216 EQUIPMENT ACQUISITION

EQUIPMENT ACQUISITION

ROBERT STIEFEL

University of Maryland

Baltimore, Maryland

INTRODUCTION

Equipment acquisition is the process by which a hospital introduces new technology into its operations. The process involves determining the hospital’s needs and goals with respect to new technology and equipment, how best to meet those needs, and instituting the decisions. The process involves virtually every clinical and support department of the hospital. This is consistent with the Joint Commission on Accreditation of Healthcare Organizations (JCAHO) (1) medical equipment management standards which require hospitals to have a process for medical equipment acquisition.

Unfortunately, in many hospitals it is a ritual, the control and details of which are jealously guarded. In fact, the needs of the hospital’s operation would be much better served if all departments knew how the process worked. If the rules of the process were known and based upon the stated goals and priorities of the institution, then the people who must attempt to justify requests for new equipment would be able to do their jobs better, and with subsequently better results. If a new technology can improve the hospital’s finances and/or clinical or support functions, then the methods by which this can be used to justify requests should be clearly explained. If the hospital’s reimbursement structure is such that the introduction of new technology is difficult, but the improvement of current functions is more easily funded, then this should be explained.

In short, there should be a policy and procedure for the method by which the hospital acquires new equipment. It should define what the hospital means by a capital expenditure, reflect the hospital’s overall goals and objectives, clearly state how to prepare a justification, and explain, at least in general terms, how a decision is to be made about the funding of a proposal.

The scope of this article is limited to the justification, selection, and implementation of new medical technology and equipment (Table 1). It is not intended to provide cookbook methods to be followed exactly, but instead to explain principles that can be applied to different hospitals and their differing needs. This seems to be particularly appropriate because needs vary not only between hospitals, but also with time.

JUSTIFICATION PROCESS

The justification process lays the groundwork for the acquisition of medical equipment. The better the justification, the more dependable the results will be. If the rules of the justification process are carefully planned, and just as carefully followed, the equipment acquisition function of the hospital will be respected and adhered to by other components of the hospital system. It is via the justification process that the hospital’s needs are recognized, proposals

Table 1. Equipment Acquisition: Outline of Process

are created to meet these needs, and sufficient funds are budgeted to fulfill the most acceptable proposals.

Needs assessment is the first step in the justification process. The requirement for new equipment can be based upon a variety of disparate requirements. There can be a need for new technology or expansion of an existing service. Need for equipment can be based upon cost effectiveness of new technology, safety, maintenance costs, or simply a need to replace old equipment. The justification for acquiring equipment based upon any of these reasons must be supported by facts.

The age of equipment by itself is not sufficient justification for replacing equipment. If the age of equipment exceeds accepted guidelines, and maintenance costs, for example, are also exceeding accepted guidelines, then the replacement of equipment is adequately justified. What this points out, however, is that there must be guidelines for replacement of equipment based upon both age and maintenance costs.

A general guideline is that when equipment is over 7 years old, it is time to start considering its replacement. The age when equipment should be considered for replacement can also be based on its depreciation life, which varies depending on the type of device. Wear and tear, along with the advancement of the state of the art in equipment design, will start catching up with the equipment at about this time. When total maintenance costs exceed approximately one and one-half times replacement cost or when an individual repair will cost more than one-half the replacement cost, it is probably more appropriate to consider replacing the equipment. Age and/or maintenance costs by themselves do not necessarily require equipment replacement. There can be mitigating circumstances, such as the fact that the older equipment might be impossible to replace. If an item is one of a standardized group, or part of a larger system, it might be unrealistic to consider replacing the entire group or system.

Safety considerations should be relatively easy to document. If the performance of equipment puts it out of

compliance with accepted standards, the standards and the performance of the equipment can be documented. Again, however, judgment can mitigate these standards. If a piece predates current safety or performance standards, it is perfectly acceptable to continue using it if clinical and engineering personnel believe it still performs safely and as intended. This judgment should also be documented.

Cost effectiveness is, by itself, adequate justification for equipment acquisition. If it can be shown that within 3–5 years, the acquisition of new equipment will save more than the cost of the acquisition, it will be money well spent. The justification must be done very carefully, however, to recognize all costs that will be incurred by the acquisition of new equipment, and any additional operating costs.

If an existing clinical service is covering its costs and it can be shown that there is a need to expand the service, the equipment necessary to support the expansion can be cost justified. Again, the justification must be done carefully to ascertain that there are sufficient trained people, or people who can be trained to use the equipment, as well as a sufficient population of patients requiring the service.

The acquisition of new technology requires the most difficult and demanding justification. The technology itself must be assessed. Determine whether the technology is viable, provides a needed service, and will be accepted. There must be clinical professionals capable of utilizing the technology or in a position to be trained to do so. Cost justification of new technology is equally difficult. Very careful thought will have to be given to identifying all costs and revenues. The cost of the equipment, the cost of the supplies necessary to operate it, and the cost of the personnel to operate it must all be determined.

In addition, the space requirements and special installation requirements, such as electrical power, computer networking, air conditioning, plumbing, or medical gases, will all have to be determined. Maintenance costs will have to be identified and provisions made to cover them. It must be determined that there is an adequate population base that will provide patients to take advantage of the new technology. State and local approval (certificate of need) may also have to be met. The entire process is very time consuming, and should be carefully planned to meet the scheduling of the hospital.

Once needs have been justified, primarily by the people intending to apply the new equipment, it will be necessary to create a formal proposal. The formal proposal should be prepared by a select group of people (medical, nursing, purchasing, administration, and clinical engineering) most closely associated with the management and use of the equipment. Physicians are concerned with the function performed by the equipment, nursing with the equipment’s operations, and clinical engineering with the design, safety and performance, and dependability of the equipment. Administration and purchasing are involved with managing costs. Information technology staff may need to be involved if equipment is networked, or facilities staff if there are special installation requirements.

The proposal must provide a precise definition of the clinical needs, the intended usage of the equipment, any restrictions of a clinical nature, and a thorough financial plan. The financial planning, in particular, should include

accepted planning techniques. For example, life-cycle cost analysis is perhaps the most thorough method for determining the financial viability of a new project. (Life-cycle analysis is the method of calculating the total cost of a project by including the initial capital cost, the operating costs for the expected lifetime of the equipment, and the time cost of money.)

At this stage, it is appropriate to consider a variety of physical or environmental factors that affect or are affected by the proposed new equipment. The equipment will require space for installation, use, and maintenance. Its power requirements might call for a special electrical source, medical gases or vacuum, or a water supply and drain. Its size might prevent if from passing through doors. The equipment might require special air-handling consideration if it generates heat or must be operated in a temperatureand/or humidity-controlled environment. Its weight might preclude transport in elevators or require modification of floors, or its sensitivity to vibration might require a special installation. If the equipment is either susceptible to or generates electrical or magnetic fields, special shielding may be required. There might be special standards that restrict the selection or installation of the type of equipment.

After the staff intending to use and manage the equipment have completed their proposal, it will be necessary to present this to the committee responsible for budgeting new equipment or new projects. This ‘‘capital equipment budget committee’’ will typically be chaired by an individual from the hospital’s budget office and should include representatives from central administration, nursing, and clinical engineering. It is their responsibility to review proposals for completeness and accuracy as well as feasibility with respect to the hospital’s long-range plans and patient population. Their judgment to approve or disapprove will be the necessary step before providing funds.

SELECTION PROCESS

Once the acquisition of new equipment has been justified, planned, and budgeted, the next step is to select the equipment that will actually be purchased. Again, this is a formal process, with sequential steps that are necessary to achieve the most appropriate equipment selection. There are commercial software products available that help hospitals establish priorities, develop proposals, and select capital equipment (e.g., Strata Decision Technology).

For most equipment, a standing capital equipment committee can oversee the selection and acquisition process. This committee should at least include representatives from clinical engineering, finance, and purchasing. It might also include representatives from nursing and information technology.

For major equipment or new technology, a selection committee should be formed specifically for each acquisition. Such a committee should include physician, nursing, and administrative personnel from the area for which the equipment is intended, and a representative from clinical engineering. Since the representative from clinical engineering will serve on virtually all of these ad hoc selection committees, this person’s experience would make him/her

218 EQUIPMENT ACQUISITION

the best choice for chairperson. Realistically, however, it might be more politically expedient to allow one of the representatives from the area to chair the committee.

The first step involves a literature review. A library search should be conducted, and the clinical engineering department’s professional subscriptions reviewed, for example, Health Devices and Biomedical Instrumentation and Technology. Look for applicable standards from AAMI or the American National Standards Institute (ANSI). Obtain product literature from the manufacturers being considered. Research the information maintained by the FDA Center for Devices and Radiological Health (CDRH) at http://www.fda.gov/cdrh. The FDA-CDRH Manufacturer and User Facility Device Experience Database (MAUDE) contains reports of adverse events involving medical devices, and their ‘‘Safety Alerts, Public Health Advisories, and Notices’’ page contains safety-related information on medical devices.

A list of proposed vendors to be contacted can be created by consulting the Health Devices Sourcebook (ECRI) (2). These vendors should be contacted and their literature on the type of equipment being evaluated requested. Part of the evaluation includes evaluating the manufacturers and vendors. Commencing with this initial contact, notes should be kept on the responsiveness and usefulness of the representatives contacted.

A request for proposal (RFP) should be written on the basis of the needs determined during the justification process and the information acquired from the literature review. When the selection criteria are straightforward, the RFP and the request for quotation (RFQ) can be combined. For more complex selections, such as equipment systems or new technology, the RFP and RFQ should be separate processes.

The RFP should be carefully written, well organized, and thoroughly detailed. It should contain useful background information about the institution and the specific user area. Applicable documents, such as drawings, should be either included or explicitly made available for review by the vendors. The equipment requirements should include a statement regarding the major objectives to be fulfilled by the equipment. The description of the specific requirements must include what is to be done, but should avoid as much as possible restrictions on how it is to be done. It is likely that, given reasonable latitude in addressing the equipment requirements, manufacturers can make useful suggestions based upon their experience and the unique characteristics of their equipment.

The RFP should contain a description of the acceptance testing that will be conducted before payment is approved. It should also contain a request for a variety of ancillary information: available operator and service documentation; training materials and programs; warranties; and maintenance options and facilities. There should also be a request for the names of at least three users of comparable equipment, located as close as possible to the hospital so that site visits can be conveniently arranged. The RFP should be reviewed by the entire in-house evaluation committee.

A cover letter should accompany the RFP to explain the general instructions for submitting proposals: who to call for answers to questions, deadline for submission, format,

and so on. When appropriate, there can also be such information as to how the proposals will be evaluated, how much latitude the vendors have in making their proposals, and the conditions under which proposals can be rejected. It is not necessary to send the RFP to all known vendors of the type of equipment being evaluated. If there is any reason why it would be undesirable to purchase from particular vendors, for example, poor reputation in the area or unsatisfactory dealings in the past, it would be best to eliminate them from consideration before the RFP process.

The response of the vendors to the RFP will allow the selection committee to narrow the field to equipment that is likely to meet the defined needs. The full evaluation committee should review the proposals. There will have been a deadline for submission of proposals, but it might not be appropriate to strictly enforce it. It is more important to consider the long-term advantages to the hospital and not to discount an otherwise acceptable proposal for being a few days late. The proposals should be reviewed for completeness. Has all of the requested information been provided? Are there any misinterpretations? Are there exceptions? The vendors should be contacted and additional information requested or clarifications discussed as necessary. It will now also be possible to determine the type of acquisition required, that is, whether the equipment can be purchased from a single vendor, whether it will have to be purchased from more than one vendor and assembled, or whether the equipment will require some special development effort to meet the clinical needs.

Evaluate the quality of each proposal. A simple form can be used to record the results. The form should include the elements of the review. Score the responses according to the relative importance of each element, and whether there was a complete, partial, or no response (Table 2). Include comments to explain the reason for each score. Based upon a review of the proposals submitted, the evaluation

Table 2. Proposal Evaluation Form

Evaluation of Response to Request for Proposal

Date:

Reviewer:

Manufacturer:

Equipment included in proposal (models, options, quantity):

Response submitted on time:

Score (0,1):__

Response followed specified format:

Score (0,1,2):__

Response included all information requested:

Score (0,2,4):__

Response includes exceptions:

Score ( 2, 1,0):__

Response included additional, useful suggestions:

Score (0,1,2):__

Response included reasonable alternatives:

Score (0,1,2):__

Total Score:__

Percent Score {[total score/total

possible score (11)] 100}:_____

committee should agree on which vendors and equipment to consider further (i.e., the proposals that offer equipment that meets the established criteria).

The next step will be to request equipment for an inhouse evaluation. The equipment requested for testing should be the exact type that would be ordered. If preproduction prototypes or engineering models are accepted for evaluation, it should be realized that there are likely to be changes in the operation and performance of the final product. The dependability of prototype equipment cannot be judged. In short, the evaluation will not be complete, and, to some extent, the ability to judge the equipment or compare it with other equipment will be hampered.

The most important aspect of the entire equipment acquisition process, especially for equipment types not already in use, is the in-house, comparative evaluation. This evaluation has two phases: engineering and clinical. The equipment requested for comparative evaluation has been selected from the proposals submitted. The field should be narrowed to include only vendors and equipment worthy of serious consideration. Therefore, it will be worthwhile to commit significant effort to this evaluation.

The engineering phase of the evaluation will need test procedures, test equipment, and forms for documenting the

results. The clinical phase will need representative areas, users, protocols, a schedule for training as well as use, and a method for collecting results: an interview, a review meeting, or a questionnaire. All of these details should be settled before the arrival of the equipment. For example, it might be determined that sequential testing would be preferable to simultaneous testing. Neither the hospital nor the vendor would want to store equipment while waiting for its evaluation.

The first step in testing equipment is the engineering evaluation, done in the laboratory. The tests include safety and performance aspects. Mechanical safety criteria include consideration of the ruggedness or structural integrity of the equipment as well as the potential for causing injury to patients or personnel. Electrical safety tests are conducted per the requirements in the AAMI/ANSI Electrical Safety Standard and NFPA electrical standards as appropriate. Performance testing is done as described by any published standards, according to the manufacturer’s own service literature, and per the needs determined in the justification process. The results of the engineering tests should be summarized in a chart to facilitate comparison (Table 3). Differences and especially flaws should be highlighted.

In addition to the straightforward safety and performance tests, a number of characteristics should be evaluated based upon engineering judgment. The physical construction should be judged, especially if there are constraints imposed by the intended application or installation. A study of the construction and assembly can also allow a judgment regarding reliability. This judgment should be based upon the quality of hardware and components, the method of heat dissipation (fans suggest an exceptional requirement for heat dissipation and require periodic cleaning), the method of construction (the more wiring and connectors, the more likelihood of related failure), and whether the design has had to be modified by such means as alterations on circuit boards or ‘‘piggybacked’’ components.

The maintainability of the equipment is reflected both in the methods of assembly and in the maintenance instructions in the operator and service manuals. The manuals should explain how and how often preventive maintenance or inspection or calibration should be performed. Finally, a clinical engineer should be able to judge human engineering factors. For example, ease of use, how logical and selfexplanatory is the front panel, self-test features, and the chances or likelihood of misuse all affect the safety and efficacy of the equipment.

Design a form to record the engineering evaluation results. The form will vary in the specific features and tests that are included, according to the type of equipment that is being evaluated, but the basic format will remain

the same. Include comments to explain the reason for the score of each item. Table 3 is an example of an engineering evaluation form.

The physicians, nurses, and clinical engineers on the evaluation committee should contact their counterparts at the institutions named as users of their equipment by the vendors. Site visits can be particularly useful in cases where the equipment or technology being considered is new to the hospital. The committee can see the application firsthand, and talk to the actual users face to face. Record and score the results of interviews (Table 4).

Clinical testing is performed after engineering testing. Equipment must satisfactorily pass the engineering testing to be included in the clinical testing; there is no point in wasting people’s time or taking a chance on injuring a patient. Clinical testing should not be taken lightly; it is usually more important than the technical testing. The clinical testing is done only on equipment that has survived all of the previous tests and by the people who will actually be using it.

The clinical testing should be designed so that the equipment is used for the intended application. The equipment included in the clinical testing should be production equipment unless special arrangements are likely to be made with the manufacturer. Users should be trained just as they would be for the actual equipment to be purchased. In fact, the quality of the training should be included in the evaluation. Users should also be given questionnaires or be interviewed after the equipment has been used (Table 5).

One further consideration to be judged by the full evaluation committee is that of standardization. There are numerous valid reasons for standardizing on equipment. Repairs are easier to accomplish because of technicians’ familiarity with the equipment. Repair parts are easier and less expensive to keep in inventory. Standardization allows exchange of equipment between clinical areas to help meet varying demands. Training is also more easily provided.

There are also valid drawbacks, however. Standardization makes the hospital dependent upon a limited number of vendors. It can interfere with user acceptance if users feel they have little or no say in the selection process. It can also delay the introduction of new technology. It is important that the evaluation committee consider the relative importance of the pros and cons of standardization in each case.

Assessment of the equipment should result in a ranking of the equipment that has successfully completed the engineering and clinical testing. The advantages and disadvantages of each item should be determined and ranked in order of importance. Alternatively, the criteria can be listed in order of importance. If possible, the list should be divided between criteria that are mandatory and those that are desirable. Then a judgment on whether the equipment does or does not satisfy the criteria can be made. From this charting, it is likely that clear preferences will become obvious.

Ideally, there will be two or more finalists who are close to equal in overall performance at this point. These finalists should be sent a request for quotation (RFQ). The responses to the RFQ will allow a cost comparison. A life-cycle cost analysis can be accomplished with the aid of the hospital’s financial officer. This will give a more accurate depiction of the total cost of the equipment for its useful lifetime. While it is beyond the scope of this article to describe life-cycle cost

analysis, it takes into account the initial costs (capital cost of equipment plus installation), operating costs over the anticipated life of the equipment (supplies, service, fees), and the time cost of money (or present value). It may or may not take personnel costs into account, since these will likely be the same or similar for different models. To calculate a percent score for purposes of evaluation, divide the cost of the least expensive equipment by the cost of the equipment being evaluated, and multiply by 100.

With the completion of the evaluation, a comparison of the results should lead to a final selection. This should be as objective as possible. If additional information is needed, there should be no hesitation in contacting vendors. In fact, it may be useful to have a final presentation by the vendors. Develop a point system for the individual elements of the proposal reviews, engineering evaluations, user interviews, clinical testing, and cost comparison. Weight these elements according to their relative importance (Table 6).

Once the hospital has made its final choice of vendor and equipment, it is not necessary to end negotiations. Negotiations should be conducted before a vendor knows that they are the preferred provider. Before a vendor is certain of an order, they are much more likely to make concessions. Requests for extra features, such as spare equipment, spare parts, special tools, and test equipment, may be included in the final quote. Trade-in of old equipment and compromises on special features or warranties, for example, can help reduce the cost of equipment. Consider negotiating hardware and software upgrades for a specified period.

For large orders (e.g., dozens of infusion pumps), or for installations (e.g., monitoring systems), request that the vendor unpack, set up, inspect, distribute or install, and document (using the hospital’s system) the equipment at no additional cost. In most cases, the hospital will want

Cost Comparison Score (weight 0.1 score):_____

Total Score:_____

the vendor to provide user training. This training should meet the hospital’s specified needs (e.g., all users, all shifts, train the trainer, videotapes or computer programs, etc.). The hospital may also need service training for its clinical engineering department. The hospital can negotiate not only the service school tuition, but also room, board, and travel. The negotiated quote should be reviewed by the end-users, clinical engineering, finance, purchasing, and a contracts lawyer.

IMPLEMENTATION PROCESS

The successful conclusion of the equipment acquisition process cannot be realized until the equipment is satisfactorily put into use. As with all the previous steps in the equipment acquisition process, the implementation process requires planning and monitoring.

The purchase order with which the equipment is ordered is a legal document: a contract. As such, it can protect the rights of the hospital. Therefore, it is important to include not only the equipment being ordered, but also all agreed-upon terms and conditions. These terms and conditions should include delivery schedules, the work to be performed by the vendor, warranty conditions, service agreements, operator and service manuals, acceptance criteria and testing, and operator and service training.

Before the equipment is delivered, arrangements should be made for installation, for personnel to transport the equipment, for storage, and for personnel to test the equipment. If any of these are to be the responsibility of the vendor, they should be included in the purchase order. If the hospital has to perform any modifications or fabrications, all necessary parts and preparations should be in place.

Acceptance testing should be done upon the completion of installation. The test procedures for acceptance testing should come from the initial specifications and from the manufacturer’s data sheets and service manuals. Acceptance testing should be thorough, because this is the ideal time to obtain satisfaction from the manufacturer. It is also appropriate to initiate the documentation per the standard system of the hospital at this time. The invoice for the equipment should not be approved until the equipment has been satisfactorily tested.

After the equipment is in place and working properly, training should be scheduled. The manufacturer or their representative, or the selected hospital personnel, should have the training program completely prepared. If ongoing training will be necessary over the lifetime of the equipment, in-service instructors should be involved in the initial training as well. The clinical engineering personnel responsible for inspection and maintenance should also receive operator and service training.

An often overlooked, but useful, adjunct to the implementation process is follow-up on the installation. Users should be polled for the acceptance of the equipment and their perception of its usefulness. Engineering personnel should review the dependability of the equipment from their service records. All of the people involved in the equipment acquisition process should learn from every acquisition, and what they have learned should be reviewed during this follow-up.

CONCLUSION

Table 1 can be used as a list of tasks that should be accomplished (or at least considered) in the equipment acquisition process. A schedule and checklist can be generated from this list.

The equipment acquisition should be fully documented, ideally by a write-up of the entire process. Table 1 can be used to create an outline for the final report. The results of the equipment acquisition process should be shared with manufacturers and other interested parties. It should always be the intention of the hospital personnel to improve the situation with respect to the manufacturer. Perhaps the most dependable way for medical equipment manufacturers to learn what is important to hospitals is to review what hospitals have said about the evaluation of new equipment during their acquisition process.

BIBLIOGRAPHY

Cited References

1.Comprehensive Accreditation Manual for Hospitals, 2005. Oakbrook Terrace (IL): Joint Commission on Accreditation of Healthcare Organizations; 2004.

Reference List

Health Devices Sourcebook, 2005. Plymouth Meeting (PA): ECRI; 2004.

Larson E, Maciorowski L. Rational Product Evaluation. JONA 16(7, 8):31–36.

Stiefel R, Rizkalla E. The Elements of a Complete Product Evaluation. Biomed Instrum Technol. Nov/Dec 1995. p 482–488.

Stiefel RH. Medical Equipment Management Manual, 2004 Edition. Arlington (VA): Association for the Advancement of Medical Instrumentation; 2004.

Staewen WS. The Clinical Engineer’s Role in Selecting Equipment. Med Instrum 18(1):81–82.

See also EQUIPMENT MAINTENANCE, BIOMEDICAL; MEDICAL RECORDS,

COMPUTERS IN; OFFICE AUTOMATION SYSTEMS; RADIOLOGY INFORMATION SYSTEMS.