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Why Total Cost of Ownership is Now the Name of the Game for Imaging Vendors

In the post-ACA landscape, vendors of medical imaging systems must focus on lowering the total cost of ownership of their products.

In the post-ACA landscape, vendors of medical imaging systems must focus on lowering the total cost of ownership of their products.

Tim Bosch

New healthcare economics have begun altering the radiology industry in profound ways. Shifting reimbursement models and accountable care initiatives are forcing radiology equipment manufacturers—and radiologists themselves—to redefine their role in the patient care continuum.

Against this dynamic backdrop, one of the prevailing questions we heard at RSNA in November 2014 was, “How can we produce solutions that deliver greater value at a lower price point?”

Image quality alone can no longer be seen as the universal key to success. To succeed in the Affordable Care Act era, vendors must deliver solutions that provide reliable results within a holistic workflow system while reducing the total cost of ownership over the lifecycle of their products. There are four dimensions to this challenge: accelerating time to market, reducing life cycle cost, adding value, and addressing the commoditization challenge.

Accelerating Time to Market

Whether developing new systems or integrating new features into existing systems, time to market is a key factor that directly impacts the cost of development. The longer it takes to design and verify a new product or feature, the greater the sunk cost.

Yet, the landscape into which these new systems are deployed is changing rapidly. There are many potential new points of connection as the use of image data proliferates across care protocols. Additionally, the business models of device manufacturers are evolving to include a wide variety of new long-term arrangements with hospitals.

Keeping pace with these changes requires critical skills that are often outside the core competency of in-house engineering teams. This includes rigorous systems-level analysis of today’s complex user environment and the ability to rapidly adopt and transform the many new technologies essential for next-generation imaging products. Recruiting new talent with the requisite expertise is time consuming and costly. Too often, this translates into a product arriving to market late, missing key competitive capabilities, and with a higher price tag than the competition.

Recognizing this, manufacturers are increasingly teaming up with partners who have the needed expertise. Leveraging these external partnerships intelligently can deliver a time-to-market advantage while controlling development costs and long-term product support costs. A well-managed partnership also enables vendors to keep up with the accelerating pace of change—giving them the flexibility to “plug in” whatever specific technical expertise is required for a particular project quickly and cost-effectively. Indeed, this agility will prove to be a critical competitive advantage as the healthcare landscape continues its rapid evolution.

Reducing Life Cycle Cost

Perhaps even more important than the costs of development and manufacturing is the ongoing cost of managing and maintaining systems. To justify the investment in any new system, radiology practices are taking a hard look at the costs of operating and maintaining devices over their life cycle. Forward-looking device manufacturers are focusing on strategies aimed at making their systems easier and cheaper to operate, service, and maintain. Reducing warranty and support costs also enables device manufacturers to free up resources to reinvest in new technologies and R&D.

Examples of capabilities designed to reduce operating costs include remote monitoring, equipment diagnosis, and predictive failure analysis technologies that can improve system uptime while eliminating costly and time-consuming unplanned downtime and service calls. Remote system calibration technologies enable vendors to know when a system is moving out of proper calibration and proactively recalibrate the system. In addition to reducing expense and downtime, these remote technologies improve service and clinician/patient satisfaction—competitive metrics that are crucial in this era of patient-centric care.

Reducing costs is just one side of the total cost of ownership equation. Competitive device manufacturers also need to find innovative ways to add value.

Adding Value with Analytics

Integrating the right connectivity and analytics into imaging systems opens the door to a host of value-added capabilities. Next-generation products provide information on system uptime, use of consumables with automated inventory control and management, and even operator metrics with the ability to indicate which users are in need of additional training or recertification. The key is investing precious development time and resources in the analytics that customers actually want—not analytics for the sake of analytics.

Another aspect of total cost of ownership is compliance. Standards and processes are changing continually. Remediating systems to address these changes draws engineering resources away from new system and feature development. Strategic partnerships can help here, too—updating component design or new processes to extend service life, while reducing total cost of ownership and keeping in-house teams focused on high-value engineering tasks.

Facing the Challenge of Commoditization

Radiology is a specialty that has thrived on innovation and technology advancement from its birth more than a century ago. Now, it faces a new challenge: the very real threat of commoditization as cost becomes the key market driver. It’s no longer a race solely to deliver the highest resolution or the greatest number of advanced features that most radiologists will never use. Instead, it’s about delivering the capabilities radiologists truly need to deliver patient-centric care—solutions that are “good enough”—at the lowest feasible total cost of ownership.

Complacency is Not an Option

It is increasingly obvious that the strategies that worked in the past won’t work today. Imaging system vendors must rethink their entire business model—from system development through service and support—to meet the needs of radiologists in the new value-driven healthcare economy. Working with external partners who understand these challenges and have already solved them successfully can be an important step toward achieving this transformation.

Radiology will continue to play a critical role in the diagnosis and treatment of patients. The imaging systems purchased to support this effort will be designed and built to do more with less for longer. Imaging system manufacturers that develop the most effective total cost of ownership solution will have a tremendous advantage in this new world. Those that delay are in real danger of being left behind. And the clock to develop and deliver these systems is ticking.

Stay on top of medtech trends by attending the MD&M East conference and exposition, June 9–11, 2015, in New York City.

Tim Bosch is vice president and chief architect at Foliage Inc. Reach him at [email protected].

 [image courtesy of COOLDESIGN/FREEDIGITALPHOTOS.NET]

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