Purchasing Power Roundtable

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March 2003

By Sarah Schmelling

Jan Fitzsimmons, RN, BSN, CRRN

Making large purchases, especially of facility-based equipment, takes a lot of planning at any time, but requires even more thought in weaker economic climates. How do rehabilitation centers decide which pieces of equipment to spend their hard-earned dollars on? What kinds of systems do they implement to track their purchases, and who gets to make the final sign-offs? Rehab Management recently asked these and other questions of several administrators of rehab facilities, and their answers just might provide some hints on what to do when next quarter’s budget rolls around.

Participants included: Jan Fitzsimmons, RN, BSN, CRRN, director of risk management for Madonna Rehabilitation Hospital, Lincoln, Neb; Mark Hyland, OTR/L, CHT, director of rehabilitation, STI Therapy and Rehabilitation, Phoenix; and John Cherry, chief financial officer of Casa Colina Centers for Rehabilitation, Pomona, Calif.

Rehab Management: How has spending on capital expenditures changed in recent years? To what extent have technological advances or the current economic climate played a role?

Jan Fitzsimmons: I think the technological advances play a big part in how one looks at capital. Always keeping abreast of the current technology and balancing this with resources available is the most challenging [task].

Mark Hyland, OTR/L, CHT

Mark Hyland: More analysis is necessary to measure return on investment. We are careful to examine what a piece of equipment can do for our patient population, referral sources, and financial bottom line.

John Cherry: The current economic climate has forced management to more closely scrutinize capital expenditures. Technological advances are carefully analyzed utilizing key clinical staff to ensure the best possible patient outcomes given the resources available.

RM: “Capital expenditures” include not only movable equipment, but also information systems and infrastructure costs. How do you divide costs for each of these areas?

JF:The division of capital expenditures depends on the corporate goals for the year, new programs or services that have been approved or are in the corporate goal plan, and what new regulations need to be met and are first priority. Replacement of current capital is also considered. A capital budget is approved by the administrative team but the monies cannot be spent without justification and final administrative approval.

MH:We simply divide by administrative and clinical costs. Of course, there are subcategories of each and some are put into both categories. For instance, automating our documentation and billing systems incorporates cost centers in both [administrative and clinical] so we may apply a percentage into each category.

JC: Expenditures are allocated on an as-needed basis and are adjusted annually and incorporated into the budget, which is final-approved by the Board of Directors.

RM: How much input do clinicians have on capital expenditures? Do department heads each do an assessment of their needs and then request them from you? How is it decided who should have input, and who should make the final decisions?

JF:The program leaders obtain input from the team. For example, the spinal cord injury program leader would obtain input on equipment needed for that specific program or the cardiac program may need additional portable cardiac monitoring equipment because of an increase in patients to that program. Departments also obtain input on general capital needs from their discipline. For example, nursing may need additional or replacement [bladder volume instrument] machines, or physical therapy may need a replacement pressure mapping machine. The department heads review the requests and submit the justification for budgeting purposes. The administrative team makes the final determination for the budget.

JC: Our clinical staff develop their own needs based on their program’s and their patients’ needs. Our president/CEO makes all final decisions with regard to which items are incorporated into the budget. The Board of Directors approves the final budget.

MH:Our clinicians have a lot to say about what equipment goes into their clinics. This is done as a team with the site’s clinical manager with a budget in mind, cost-benefit analysis, and review by our president and financial department. Equipment is purchased at a local clinic level. Rarely, do I, as rehab director, interfere in this process. Of course, certain items are needed in our clinics so I will review and perform site surveys, etc, to determine additional need.

RM: Do you work with specific manufacturers, or do you solicit bids from a wide variety of equipment makers? JC: All purchases that exceed a specified dollar amount require competitive bids. We will consider using any manufacturer as long as they offer quality products, have a good reputation, and are competitively priced.

JF:We have VHA purchasing and attempt to purchase from the manufacturers through VHA. At times this does not meet the requirements that have been established. We like to have at least three comparable products to evaluate before a selection is made.

MH:We have some local dealers and vendors we like to work with. They have been loyal and honest with us so we feel this relationship is important to maintain. We use a wide variety of equipment and do not use any manufacturer exclusively.

RM: What aspects of the equipment need to be considered before a purchase (ie, safety, keeping up with new kinds of therapy, return on investment, features for specific patient bases, increasing efficiency, etc)?

JF:The requirements vary per piece of equipment. Safety for both patient and staff is always considered. Other aspects that may be considered are: ease of operations; a company’s responsiveness (this includes rapid response, customer service reputation, and cost); education of staff; and repair of equipment and warranty. We also look at ease of cleaning and moving. We ask if it can be upgraded easily, with little cost, so that we do not purchase something that will be obsolete in a year.

MH:All the items mentioned in your question need serious consideration. We like to see demos of high-end and high-tech equipment and perform a thorough needs [assessment] and financial analysis.

JC: Patient needs and patient outcomes are the primary consideration in a purchase consideration. Secondarily, we would consider all of the above factors.

RM: If this applies to your organization, what kinds of different equipment considerations have to be made for different types of facilities?

JC: We offer a wide range of rehabilitative services and have many different programs to consider, each with unique needs. For example, our autism program in the Children’s Services Center would require a different type of equipment than our Transitional Living Center or our Adult Day Healthcare Center. Each program requires equipment sensitive to the needs and abilities of our patients/residents.

MH:Many of our clinics have different personalities and patient bases based on geographic considerations mostly. Therefore, each clinic makes decisions locally for capital equipment purchases.

RM: What do you find are the biggest challenges in making a capital expenditure plan?

JC: The biggest challenge we have faced recently is meeting the needs of our current growth. The increase in the number of clinical staff and the construction of our new hospital have increased our capital expenditure requirements.

MH:Information overload and biased dealers make it difficult to wade through. Time is always an issue. Something like Consumer Reports, an unbiased analysis for capital rehabilitation equipment, would be nice to see.

JF:[The biggest challenge is] foreseeing future needs of the patients, programs, and services as health care rapidly changes.

Sarah Schmelling is senior editor of Rehab Management.

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March 2003