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Ohmeda Explores Partnerships with Hospitals

Medical Device & Diagnostic Industry
Magazine
| MDDI Article Index

Originally published November 1995

The economic pressure being exerted on hospitals by capitation and managed care is forcing a reevaluation not only of the way
medical equipment is acquired, but of how it is designed and used. Some hospitals may soon begin experimenting with new
cost-saving strategies, such as the use of anesthesiology machines incorporating meters to record the amount of time they are in
use.

According to Don Spence, vice president of marketing at Ohmeda Medical Systems Division (Liberty Corner, NJ), which
supplies the machines, the idea is not to turn anesthesiologists into clock punchers, but to gain access to information about how
the technology is used. "We need data about processes from the machine so that we have a chance to improve costs and
outcomes," Spence says. Thus, metered equipment would not be a product, but rather a research tool, perhaps to be applied
at institutions collaborating with Ohmeda to conduct research into the practice of anesthesiology.

Such partnerships will be integral to the future of the company, he explains. For hospitals, the data generated by devices such
as metered anesthesia machines should ultimately enable them to develop purchase plans that more accurately reflect the way
the equipment is used. "More and more, the operating room is not a profit center but a cost center," Spence notes. "We have
to move away from this idea of selling things and start selling solutions."

One implication of the changes wrought by capitation and managed care is that the traditional methods of capital acquisition -
purchasing, leasing, and renting - may eventually become extinct. Instead, customers may opt to pay for equipment by the
hour, in which case anesthesiologists might indeed punch a clock on their machines. Hospitals might be better served, however,
if they pay for equipment on a per-procedure basis, with different procedures incurring different charges. These charges might
include not only the use of the anesthesia machine, but also consumption of the anesthesia agent and some disposables.
Information management systems will help to determine how these charges will be applied and how the various components
will be bundled, Spence says.

Spence's proposed formula for success applies beyond the anesthesia marketplace, he says - it applies to all medical device
companies. "Companies that focus solely on providing tangible products without understanding their customers' needs and
processes will suffer a significant margin squeeze," he says. "In five years, some of us vendors will be here and some of us
won't. We certainly hope we will be among the survivors, but getting there will require us to be flexible and offer a wide range
of programs to customers."

- Greg Freiherr

(This article originally appeared in the November 1995 issue of Medical Device & Diagnostic Industry. © 1995 CanonCommunications, Inc. All rights reserved.)

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