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The total cost of ownership (TCO) is an important metric for any medical equipment purchase, giving planners insight into a product’s actual lifetime value. TCO goes beyond a product’s sticker price and estimates all of its associated costs, including maintenance, optimization, disposal, and even labor.
Of course, calculating all of these costs can be incredibly complex — and involve even more work than you think. What are all the factors that contribute to TCO, and how do you evaluate them? Here are 13 critical elements to consider:
Acquisition Cost. This is affected most by contractual buying relationships like those with group purchasing organizations (GPOs), volumes, local agreements, and other discounting factors.
New or Refurbished Equipment. This can include a cost/benefit analysis of using “last year’s technology” at a significant cost savings (assuming a reliable/trustworthy dealer relationship is established to ensure equipment quality and provide a warranty).
Financing. There will be a cost difference between outright purchasing versus leasing or other installment
programs. Outright purchasing has a larger initial price tag, but no payments or interest rates to track over the course of a loan.
Freight and Logistics. The cost of buying locally could be less than the cost of shipping, especially given the rising prices of shipping freight internationally. However, making bulk purchases can activate reduced pricing with some suppliers, making shipping costs worth it. Remember to factor in storage and staging costs as well.
Electronic Health Record Connectivity. All IT personnel and software requirements needed to correctly capture or exchange data will incur some overhead cost. This may also require additional software integration costs that were unknown at the time of purchase.
Construction and Installation. Construction costs can have a significant impact on TCO, especially if there are major building adjustments or space configurations to accommodate large equipment, such as moving, removing or adding walls. This cost dimension can also include handling, mechanical, plumbing, and electrical supply considerations, plus all data port and wall mounting requirements.
Upgrades. Look for opportunities to negotiate upgrades at the time of purchase, or lock in future upgrade pricing. Many suppliers want to sell in bulk or establish long-term relationships with their buyers so it’s easier to predict revenue. As a result, many sales teams will happily make special deals if it means securing more business.
Support. Are there limited support hours and are there any on-site support options? What happens when a user needs off-hours support? Keep these in mind, as they will incur additional costs.
Operational Costs. Can a lower-cost consumable be used, or is the device owner tied to the consumables for that device only from that manufacturer? What is the typical downtime for the device? How much revenue is lost when a device is inoperable?
Training and Implementation. How many training hours are included in the original purchase order (PO), and does it include both clinical and maintenance training? What are the costs to train additional users, or is there a “super users” training program? Are there refresher courses available as upgrades are released? Is training off site, and will the organization need to pay for travel costs?
Repair and Maintenance. What is the warranty agreement, and does it make sense to purchase extended service contracts? If so, do the extended service contracts cost more than the equipment over the lifetime of the device? What about failure rates, repair costs, and parts?
Disposal. Consider the decommissioning and removal costs of the equipment. Some materials may require hazardous waste disposal by expensive specialists who collect and dispose of them. On the other hand, some materials may be recyclable, which can help mitigate disposal costs.
Supplies. Consider the cost of disposable supplies and instruments required for operating or maintaining
equipment. The manufacturer should have recommended replacement timelines so you can estimate the additional costs per month, year, or even the product’s entire estimated lifecycle.
Medical equipment planning requires more than evaluating sticker prices. Planners need to consider the full financial impact a piece of equipment will have throughout its entire lifetime. Attainia by Revalize offers robust insight into every product in its catalog, making it easy to calculate TCO. Schedule a demo to experience the difference with deep TCO insight at the tips of your fingers.
