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8 Tips for Better Equipment Planning
Advice from a pro on outfitting your new surgery center.
Scotty Farris
Publish Date: October 10, 2007

Physicians and healthcare organizations engaged in building a new ambulatory surgery facility often focus all their attention on the "front of the house" and how the building looks. Only late in the project do they give attention and consideration to how the building functions. Equipment often receives the same consideration as furniture; just about anybody can pick it out, and you can do it on piecemeal basis, mixing antiques with new according to taste. This approach is wrong for furniture and equipment.

I advocate a much more organized and systematic approach to technology planning. Remember that the technology you buy for the center will make up between 20 and 40 percent of the cost of opening a facility. It will have a major impact on how well and reliably your center operates. Just as important, equipment selections will have bearing on how attractive the facility is to new surgeons you are trying to recruit.

An organized approach will almost certainly end up costing you less by buying the correct level of technology at the right price. An organized approach will certainly result in an ASC that runs more smoothly and economically, particularly if it gives consideration not only to the acquisition costs of equipment, but to the costs of ownership over its expected useful life (Life Cycle Costing). In this article I'll offer eight pieces of advice for better, more organized equipment planning.

1. Order your project priorities
First, put your plan-ning in the right order. Before even trying to sketch out what the physical facility should look like, determine what services you will provide at your ASC and roughly what technologies you will need to deliver those services. View the new facility as a factory-as a building designed specifically to implement the technologies it houses-"the back of the house." Consider this issue as thoroughly and concretely as possible. Involve the other stakeholders and be mindful of other physicians you would like to recruit in the future. There are two very important reasons why.

First, the technology you employ now or anticipate in the near future will have a significant impact on the infrastructure of the facility. Equipment rough-ins could involve any mix of the building's structural, mechanical, electrical, and plumbing systems. Here are some examples:

  • Any equipment that will be supported from an above-ceiling structure requires extra steel bracing or other type of reinforcement;
  • Mechanical systems could involve delivering remote air conditioning through a boom mounted duct while exhausting laser smoke plumes through special exhaust systems;
  • Electrical considerations while planning include cabling for power, data, fiber optics, video, imaging and communications;
  • Plumbing involves the vacuum and anesthesia waste gas scavenging system and pipeline medical gas system. Even if a boom is not equipped with medical gases, it still could possibly require compressed air or nitrogen for booms with pneumatic brakes; the same holds true for active microscope vibration isolation systems that have pneumatic suspensions needing compressed air or nitrogen;
  • Most sterilization equipment requires specific plumbing, including water at a specific pressure level and drains. If you plan to use the Steris 1 cold sterilizer, you will need water at a specific temperature as well; this often requires a hot-water loop or a temperature booster;
  • Wall mounted equipment often requires blocking between the studs.

Some procedures, like total joints (a popular consideration among ASCs and surgical hospitals these days) require more aggressive instrument washing systems, post-op facilities and rehabilitation equipment.

Second, planning your equipment early will allow you to do a more accurate business plan. Know exactly what you are going to need by knowing exactly what procedures you are going to perform. For example, there's a major difference between the equipment necessary for facelifts and tummy tucks and the equipment necessary for laser skin resurfacing and liposuction. Just saying you are planning to do cosmetic procedures is not specific enough to do good planning or budgeting.

Good equipment planning and budgeting will identify related capital requirements. It will give you solid data to use when determining a project's feasibility. Remember that just because a project sounds like a good idea, and everyone involved is excited about the idea, and the investors are ready to write checks and get the project underway, does not mean that the project really is a good idea. Not only do you need to understand what procedures you want to do and what equipment and instruments are required to do those procedures, you need to know what you will be reimbursed for those procedures.

When it comes to project cost overruns and the bank, the old adage that it is easier to ask for forgiveness than ask for permission does not work. My banker has a sign in his office that says "a lack of planning on your part does not constitute an emergency on our part."

Good planning may also allow you to avoid "overspecs" and unnecessary build-outs. For example, some ASCs go to significant extra expense to put surgical lights in their endoscopy rooms, just in case they "might maybe" "possibly sometime in the future" "just in case" may ever have some need to do a minor surgical procedure in an endo room rather than an OR. Buying a light on a stand usually works just fine for those minor occasional procedures, and it's significantly less expensive.

2. Consider "throughput"
Just knowing which procedures you'll do is not enough. It's also important to envision how you will be doing them. For example, if your center will be doing lots of ophthalmology, you may have a surgeon who wants to block schedule all cataracts in one morning and bounce between two rooms to do them. If so, you will require two phaco machines and two operating microscopes, not just one.

The same is true of a center that is heavy in orthopedics. You might have a four-OR ASC and be doing ACLs in every room. If so, you are going to need four complete sets of tools and four video endoscopy set-ups. On the other hand if you believe you will be able to schedule your minimally invasive cases (sinuscopy, arthroscopy, laparoscopy, urology, etc.) at different times, you may very well be able to buy only one or two video carts and move it between rooms. Video is video-what matters are the scopes, couplers and instruments used with the video imaging chain.

A word here about another device thought by some to accelerate throughput: The OR Service and Equipment Boom. Several anecdotal reports, some sponsored by boom manufacturers, suggest that room turnover is speedier when you put as much equipment as possible on booms. Skeptics call booms an $18,000 convenience for a $7-an-hour employee. I think the jury is still out. However, I know physicians that believe video monitors mounted on booms are functionally superior because they allow you to move the monitor in three planes rather than just two. This makes for better ergonomics, which is proven to reduce musculoskeletal stress and repetitive motion injuries.

3. Buy conservatively
An excellent point to remember is that you can always buy more new equipment later. Unfortunately, the same is not true of selling used equipment later if business does not go according to plan. In fact, some appraisers of failed ASCs value some used OR equipment by the pound!

Avoid the trap of "hospital-think." Don't buy any more backup equipment than you need. Because they are high-acuity facilities, most hospitals believe they have to have two of everything ready to go and one in reserve. Ambulatory surgery centers are much lower acuity. The surgery schedule occurs during normal business hours. Almost all the surgery is elective. If a piece of equipment breaks down before a case, you can nearly always reschedule. If a device you purchased new were to fail, most major manufacturers have provisions for loaner equipment, delivered by a smiling Federal Express employee the day after you call.

I recommend taking a hard look at the possible return on investment for every piece of equipment you buy. Instead of buying an "iffy" or "trendy" technology, consider renting the device a per-day or per-case basis. A good example is the holmium laser, a device nearly all urologists covet. These instruments are expensive and they deserve a special look at cost justification. If you think you can cost justify the holmium, rent it and see. Do not forget to include disposables and staff training costs. Also, when doing a cost justification, look at reimbursements. You may not get reimbursed any more for using a laser when other methods are also paid under the same CPT code.

By all of this I am not recommending that you purchase less equipment than required. If you can reasonably estimate that a three-chip autoclavable video camera system with robotic voice activation is going to attract hundreds more cases, or that $200,000 image-guided surgery system for ENT will pay for itself, by all means go for it. What I am saying is to avoid buying equipment based on a comment from a surgeon like "buy this device and I will bring all of those cases here" or "we ought to have one in case I decide to start doing those procedures here."

4. Buy used equipment carefully
Let me state my bias up front. With a few exceptions, I generally prefer new equipment. It is a simple fact that surgeons are the only ones who can bring cases to your facility. Great, new equipment in the back of the house will impact the success of the facility much more than choice of fabric on the waiting room chairs in the front of the house. Having said that, I have purchased and continue to purchase certain items used. If you are careful, you can save a significant amount of money with this strategy. Here's what to do:

  • Understand exactly how the dealer altered the equipment prior to selling it to you.

In some cases, used equipment is literally better than new. I like to cite Steris's rebuilding program for its sterilizers. The company extracts the door assembly and pressure vessel from the old sterilizer and then tests and refurbishes the vessel and door, then they replace everything else. Everything. The brand-new components are more modern than the original ones. This unit sells for significantly less than a new current production model. Other equipment refurbishers disassemble equipment to its smallest component and replace worn parts with brand new ones that are at least as good as and possibly better than new. Some companies call this "remanufacturing," but I don't like the term; it implies a change of function. I call this process "overhauling." It's the best and also the most costly method of refurbishing.

At the other end of the spectrum are refurbishers that practice the "spray and pray" method. They repair the item, clean it up, sell it to you and hope that it doesn't break down during the warranty period. You'll get the lowest prices on these items, but it may be far from the best deal.

How do you tell the difference? You can ask around about the company's reputation, but the best method for my money is the "surprise inspection" approach. Show up at the biomedical shop unannounced and ask to see the piece of equipment the vendor wants to sell you.

  • Ask if there is a complete repair history on the equipment you are buying. If one does not exist, you cannot know if certain repairs-for example, manufacturer's recalls-were performed.
  • Consider serviceability. Equipment that has a huge market share-certain brands of anesthesia machines and power hand tools come to mind-can have nine lives because even if the manufacturer has stopped supporting them, there are independent aftermarket parts suppliers who can. Less popular, higher tech equipment may not enjoy this advantage. You may buy a used, less than well-known brand, electrosurgery unit for a great price, but when the circuit board goes there simply may not be a replacement available for it.
  • Remember that reliability can be in the mind of the beholder. No matter how well a piece of equipment was rebuilt, it will remain "used" in your mind and those of your staff. Objectively, the equipment may perform better than a new one, but there will always be a stigma attached.

5. Consider service
This is a very important component of equipment purchases, its cost of ownership. First of all, don't forget to factor this expense into your pro forma. After the warranty runs out, you can expect service to cost you from 5 percent (sterilizers) to as much as 15 percent (imaging equipment) of the original acquisition price each year. Don't get too fixated on the cost of acquisition. Think instead about the cost of ownership, which includes the acquisition and service costs.

Find out how quickly the service will be provided. You need to be able to get the equipment up and running within 24 hours of the malfunction. The company should either have a well-dispersed factory service force or licensed independent biomedical service firms do the work. Strongly consider extended service contracts on items that break down often. Flexible endoscopes come to mind. Consider doing without on items that don't. Rigid endoscopes, for example, rarely need service if cared for properly.

6. Use RFPs
Very often, more than one brand of equipment will be acceptable to the stakeholders of a new ASC. If this is true of your center, I highly recommend using requests for proposals (RFPs). Say you need five flexible endoscopes and Brand A and Brand B are both acceptable to all the physicians in your center. Describe exactly what you need on paper and then ask Companies A and B to provide you with their very best offer. Ask them to state warranty periods and terms and conditions and sweeten the deal however they want. You may be surprised at the concessions companies will make to get the business. Very often, companies will also promise to "meet any competitive offer."

7. Finance it Right
Most equipment companies offer their own financing. This is often a very convenient way to go, but it may not be the most economical way to go. Most of these companies do not truly do financing-they buy it from a financial company and resell it to you, taking a mark up in the process.

Most ASC principals will be better off going with one of two other options.

One is your local bank. Banks typically have excellent access to wholesale financing and they will pass the savings along to customers with whom they have an excellent long-term relationship. A downside is that banks rarely offer non-recourse financing. They typically want personal guarantees.

Another is one of the companies that specializes in medical equipment lending. These companies will accept the equipment itself as collateral. Some lenders have special finance products just for surgery centers. The catch is that this type of loan almost always costs more.

8. Consider Getting Help
Physicians who are behind most ASCs often know a lot about the equipment they touch, but very little about the items they don't, like stretchers, sterile processing, ice machines and under counter refrigerators. They may know that they need a sterilizer, but may not know the difference between a vacuum and gravity sterilizer, a critically important distinction for fast OR turnover.

It's certainly possible for physicians to learn what they need to know-there is no magic in equipment planning-but it's rarely the most efficient way to go. Most are better served by hiring professional equipment planning help.

Several equipment companies will provide you a significant amount of equipment planning help for free, and the quality of advice is usually excellent. The catch is that you must use their equipment.

You can also hire an equipment planner. The services of these individuals are not free. The typical cost range is $10,000 to $20,000 per OR for these services in a pure day-surgery model. Other care delivery models that incorporate surgery plus another specialty group like imaging, physical therapy, rehabilitation, oncology treatment, etc., are priced based on the labor required for the work needed for a given facility's project. For that, you do receive three significant benefits:

  • Independence. A good equipment planner will find the brand that's right for you. He or she will not be restricted to one company's offerings.
  • Experience. Any experienced equipment planner will have purchased more equipment over a few years than any single hospital department head would purchase in his or her entire career. As such, equipment planners can offer advice to the ASC principals, helping with the budget, preventing overbuying -and underbuying-and also heading off mistakes that will cause change orders in the construction. They can also drive better bargains since they know the "street" prices of most equipment.
  • Efficiency. Determining the equipment needs of your center, sending out requests for proposal and cutting purchase orders and arranging delivery takes hundreds of man-hours. Another person in your organization may have the expertise to do equipment planning, but does he have the time?

Whether you do your own equipment planning or end up engaging the services of someone else, do it the right way. Organized, systematic planning is key to efficient, economical ASC construction and smooth operation once you are up and running.