Medical technology is one of the leading causes of rising healthcare costs, the Healthcare Financial Management Association (HFMA) reports, where the combined cost of ownership, storage, and repair has become a burden to healthcare organizations. These costs are compounded when equipment goes unused, even for temporary periods. These investments lose value when they aren’t delivering value for patients.
Recent analysis suggests many healthcare organizations don’t have a grasp of the lifecycle costs of their equipment. Stakeholders are frustrated by these costs, but they struggle to measure them as a function of time and value. That’s because acquiring and maintaining medical equipment requires more extensive analysis than in other industries where companies make full-time use of their investments.
What’s more, healthcare organizations lack a globally consistent acquisition process that would ensure they achieve the greatest value from their equipment. The impact of unpredictable crises exacerbates this problem, where too often healthcare organizations must rush to unequitable deals at the expense of deeper financial analysis.
There are opportunities for hospital decision makers to achieve both a universal acquisition process and align their capital investments directly with patient outcomes. Shifting to a pay-per-use financing model—where hospitals pay for equipment based directly on their degree of use, and therefore the value they deliver for patients—represents an ideal solution given the unpredictability of demand for healthcare services. The HFMA highlights additional benefits:
“As value-based payment and risk-bearing contracts become more prevalent, hospital leaders will be incentivized to broaden their analytical toolbox to incorporate methods that provide increased transparency and evidence into whether a technology adds value by improving patient outcomes at the lowest possible cost of care.”
Pay-per-use financing naturally aligns with hospital decision makers’ existing measures of value, which relate to patient outcomes. Aligning this perspective with equipment financing would encourage stakeholders to take a more comprehensive look at their medical equipment needs and finance them in a sustainable and equitable way. Equipment costs would directly align with paid services, connecting their value and equipment supply chains directly.
The pay-per-use or Device-as-a-service (DaaS) model has found recognizable applications in other industries. In manufacturing, DaaS models offer companies flexibility to change their plans on short notice, protecting financial interests during fluctuations in production levels. Now, both medical device manufacturers, financial service providers, and hospital stakeholders are discovering potential applications in healthcare.
In a DaaS arrangement, healthcare organizations do not have to purchase equipment themselves; instead, providers supply equipment for arranged or indefinite periods. Healthcare organizations can pay for equipment only when it’s needed—during a crisis that requires specific types of equipment, for example—and can return the equipment for updating, for replacement, or when the need for the equipment subsides. Meanwhile, suppliers continue to maintain equipment themselves as hospitals use them, relieving hospitals of that administrative and cost burden.
This method solves several immediate and ongoing points healthcare organizations experience today, including:
Hospitals may also gain access to third-party resources for data analysis and workflow optimization as part of DaaS arrangements with suppliers. That’s because DaaS directly aligns suppliers’ interests with value creation—that is, positive patient outcomes.
Thanks to its inherent flexibility, DaaS opens doors to a wide range of payment arrangements based on need. Hospitals can finance dozens of types of equipment they know they will need long-term as part of a single, low-cost “bundle.” They can arrange to have large quantities of a single equipment type on a short-term basis as well. More broadly, they can scale their equipment investments up or down based on the needs of their patients.