the best possible foundation in the coming year.