Every year, hospitals across Australia spend billions of dollars on equipment and supplies. According to a report by the Australian Institute of Health and Welfare (AIHW), hospitals in Australia spent approximately AU$71 billion on recurrent expenditure in 2017-18, with a significant portion allocated to medical equipment and supplies [1].
For clinical department heads responsible for maintaining uninterrupted operations, planning for supplies, equipment upgrades, and consumables quickly becomes a game of trade-offs.
Here are four considerations when planning your equipment budget:
1. Start with the Previous Year’s Budget vs Expenditure
The best place to start when thinking about equipment planning is by examining the equipment budget and expenses of the previous 1-2 years. Annual budgets are often set using previous year data, and regularly reviewing past expenses can help identify patterns, discrepancies, and oversights that may impact future spending.
To establish a baseline, identify any isolated expenses, such as facility remodels or expansions, during the previous period and factor those anomalies out of the expenditure.
Once the baseline has been established, break the equipment expenses into two categories: replacement and repair/maintenance.
Equipment repairs are considered operational expenses (OpEx), while improvements and replacements are considered capital expenses (CapEx). Understanding this distinction will be important later in the process.
2. Understand the Facility (or Health Network) Growth Rate
The overall growth of your facility or the health network to which your facility belongs will heavily influence budget allocation for the coming year.
Facilities and health networks that are rapidly increasing the number of patients treated will likely invest more in annual budgets across the board, while steady-growth networks are more prone to keep budgets flat and negative- or no-growth networks tend to deprioritise all but the most critical equipment needs.
Knowing the overall growth trajectory of the health system will help you understand and adjust your baseline.
If you are a member of a high-growth health system, push for the highest quality equipment you can during the high-growth season. Premium equipment will cost more up front, but quality equipment will last longer, cost fewer maintenance dollars, and create less frequent operational challenges.
3. Conduct a Walkthrough Assessment of Current Equipment
After establishing baseline capital expenditure, conduct a walkthrough assessment of the facility or department examining all capital equipment and noting the following:
- Income Generation Status
- Age
- Rated Service Life
- Operating Condition
- Previous Repairs
Use these criteria to create a prioritised replacement schedule for equipment.
Income-generating equipment, or equipment that, through its daily use actively generates income for the hospital (MRIs, CT Scanners, Ultrasound equipment, etc.), will almost always take precedence, followed by critical operational equipment that is currently inoperable or will soon require major maintenance.
Equipment near the end of its rated service life but still operational should be next. New equipment in good operating condition can wait.
A note on rated service life: Two products sharing the same rated service life may provide wildly different levels of reliability. Opt for products with a rated service life that matches your facility’s needs and real-world track record of quality.
For example, our Helmer Scientific cold storage equipment carries a rated service life of 10 years, but many of our units have been in service much longer. This kind of longevity can be particularly valuable in the Australian healthcare context, where equipment often needs to perform reliably in diverse environmental conditions.
4. Use the CapEx/OpEx Distinction to Your Advantage
Understanding CapEx and OpEx, how each is budgeted, and your facility’s preference for one or the other can help you develop a long-term equipment planning strategy.
Replacement, upgrades, and the purchase of new equipment will typically fall into the capital expense category. Operating expenses will include maintenance, both regularly scheduled and break-fix.
Take the prioritised list of equipment from the facilities walkthrough and allocate budget dollars to replacing those pieces of equipment. A percentage of the capital equipment budget should be in reserve as a contingency in case of unforeseen equipment failure.
Planning for repairs is more challenging due to the unpredictable nature of equipment failure. The amount needed for repairs will be based primarily on age of equipment and maintenance history.
There are a few actions that can help regulate operating expenses due to repairs:
- Conduct regular preventative maintenance. Most manufacturers include a regular preventative maintenance schedule in their operator’s manual.
- Consider service contracts, which can help remove risk and volatility by covering agreed-upon maintenance and repairs that can help stretch the service life of key pieces of equipment, helping you make the most of your equipment planning budget.
For instance, Aurora BioScience offers a range of custom service contracts across most of our products, including the full Helmer Scientific blood and component storage and processing products that can help remove risk and volatility by covering agreed-upon maintenance and repairs. This can help stretch the service life of key pieces of equipment, allowing you to maximise your equipment planning budget.
Equipment Planning with Aurora BioScience
Whatever your budget, Aurora BioScience can help you get more for your dollar with premium quality, reliable equipment. Our Helmer GX Solutions refrigerator and freezer units are available in specialised configurations for blood banks, pharmacy, and clinical laboratories. In addition, our Platelet Incubators and Agitators have been the industry gold standard for more than 20 years.
Aurora BioScience can offer customised service contracts to help you get the most out of your equipment so you can budget accordingly, Contact your local Aurora BioScience representative or visit our website for more information on products and services available across Australia and New Zealand.
References:
- Australian Institute of Health and Welfare. (2019). Health expenditure Australia 2017–18. Canberra: AIHW.