MD EXPO LAS VEGAS, NV OCTOBER 05, 2012

NEGOTIATING IMAGING SERVICE CONTRACTS MD EXPO LAS VEGAS, NV OCTOBER 05, 2012 Myron D. Hartman MS, SASHE, CCE, CBET, CRES Program Coordinator Biomedical Engineering Technology Penn State University

Negotiating Imaging Service Contracts Friday, October 5, 8am 9:15am Myron Hartman, MS, SASHE, CCE, CBET, CRES Program Coordinator, Penn State University Ensuring that medical equipment service contracts provide high quality maintenance at affordable and manageable costs is imperative in today s cost sensitive environment. This session will discuss major items of concern when negotiating imaging service contracts specifi cally and the tactics used when negotiating.

Ensuring that medical equipment service contracts provide high-quality maintenance at affordable and manageable costs is imperative in today s cost sensitive environment. This session will discuss major items of concern when negotiating service contract and the tactics used when negotiating.

Topics of Discussion I. Preparation II. Information Exchange III. Types of Agreements

Negotiation is an interactive communication process that takes place whenever we want something from someone else or another person wants something from us

Negotiation for medical equipment service agreements involve many parties that must communicate: Supplier of service Biomedical management/technician Clinical department Materials management Risk management Finance/Budget Administration

So what are the steps (from a biomedical management perspective) in negotiating a service agreement that creates a Win-Win solution for both organizations?

When you are negotiating, it commonly follows a four-step sequence: 1. Preparation II. Information exchange III. Negotiating IV. Commitment

I. Preparation 1. Information - Learn as much as you can about the: Supplier Agreement Equipment Expectations of your organization What information do you: Have Are in need of

I. Preparation 2. What are the top issues related to this agreement: Cost Scope of services (labor, PM, parts ) Response time for service Down time of equipment

I. Preparation 3. Goals and Expectations: Define in writing, what your organization expects as a final outcome of services to be provided. This will become the specifications or expectations of the service agreement. Recommend using a Request for Proposal (RFP) in some cases, especially new capital equipment purchases.

I. Preparation 4. Make sure all of the individuals for your organization have a clear understanding of what the steps, roles, and process will be to negotiate with the suppliers. Many times these actions will be defined by policy.

II. Information Exchange 1. Logistics How and when do you initiate the process: Is this a first time agreement after warranty Is this an annual renewal agreement Did the supplier initiate or did you make a request for the service agreement Do I have a time limitation to have the agreement in place

II. Information Exchange 2. Opening offers: What is the best offer you can justify? Should you make it, or wait to let another party go first?

II. Information Exchange 3. Subsequent offers: How should you adjust your negotiating plan when responding to unanticipated moves by your opponent?

III. Types of Agreements Full Coverage Parts, Labor, PM s, 24X7 Limited Contracts - Parts, Labor, & PM s, specific days and time coverage PM Inspections Parts Only Parts Consignment

III. Types of Agreements Depot/Replacement Equipment exchange Technical Phone Assistance Time & Materials Pre-agreed charges for labor and parts Labor Only Specific days and time coverage

III. Types of Agreements Insurance Agreement OEM/ISO/In-house labor reimbursement for insurance contracts spare/loaner equipment rental for insurance contracts limit of service liability for each device for insurance contracts method of payment to service provider for insurance contracts access to expensive parts for insurance contracts access to database of labor and parts costs for insurance contracts administrative paperwork flow for insurance contracts management of insurance contract (possible) for insurance contracts

III. Types of Agreements Detail of responsibilities for both parties for all agreements preventive maintenance first line service requests corrective service requests tube replacements training & in-services technical assistance

Multiple devices per one agreement Discounts Efficiency Addition/removal of items Group Purchasing Organization (GPO) discounts National discounts Parent organization agreements

Cancellation terms Notice (time & writing) required Billing/credits issued for unused months Penalties Auto-renewal clauses Notice (time & writing) required not to renew Remove if possible

Multiple year contract Discounts escape clauses Add/remove equipment Length of agreement Months Year Multiple years

Escalation cost caps for future contracts The state for legal terms and conditions In the event of litigation, this will define which state the suit must be filed and which laws will prevail HIPAA Compliance Statements of compliance Subrogation conditions for fines/penalty if violated

Cancelation notice Time - 30 day Written address Workers compensation insurance Minimum levels required by Risk Management Prof of insurance or compliance

General liability insurance Minimum levels required by Risk Management Prof of insurance or compliance Labor Rate Charges Normal hour Over time Weekend/holiday Travel Phone support 2 Persons required on job

Shipping Expenses for Parts Supplier or Buyer or Shared Prepay (determined in advance) Billed (estimated and billed at actual rates) Use of buyer shipping accounts (UPS, FedEx, ) Handling/Processing Fees Overnight Quick pick Handling fee

Parts Discount Percentage Multiple items (bulk) Payment Terms Fixed schedule Discount for lump sum or early payments Late fee amounts Time: Net 30-45-60-??

Free or Freight on Board (FOB) Terms The point of ownership/responsibility transfer from the supplier to the buyer Considerations for damaged/lost/stolen goods Ideal installation point Acceptable receiving dock Not acceptable ship point

Contact Information Management & Technical Personnel Phone Numbers (office, cell, answering service, pagers) Email Vendor Registration/Credentialing Required and if so by who Individuals existing/new/deletions Costs Renewal cycle

Preventive Maintenance Inspections How many provided PM checklist (all tests, limits/accuracies & intervals) How/when/length will they be scheduled Scheduling daylight/off shifts Documentation provided - types Contingency for PMs not completed

OSHA and regulatory requirements compliance Awareness of requirements Subrogation conditions for fines/penalty if violated Exclusions of contract Parts, labor, shipping, days/times,. Exclusion costs

Response times & guarantees (on-site) How measured Frequency for analysis Uptime guarantees (system operating) How measured Frequency for analysis Partial system operation

Training and in-services for users Included for new hires or refresher training sessions Analysis of agreement costs (quarterly/annual) Is there a process to review the agreement What types of reports are available for review

Technician credentials Provided in advance or as requested Meet accreditation requirements Upgrades and enhancement discounts Recurring problem resolution steps

End of contract equipment evaluation Last month evaluation of equipment/system Issues not resolved by end of agreement will extend agreement at no charge till issues are corrected

Documentation for all maintenance Paper or electronic Time to receive documents Escalation cost caps for future contracts Can be negotiated at time of agreement or capital purchase

Spare/loaner equipment Costs Shipping Time/Delivery Acceptance Checks Software Maintenance/Support

Days of Coverage and exclusions

Software Maintenance

Agreement Term

Exclusions