Case Study: New or Used?

Refurbished equipment's value

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Refurbished equipment and its place in healthcare has been a hot-button issue for years and one for which there are strong opinions on both sides. But for many customers, especially those in the world of medical technology, where the nature of the machinery and the purposes for which it is used demands cost-effective solutions – refurbished equipment is worth considering. In fact, there are many factors to take into account, starting with identifying the needs of your facility and determining how your equipment choice will affect patient care.

Is New vs. Used the Question?

A common assumption is that new equipment will always outperform refurbished equipment, but not all previously owned equipment is reconditioned to the same standards. The decision to purchase new or used equipment should be made when facilities can address these key questions:

• What is your budget?
• What is your volume of service?
• What is your rate of growth?
• What is your long-term plan for service offerings?
  

These and a host of other operational and clinical concerns unique to your facility should ultimately determine your buying strategy. The total cost of ownership of the purchase over time is another important consideration – a less expensive option that fails to perform to today's standards could turn out to cost a fortune in maintenance and repair costs, not to mention downtime.

Don't look at new and used equipment as directly competing alternatives. Rather, look at them as options that give you much-needed flexibility in equipping your facility.

What Should You Look For?

The marketplace for refurbished medical systems can be somewhat confusing. First, there are the name variants – from refurbished to remarketed, previously owned and used – that leave you wondering what the differences mean.

More important than the naming conventions, most of which are simply synonyms, is what you're actually getting. Customers exploring the refurbished marketplace should take the following issues into consideration:

Stringent selection criteria. Is the equipment intended for resale a prime performer with a reliable track record or a partially operable dinosaur? A solid refurbishing program begins with sound equipment and does not include laggards.

Careful de-installation. Medical systems are highly sensitive, so the way in which they are de-installed and transported can mean the difference between maintaining the system's integrity and reducing the life and usefulness of the machine.

Complete refurbishing. There are varying levels of refurbishment, from making the machinery look like new to making it run like new. Does the system in question perform to its original specifications? Does it have the latest upgrades? Are worn or defective components replaced with original parts from the manufacturer? Are the vacuum components essential to image quality (e.g., X-ray tubes and image intensifiers) replaced with new parts from the manufacturer?

Installation logistics. What is the timeline for installation? What are the technical qualifications of the installers? The answers to these questions play a large role in your satisfaction with the purchase. Project management that ensures safe installation and fast uptime allows you to put your new equipment to use without delay.

Support services. Is a full warranty of the equipment guaranteed at the time of purchase? Is the support package commensurate with your ongoing needs? Cost effective maintenance and a comprehensive warranty make the difference between a smart choice and a risky investment. Look for a vendor that refurbishes its own systems (not via third party contractors). Finally, investigate the financing options. Ideally you'll be able to obtain in-house financing similar to what you'd expect when purchasing a new system.

Meeting CON Requirements

"Working in a private practice, the balancing act is to provide the right amount of technology at the right location at the right time," says Henry Soch, director of business development and marketing at Advanced Radiology Consultants, Trumbull, Conn. "We're a certificate of need (CON) state, so our ability to add equipment is limited. Anything more than $400,000 needs to be justified to the state via a CON filing."

CON thresholds often put pressure on facilities to seek less expensive alternatives to adding a service or piece of equipment, driving demand for refurbished systems that can meet current performance standards. Does this seem like a sacrifice?

"I think the stigma that used equipment is not as good as new [equipment] has a lot to do with perception and also with the variance that exists among refurbished systems," says Soch. "If you're in an academic medical center, there may be a general bias against refurbished equipment. There is a sense of urgency at many academic medical centers around having the latest and greatest. For us, the use of refurbished equipment to provide high-quality imaging services is a strategic move, and we've never had a problem over the long haul. It's always proven out."

Going directly to the original equipment manufacturer (OEM) provides greater assurance about the quality of the refurbishing process and affords customers full visibility of the vendor's track record.

"The issue around this is reliability, so going with an OEM program where we're confident that the reliability is going to be there is a priority," says Soch. "Uptime is key in an outpatient environment. In an era when we're having a hard time getting enough imaging professionals to meet our patient demands, ease of use of the equipment is also very important – and the learning curve on Philips [Medical Systems, Andover, Mass.] equipment is very easy. The [return on investment], when you look at productivity, reliability and uptime measures, is extremely favorable," he says.

Overcoming Reservations

According to Mark Goodwin, MD, director of the cath lab at Edward Hospital, Naperville, Ill., the Chicagoland area had multiple cardiology centers, but needed a heart hospital that combined the best patient care with enhanced efficiency and workflow for physicians. About five years ago, Edward Hospital, in conjunction with Illinois-based Midwest Heart Specialists, set out to do just that.

"What we've been trying to do is expand from two labs to four to meet demand," says Goodwin. "The catch is that one of our existing labs was considerably out of date – meaning we really needed three new cath labs."

Of course, there is capital outlay that accompanies this goal. Projections indicated that Edward Hospital could not afford three new labs, but increased patient traffic was in danger of increasing wait times, severely inconveniencing patients and keeping cardiologists at the lab long after hours.

"We ended up putting in two new [Philips] Nova stations in the interventional labs and adding a re-built lab," says Goodwin. "It's by far the best value for the price. The choice was all new equipment or refurbishing our 10-year old lab and bringing it over."

To assist facilities like Edward Hospital, Philips created the Diamond Select program, which takes the vendor's pre-owned systems and completely refurbishes, updates and rigorously tests them before resale. The equipment features the latest technologies and includes full technical support throughout the equipment's lifetime.

Edward's staff describes Diamond Select cath lab as "a new structure built on the foundation of a former lab." All of the software and working components now include advanced technologies and warranties by Philips.

"[The lab] gives cardiologists the impression of all new," says Goodwin, "but met our goal, which was not to load up every room with the highest end, newest equipment on the market, but to balance the equipment required in our most urgent interventions with our ongoing needs for testing and diagnostics. I'm surprised it's worked as well as it has. We had our reservations about not going with new [equipment], but the lab has functioned every day, with no downtime, so it's worked extremely well," he says.

For Edward Hospital, refurbished equipment helped balance the capital expenses required to meet increased patient demand. As cath labs evolve from steady profit centers to cost centers, building the right efficiencies can make all the difference. Goodwin remembers asking himself, "We need one more lab for throughput, but can we really afford $1.2 million? We need to get patients home earlier and save money on staff time."

Given the choice of operating on three labs and waiting for a fourth newly equipped lab, or having four labs in operational shape in short order, the clinicians overwhelmingly advocated for four labs, despite some initial bias against refurbished equipment.

"There is a natural tendency to want the latest and greatest equipment no matter what; refurbished has a bad name," Goodwin says. "But with the Philips program we got new software, hardware and a new image intensifier. It's sort of like getting a 2002 car when a 2004 car is available, and though the styling might be slightly different, the 2002 has the latest features and benefits."

"The glory days of cardiology as a cash cow are over – insurance issues and a number of other factors have changed that," Goodwin continues. "You still may want brand new stuff for high-end interventions, but you need to look at big-picture usage and the requirements for each lab."

CT at a Great Price

Robinson Memorial Hospital in Ravenna, Ohio, is a 289-bed facility and the only hospital in the county. "There is an imaging center within seven or eight miles," says Judy Mink, director of radiology at Robinson, "so there's competition, and CT is a growing business for us." The challenge for Robinson was how to replace a loaned scanner when the owner wanted it back on extremely short notice.

The hospital projected a 5 percent to 10 percent increase in CT business and could neither meet that demand nor work within its submitted budget without the use of the CT scanner, which was no longer available. "We didn't have a million dollars to spend," says Mink. "Once our backlog of referrals got to be a month out, we feared losing patients and asked Philips to get us a quote on a 6-slice system. This was a considerable compromise for us, as we already had a 16-slice system that the staff knew how to use and really liked."

But when a used 16-slice unit became available for roughly the price of a new 6-slice system, Mink says the hospital quickly decided this was the way to go. Robinson Memorial looked at other CT systems, but chose a refurbished system instead.

"You would never know it's reconditioned if someone didn't tell you," says Mink. "We upgraded the refurbished system, plus our existing system to the Brilliance software platform, which is designed with the clinician in mind, while remaining user friendly. Furthermore, [Philips was] able to tie both systems into 3-D workstations. The learning curve was zero – our image specialists hit the ground running. Due to backlog it was important to have the equipment delivered quickly. From the [purchase order] to installation, it was five weeks to fully operational status."

For Robinson Memorial, the decision to go with refurbished equipment was precipitated by losing a scanner on short notice with no budget allocated for new equipment and higher demand for scans.

"We needed the scanner to meet our projections," Mink says. "The technologists are thrilled with this system. It works exactly like our other one, plus we got a software upgrade on our "new' and existing systems. The radiologists can't tell which scanner the images come from."

High Performance

As for the aesthetics of refurbished equipment, Peter Adam Ehlenz, MD, of Johanniter Krankenhaus Hospital in Bonn, Germany, points out, "When you look at the system, you can't distinguish it from a new system externally, and I've seen the system exposed and with its components amidst construction during the past weeks. As for the internal components, they're cutting edge, like new."

Staff at Johanniter Krankenhaus report that the resultsproduced by the reconditioned device are identical to the results of the existing Intera system when performing the same task and with the same sequence setting.

"Looking at the record, you can't tell whether the inspection was carried out on our "new' or reconditioned Intera system," says Ehlenz. "And overall, the reconditioned system is more efficient than our existing one due to its specification."

A New Look at Old Products

The usefulness of refurbished equipment can often exceed expectations. Refurbished machinery has acquired a bad reputation because of the general assumption that second-hand goods are sold for cut-rate prices to dispose of inventory.

The myth of the inferiority of refurbished equipment in all applications and environments can now be dispelled. In certain situations and with the manufacturers' assurance of quality, as well as with attention to installation issues, refurbished equipment can often be the smartest move for healthcare organizations looking to maximize equipment dollars.

— Tom Giordano is vice president of marketing, North America sales and service representative for Philips Medical Systems North America, Bothell, Wash. Jim Moran is senior marketing manager, equipment remarketing, North America sales and service representative for Philips. Questions and comments can be directed to editorial@rt-image.com.