January/February 2006

A Capital Decision

By Stephen Krcmar

A group of rehabilitation facility representatives discuss their company’s protocols for annual capital equipment purchases.

Each year, at some point in their individual fiscal cycles, rehabilitation-facility directors and staff must wade through the decision-making process regarding their equipment-purchasing needs. They constantly strive to improve and update the equipment they use with their patients. Whether they make their purchases once per year or throughout the year, considerations to be weighed range from patients’ and staff members’ needs to the equipment’s cost and warranties.

Rehab Management (RM) recently asked an assembly of purchasing decision-makers to discuss how their institutions make capital purchases. Among the participants invited to discuss their respective facility’s purchasing procedures were: Sarah Morrison, director of the Spinal Cord Injury Program at the Shepherd Center, Atlanta; Lynn J. Forde, PT, ATC, site manager at the Spaulding Rehabilitation Network, Framingham, Mass; Dameon Carot, CMPP, materials management manager, Rehabilitation Institute of Chicago; Jim Sok, COO, Good Shepherd Rehabilitation Network, Allentown, Pa; and Kathleen Putzier, OTR/L, Salina Regional Health Center, Salina, Kan. They were invited to talk about about their facility’s equipment-purchasing process, and which items are a priority purchase this year. Despite any differences in the process, one thing is certain: There is much to consider.

Sarah Morrison

RM: What is your primary buying cycle regarding the purchase of capital equipment (yearly, quarterly, or as needed)?

Sarah Morrison: Every fiscal year (April 1 through May 30), we request various items for capital equipment [anything costing more than $1,000]. The entire capital equipment budget is reviewed by our executive team, and items are approved or denied. The request that is turned in to the executive team describes, in detail, what the equipment is, its cost, the reason for the purchase, whether the purchase is revenue generating, if there is a cost benefit to the equipment (for example, if it decreases staff time performing different procedures), and the life expectancy of the equipment.

Lynne J. Forde: Consideration for capital equipment requests for the upcoming fiscal year is typically initiated in the late spring of the current fiscal year. Requests are prioritized based on justification and timing of need. Once approved by the senior director of ambulatory services and the CFO, release of capital funds occurs quarterly throughout the new fiscal year.

Dameon Carot: Capital purchases, or those more than $500, are budgeted near the end of the fiscal year and scheduled for purchase over the four quarters of the new fiscal year. Non-capital equipment purchases, which are paid for from approved departmental budgets, may be approved at anytime and purchased on an ongoing basis.

Kathleen Putzier: Our primary buying cycle for capital equipment is yearly. This revolves around our fiscal year.

Jim Sok: The capital budget is set annually as part of the budget process. At that time, we prepare a 5-year capital plan so that we can determine future capital needs. Equipment approved as part of the annual budget is purchased throughout the year in accordance with a schedule based on need and as projects come online.

RM: What process do you follow when making purchasing decisions? How is the rehabilitation staff involved?

Morrison: In January, all staff [members] are asked for their “wish list” of capital equipment. The supervisors review the list and assess the cost, benefits, and potential use. They complete a capital equipment request form, as well as describe the equipment and the reason for the request. The supervisors then pass this information on to the program director, who puts all requested equipment in the budget under the area titled “capital equipment.” Once the complete budget—along with capital equipment requests—is submitted to the CEO, it is presented and approved or denied by the executive team and board of directors.

Jim Sok

Forde: Decisions are made based on the strategic plan for growth at the clinic and within the Spaulding Network. For example, this year, the Framingham clinic launched a new oncology rehabilitation program called RESTORE. Most of the capital equipment that will be purchased this fiscal year will be to support the growth of that program.

In the spring, when capital equipment requests are being considered, clinical staff is given the opportunity at a staff meeting to voice their input and make any requests for the upcoming fiscal year. Requests are then considered within the context of program goals and are approved if deemed appropriate and necessary.

Carot: Each department gives the purchasing team specifications for equipment. The purchasing department secures at least three quotes, which are returned to the department for review. Then, the requesting department prepares a purchase requisition and obtains all the necessary signatures before forwarding to the purchasing department, which creates the purchase order, places the order, and sends confirmation of the order back to the requesting department.

Putzier: About 4 months before the beginning of a new fiscal year is when we start exploring and discussing capital equipment needs for our facility. Department supervisors ask their staff for capital equipment needs and ideas. The department supervisors prioritize the equipment according to the greatest need at that time. These needs are discussed and reviewed with the rehab director, who also prioritizes them. This information is then included in the proposed budget for the new fiscal year. All budgets, including capital equipment, must be approved by Administration. A factor contributing to the ability of the hospital to purchase some or all of this equipment is also tied to how well financially the hospital did the previous year.

Sok: The clinicians define their requirements. Purchasing then does market research to find the equipment that may meet the requirements and shares that information with the clinicians. Then, the clinicians decide which equipment they want to trial. After the trial, they will communicate their choice to the purchasing department. Purchasing will negotiate the deal, and the final decision is made as a collaboration between the clinicians and purchasing. We will try to standardize as much as possible. Purchasing will also negotiate for consumable supplies and service (if needed) in conjunction with the purchase negotiations before the order is placed.

RM: How do you determine whether to purchase new equipment?

Morrison: Staff input is the primary determinant of need. Medtrade, the annual health care trade show that is held in Atlanta, is a great time to look at what equipment is out there and any advancements made to existing equipment. We have multiple staff members attend this exposition so they can review, trial, and search out various types of equipment.

Lynne J. Forde

Forde: Due to our expansion, we have additional treatment space that needs to be readied for patient use. That new space includes six semiprivate treatment rooms that all need to be equipped with hi-lo treatment tables. We will also be purchasing an oversized hi-lo treatment table, bringing our total to seven new treatment tables for this fiscal year.

Carot: Departments make that decision based on the age and wear of the equipment and whether it presents a risk to patient care. They will also look at the age of the equipment and weigh it against the useful life of the equipment, which is usually determined at the time of purchase. Purchasing can also contact the manufacturer and get that information.

Putzier: Much of the capital equipment that is purchased is used to implement new programs to expand our services. Also, if equipment is in poor condition, or is outdated, then those items would need to be replaced.

Sok: We generally purchase new equipment. If needed, we conduct a purchase/lease/rent cost analysis to assist us in making the best overall decision.

RM: What pieces of equipment are you planning to purchase this year (for example: beds, computer equipment, gait and balance equipment, aquatic therapy devices, lifts, and transfer equipment)?

Morrison: [Intended purchases for 2006 include:] Hospital beds, we are in the process of replacing all of our older hospital beds with new ones, overbed tables; an overhead lift, we have these center-wide, and there are a few more areas that require this lift; RTI FES bikes; bathroom equipment, every year we need to replace worn or unrepairable bathroom equipment, such as shower/commode chairs (upright and reclining), shower stretchers, and so on. This year, we ordered a robotic gait orthosis. We will not have the funds to purchase another one, but the maintenance contract will be covered. [We are also planning on purchasing] hi-lo stretchers for transport of patients to and from various procedures; monitors for the nursing staff to take vital signs; mobile arm supports; hi-lo mat tables; and hydraulic lifts for patient/family training.

Kathleen Putzier

Forde: At our clinic in Framingham, we recently expanded our facility by an additional 3,000 square feet, thus making our capital needs this year quite significant. Our list of purchases for this year included: hi-lo tables, an exercise bike, upper body ergonometers, a leg press machine, a weight cable system, a moist heat therapy unit, [a cold pack chilling unit], an ultrasound machine, and an ultrasound/e-stim combination machine. In addition to our rehabilitation needs, we are also incurring capital expenses to enhance our external signage, to upgrade our telephone system, and to add additional computers and printers to accommodate our growing staff.

Carot: As part of our goal to maintain an excellent level of patient care, we are buying 10 beds each fiscal year in an ongoing effort to improve and update our beds. And, with the new RIC Spine & Sport Rehabilitation Center—River Forest opening this spring, we are buying a full range of patient care and therapy equipment and computer equipment.

Putzier: Some examples of items that we are planning to purchase this year include: video Frenzel lenses, a driving simulator, computerized balance equipment, software for speech training, a low bed, an ultrasound machine, CPMs, a bladder scanner, and a vital sign monitor.

Sok: We plan on replacing most of our beds. [We also intend to purchase] wheelchairs, wheelchair cushions, leg braces, pulse oximeters, furniture, assistive technology equipment, treadmills, and exercise equipment. [The list also includes] computers, audiovisual equipment, printers, adaptive devices for computers, elevator-access equipment, high-end vacuum cleaners, high and low technology assistive augmentative communication devices, as well as stretchers, motorized wheelchair electronic devices, several automobiles, and other computer hardware and software.

RM: What is the most common new piece of equipment that your rehabilitation department is planning to purchase?

Morrison: I would have to say that hospital beds would be the most common piece of equipment. As far as “new” pieces of equipment [are concerned], I don’t anticipate any brand-new products, as we have ordered new products recently.

Forde: [We will be purchasing a total of seven] hi-lo treatment tables, [including] an oversized hi-lo treatment table this fiscal year.

Carot: [We intend to purchase] hi-lo tables.

Putzier: The most common new equipment that the rehabilitation department purchases are CPM machines.

Sok: Wheelchairs.

Dameon Carot

Morrison: There are several factors I like to look at [and they lead me to ask myself a number of questions]: Will the equipment benefit the patients? What will the use be? Will the equipment benefit the staff—for example, will it cut down on injuries? Increase efficiency? Increase accuracy? What is the cost of the equipment compared to the benefit?

[Also, what type of] training is involved for the equipment? We want to make sure that multiple staff can be trained and will use the equipment. That way, when a staff member leaves, we do not have a $50,000 piece of equipment that nobody knows how to use. Lastly, we do look at service agreements and warranties closely.

Forde: Some of the most important factors that influence our purchasing decisions are the ability to demo the equipment prior to purchase to determine quality and applicability, then weigh those findings against price. When we purchase, we are looking for value in both the short term and the long term. It is important for us to know that a piece of equipment will be used by the therapists and will be durable enough to last.

Carot: We want to look at every opportunity to ensure that each purchase reflects the best price. For every purchase, we consider if the desired equipment (manufacturer and brand) is covered under a contract with one of our group purchasing organizations. This helps to ensure the best pricing for the desired product. If the product does not come under one of our contracts, we see if there are comparable products that are covered by contract, research them, and offer them to the requesting department for consideration. Rarely, there are times when a desired product only has one source and that source may not be covered by a contract. In those cases, the purchasing department negotiates with that supplier for the best price.

Putzier: Our facility belongs to a purchasing group. When we are ready to buy equipment, we are more apt to purchase items and brands that are available within this group. This is the most cost-effective way to get our equipment.

Sok: All of the above are important, but for the more expensive items, vendor visits, service agreements, and price points (especially proprietary consumables) are looked at closely. Depending on the item, we may also look at where that item is in its technological life.

Stephen Krcmar is associate editor of Rehab Management.

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