Cost-of-ownership is a heavily used terminology in the sales pitches of medical devices. It is a favorite resort of a sales rep to justify a high cost of an equipment. On the other hand, sometimes there is a lucrative, low-pricing, offer that doesn’t incorporate many essential components of the ownership costs such as warranty, PMs, training, etc. For a healthcare provider focused on delivering patient care, it is generally hard and time consuming to list down various components of these costs, analyze it over a period of time, and compare different equipment side-by-side. In short, there lacks a simple tool or framework that can assist providers in making informed decisions. We make an attempt here to explain various cost components and then share with you a downloadable tool that can help you perform your cost-of-ownership analysis.
Components of cost
- Product list price
As the name suggests, this is the price often referred to while listing the product. In the context of a C-arm, the list price of a new equipment can be as low as $70,000 and can even go above $250,000, while a refurbished C-arm may list between $40,000 and $70,000 (unless too old and outdated that may list even cheaper). Most of the healthcare providers review this price in conjunction to product features, such as Image Intensifier (II) or Flat Panel Detector (FPD), size of an II or FPD, DSA/Vascular package included or not, possible mechanical movements, type of procedures, size of the equipment, size of the generator, image quality, radiation exposure, laser aimer, pulse mode, so on and so forth. The long features list to consider for a purchase decision makes the process fairly complex in-itself, but that is just one component of the overall cost of ownership.
Cost of ownership (new machine): $70,000 - $250,000+
Cost of ownership (refurbished): $40,000 - $70,000
- Parts Warranty
Repair costs on the C-arms can go very high as many components used in the system are expensive. Most brands offer 1 year parts warranty on new machines while refurbished equipment often have no or very low warranty coverage. Additional warranty is offered as an extended contract that can cost anywhere between $8,000 and $15,000. It is important to understand that components such as X-ray Tubes are often prorated. That means if the total extended warranty on the x-ray tube is 5 years and it fails in 2 years, only 3/5th cost of the new new tube is covered under warranty and 2/5th is paid by the customer.
For C-arm models such as Skan-C from Skanray standard parts warranty is 5 years, which is unprecedented in the industry. Even parts such as X-ray tubes are fully covered (and not prorated) as Skanray manufactures its own tubes in Italy. Such warranty coverage not only provides you peace of mind but also puts significant value directly back in your investment (in Skan-C’s case , about $32,000). It is worthwhile to consider part warranty cost in your calculations about cost of ownership.
Cost of ownership: $8,000 - $15,00 annually
- Labor Warranty
Labor warranty is also a very important cost to consider in overall cost of ownership. Typically, labor coverage is not included in the sale of an equipment and is almost always over and above the list price. In general, budgeting anywhere between $4,000 and $10,000 annually is a good estimate, however, it can vary based on the level or response time committed by the service provider.
New technologies such as remote diagnostics and IOT based monitoring are changing the landscape very rapidly. For example, in Skan-C from Skanray, the equipment keeps monitoring itself and can be dialed remotely. This is very effective as it significantly reduces the response time to look into any reported issue. Many cases can be resolved remotely while in certain situations tech has to be onsite, who show up with right parts and resolution in hand rather than the traditional approach of reaching for the first time, troubleshooting, then ordering parts and visiting a second time to fix the problem.
Cost of ownership: $4,000 - $10,00 annually
- Preventative Maintenance (PM)
Even with comprehensive warranties, PMs are a good way to ensure that equipment is often serviced and performing well. It lowers the chances of failures due to wear and tear and in turn reduces the downtime. Downtimes are particularly detrimental as they impact both the top and bottom lines. PMs improves the life span of your equipment. In general, a PM can cost anywhere between $1,000 and $2,500 and could be performed annually.
Cost of ownership: $1,000 - $2,500 annually
- Applications Training
Churn in staff at a facility brings the requirement to train new employees. Good training helps to improve productivity of the staff, provides better technical support to the provider, takes necessary care of the equipment, and overall delivers superior patient care. Where an onsite training can cost anywhere between $2,000 - $4,000, newer technologies, such as those in Skan-C from Skanray, allows you to take advantage of remote applications training sessions where the trainer can be available virtually to even support on live cases. Generally, these remote training sessions are offered free of charge or at a nominal cost. It is important to factor in training cost based on the estimated churn. For example, to train a new staff every two years
Cost of ownership: $2,000 - $4,000 per two years
- Financing Cost
Often overlooked aspect in the cost of ownership, financing cost is directly proportional to the price of the equipment. Customers often prefer financing as it helps reduce upfront burden and provides opportunity to earn revenue with the equipment and then pay back. Though this cost can depend on multiple factors such as your credit score, cost of capital / bank rates, duration, etc., major determining factor is the price of the product itself. We are making a broad estimate to consider 3-7% interest rate as financing cost annually.
Cost of ownership: $2,100 - $15,000 annually
We hope that this article will help you to understand the components of the cost-of-ownership better.
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