5 Steps for ASCs to Make Big Equipment Purchases

Equipment purchases can be a difficult process for many freestanding ambulatory surgery centers, but it's necessary for attracting new surgeons and staying competitive in the market. Now, ASCs are seeing cases that were previously done as inpatient procedures ushered into the outpatient setting and they must make capital purchases to capture a portion of that market share.

"We are seeing a lot of capital purchasing at our centers as cases that have been dedicated to the hospital environment move toward surgery centers," says Daren Smith, director of clinical services at Surgical Management Professionals. "Some of those cases coming into ASCs require power equipment — like total joint replacement — or other tools for procedures like spine surgery."

Surgery centers are also seeking to propel themselves ahead of the curve by purchasing electronic health record systems. Here, Mr. Smith discusses five steps for acquiring new equipment with ease in today's healthcare environment.

1. Know when the time is right to make a purchase.
There are two main reasons why ambulatory surgery centers purchase new equipment: to stay updated with new services coming into the surgery center or to attract a new specialty with the best equipment available. This equipment should improve patient care and enhance the surgeon's experience.

"If the local hospital and other ASCs in town have high definition technology and you're still on standard definition, you're not going to attract the market share you would want because you don't have the equipment to support what the market wants," says Mr. Smith.

ASCs must stay attractive in today's competitive healthcare environment.

2. Look at capital expenditures over the next five years.
Before purchasing new equipment, surgery center administrators should complete a capital budget analysis that considers all capital acquisitions that will be made over the next five years. Research how those acquisitions will impact your capital budget and set the appropriate benchmarks for payment.

"On each of the items you plan to put into a capital budget, do research to create a return-on-investment report," says Mr. Smith. "Show your board how the investment in new equipment will yield new cases and how long it will take before the equipment will pay for itself."

Once you've finished that process and presented it for board approval, focus on scheduling the purchases to respect the cash you have on-hand or make time to obtain financing on individual items.

3. Collect quotes from different vendors.
Once you've determined which projects you want to move forward, gather quotes from different vendors and compare products. Mr. Smith directs surgery centers to distribute a standard terms document when requesting a quote for capital equipment that outlines terms for delivery, payment and warrantee.

"That information is written in a single document and we ask companies to quote equipment using those terms," says Mr. Smith. "We also ask the center's group purchasing organization to review the quotes and make sure the fine print is acceptable and congruent with the GPO's pricing and contract."

Most GPOs have a quote review product which can really assist surgery centers when making their final decisions.

4. Access available capital. You may need to seek additional financing for big ticket items. This process can take several months from initial conversations to closing negotiations and will likely include back-and-forth between parties. Traditionally, surgeons sought financing from banks, but other opportunities now exist to access capital, such as private equity or other healthcare-specific lenders.

"There are many different ways to finance capital acquisitions, whether you are leasing or purchasing the equipment," says Mr. Smith. "However, working through these options takes time and research."

Make sure you know how long it will take to pay off the equipment and realize a return on investment. Timeframes depend on the type of equipment, but generally Mr. Smith likes to see an ROI in less than 24 months.

5. Coordinate installation and training.
Surgery centers can order equipment and have it delivered onsite within a few weeks, but surgeons must wait for the company to install it and train their employees. Sometimes it takes a while before the company is able to send a representative onsite, which spells trouble if the surgeons have speedier expectations.

"Highly anticipated items coming to the market often means you'll have to wait longer for someone to install it and train your staff," says Mr. Smith. "Sometimes these smaller companies only have a couple of installers for the United States, so you want to make sure you get on their calendar. Managing physician expectations is important because surgeons usually want the ability to use the device right away."

Discuss this process with physicians so they know everyone must be trained and checked off before the equipment is put into service.

More Articles on Surgery Centers:

6 Common Myths About Patient Financing in an ASC

The Opening of Malo Clinic ASC: Q&A With CAO Joseph Testani

10 Revenue Cycle Mistakes Surgery Centers Make—And How to Fix Them

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