It’s down, THE MRI MACHINE IS DOWN. This is one of the last things you want to hear when running an imaging department or if you are reliant on the images produced by your MRI machine to treat patients. Downtime will affect your entire practice beginning with scheduling, staffing, diagnosis, and the impact of lost revenue and repairs. To hedge against unexpected downtime is proper service and maintenance.
Service comes in many forms and we’ll talk about the most popular options and providers below. As a quick summary, there are levels of coverage from full parts and labor contracts to the scaled-back time and materials agreement with preventative maintenance. You also have a choice when it comes to the service provider. Coverage can be provided by the OEM, a third party, an insurance company, or your in-house provider.
Coverage Types
Full Parts and Labor Contracts
Full-service contracts provide the most comprehensive coverage for your MRI machine. In short, all costs associated with the maintenance and repair of the equipment are prepaid in the annual service premium. These plans have the highest cost but are fixed regardless of the service event. All of the financial risks of maintaining the equipment is transferred from your organization to the service provider. These plans are ideal for facilities that want a fixed service expense and want to minimize downtime.
Pros:
- Upfront pricing
- No variable costs
Cons:
- Expensive
Parts Only Contracts
Generally speaking, a service contract has two costs to the service provider: parts and labor. Many providers will offer parts only coverage at a reduced rate when compared to a full parts and labor service contract. These agreements will cover the cost of the replacement components needed in the event of a repair but will not cover the labor expense. Instead, the agreement will typically include a predetermined hourly rate for the technician or engineer. This labor expense is included in the event of a repair. The preventative maintenance is often included at no additional expense.
Pros:
- Cheaper than full parts and labor service contracts
- Coverage for components
- Includes preventative maintenance
- Pre-set hourly labor expense
Cons:
- Labor is a variable cost (financial risk)
Time and Materials Contract
Also known as a T&M contract, these are agreements that cover the preventative maintenance for your MRI machine as recommended by the manufacturer. Additionally, they include pre-set hourly rates for labor in the event of a service call. For organizations that have a higher risk tolerance and want to minimize their service expenses, the T&M contract is a solid option. The preventative maintenance is designed to keep the MRI machine operating properly along with providing an early indication for any components that are nearing failure. The main advantage to a time and materials contract is the low cost as compared to a parts only or full parts and labor contract.
Coverage Type Summary
Full service, parts only, and time and materials contracts each have their own cost-benefit profile. The full service is a fixed price option that transfers all the risk of labor and expenses to the service provider. The parts only contract splits the risk with your organization bearing the labor costs in exchange for a discount. Finally, the time and materials contract is designed to get in front of potential problems, but in the event one occurs, you hold the financial responsibility for the repair of the MRI machine.
Service Providers
Original Equipment Manufacturer
Most often, service is provided by the original equipment manufacturer or OEM for short. OEM service has many advantages with a few drawbacks. The first advantage guarantees access to parts. The FDA requires OEMs to provide parts and service for 7 years past the last manufacture date. The mandate ensures that coverage will continue for most of the equipment’s useful life.
The second advantage is in diagnosing an underlying equipment issue. MRI manufacturers like GE, Siemens, Philips, and Canon have access to their service keys which are codes that the system outputs to tell the technicians what is wrong. These codes help speed up the time to resolution and support remote troubleshooting.
A third advantage is scale. The OEM’s service organizations are large and designed to support clients across the globe. This scale helps with access to engineers and parts, especially in hubs. This is key when response time is important.
Parts availability, scale, and access to the proprietary service keys have a cost and that is the price of service. OEM service is the most expensive option when compared to third-party or insurance coverage.
Third-party Service
Third-party service can take two forms. One is a multi-vendor service contract with one of the OEMs and a second is a contract with a true third-party. We’ll be focusing on the third-party contract. The main advantage of these contracts is price. Using OEM service as a benchmark, third-party service is typically 15% less for comparable coverage.
Another reason our clients elect to use third-party service is because of the individual technician or local presence. A good service provider can create significant value by being responsive, knowledgeable, and personally getting to know your equipment and team. Third-party organizations can be great in their local markets by providing fast response time.
As discussed above, the OEM is required to stock parts for 7 years after the last manufacture date. After that period, the equipment will be deemed end of life by the manufacturer even if equipment can still be used effectively in a clinical setting. Third-party providers will often continue service for these units. While this is a more specialized case, it can be of value to you to not replace a fully-functioning unit.
Insurance
Maintenance insurance is a financial product that covers the expense of a repair. Similar to a time and materials contract, all of the parts and labor are billed on a per-event basis. Benchmarked against OEM service, maintenance insurance can produce savings of 10%-20%.
The important item to note on maintenance insurance is how the policy is written. Some policies name the OEM as the service provider, while others will contract a third-party. The same goes for the parts; some contracts state that OEM components must be used while others will use aftermarket or refurbished parts. These terms and conditions will change the premium of the contract.
Final Thoughts
We have not talked about dollars and cents in this article and that is because every contract is different. Here are the factors that have the biggest impact on price:
- Number of Systems: The per-unit cost of a contract covering a single system will be much higher than multiple systems because the financial risk is spread out.
- Multi-Vendor Contract: This is a form of third-party maintenance which is designed to cover multiple modalities throughout the facility or system. Multi-vendor contracts are typically completed through one of the major OEMs like GE Healthcare, Philips, and Siemens Healthcare. The selected provider handles service for all of the equipment regardless of brand. The more equipment that is covered, the better the discount.
- Multi-year Agreements: Service providers will often give discounts for multi-year contracts because the financial risk of a service event is spread out over a larger period.
- System Type: MRI manufacturer, model, age, and components will all have a factor in price. The more common the system, the lower the price of service, especially in the third-party market because of parts availability.
- Helium: Prices for helium have recently skyrocketed. While most modern MRI machines operate with zero-boil off, including helium in the service contract may have a significant impact on price. Many providers are now capping the amount of helium included per year.
- Response Time: Do you need 24-hour coverage with a 2-hour onsite response time? That will come at a premium. Additional savings can be achieved by evaluating what you consider a reasonable response time and setting that as your contracted service level agreement.
- Uptime Guarantees: Some contracts may include an uptime guarantee. In the event the system is down for more time than the contract states, the service premium is prorated and refunded. This type of agreement can lessen the financial impact of unexpected downtime.
Service contracts can be complex but they exist to keep your MRI machine operating and to reduce the financial risk of unexpected downtime. As a key takeaway, follow the manufacturer’s recommendation for preventative maintenance. Secondly, evaluate what is most important for your organization. Does that mean full coverage in exchange for a known payment, or a lower maintenance expense with some risk in the event a repair is required? The choice is yours. Consider Meridian Leasing a resource for any questions you have regarding purchasing or leasing an MRI. Call +1 (855) 980-4578 or send an email to [email protected] for more details or to speak with a medical equipment specialist.