Scarce capital, these days, poses a serious threat to imaging enterprises hoping to see even modest growth. Blame the economy if you will, but there are any number of other contributing factors, including the rapid commoditization of equipment maintenance, punishing tax rates, investment-portfolio losses, and the hold that regulations and legal mandates can place on opportunity.
Given all that, where is an imaging center or radiology department to turn for funding? Look inward, then purge waste, Simon Walls, managing principal of GE Health care’s Asset Management Solutions unit, suggests. “The starting point is your existing base of clinical equipment assets because, in all likelihood, they’re not being optimally utilized, managed, and maintained,” he says. “That means waste is occurring. Reduce the waste and there should be freed-up funds sufficient to support not only day-to-day operations, but also strategic growth initiatives.”
Walls contends that few imaging providers ever stop to consider strategically how their imaging assets help or hurt the bottom line. “Unfortunately, taking health care as a whole, the failure to make this link is each year resulting in billions of dollars of wasted potential capital,” he estimates.
A New Approach
One area in particular where such waste occurs is in the utilization of imaging assets. Within limits, more utilization equals more revenue. According to Walls, however, “An imaging center is going to have a difficult time increasing utilization if it hasn’t got a handle on its utilization picture. Unless you know how your assets are being used, you can’t develop an effective distribution strategy that paves the way for optimally appropriate utilization.”
Walls adds that asset management, in GE Health care’s parlance, does not mean what it traditionally has meant: equipment maintenance. “With maintenance, the key metrics include quality compliance, equipment reliability, and uptime,” he says. “On the other hand, asset optimization is measured in terms of how capital investments and operational expenditures are managed in order to take waste out of the system and free up capital so that growth visions can be more quickly and fully realized.”
Walls identifies three drivers for asset management in the newer sense of the term: optimization of asset performance, optimization of asset distribution and use, and optimization of asset-replacement strategies. “These three are not separate from one another, but are connected elements that must work together holistically in order to achieve the desired return for the organization,“ he explains.
Where the Money Is
GE refers to this as an asset-management framework. Applying it, Walls indicates, “can be an eye-opening—and money-saving—experience for a health care organization. For instance, too often, organizations wastefully overspend on maintenance contracts for assets no longer in distribution, or they unknowingly lease equipment when they already own more than enough units to meet demand, but they very possibly might never know this without some kind of asset-management framework to go by.”
Walls illustrates this with a client’s success story: the case of Wisconsin Valley Health Network (WVHN), Wausau, Wisconsin. WVHN is a member-owned cooperative managing the supply chain and biomedical-engineering activities of four hospitals and over 40 clinics in North Central Wisconsin. In 2007, WVHN asked Asset Management Solutions to conduct a physical inventory of assets across the organization—not just radiology equipment but infusion pumps, endoscopes, and the works.
Going in, WVHN thought that these assets numbered 8,000. To the network’s dismay, the count conducted by the GE team showed an actual inventory of fewer than 6,000 items. “That actually turned out to be a good thing,” Walls says. “WVHN used this census as the basis for a new service contract—one reflective of the true size and composition of the equipment fleet. Eliminating coverage of phantom assets saved the network about $800,000 for that contract year.”
Those operational savings allowed WVHN to offset fully the declines in revenue caused by investment-portfolio losses and decreased clinical volume, Walls notes. A delighted WVHN then gave GE a green light to delve deeper into the organization’s clinical assets. “More misalignments were found between inventory and utilization,” he reports. “Since that time, WVHN has become more effective at lifecycle