Why healthcare services needs to think about total cost of ownership
Healthcare service operators of all sorts have failed, at least until very recently, to measure and manage the total cost of ownership. That is odd because TCO models, in which you measure the real costs of operating, can massively improve EBITDA, particularly for capital equipment. It can also be adapted to measure and improve entire facilities – see our interview with Patrick Gontard below. He claims that TCO in labs can grow EBITDA by 10-15 percentage points. Similar gains can probably be made in imaging, for instance.
The really interesting question is why healthcare services has lagged so far behind other sectors in calculating TCO, a concept developed in the late 1980s and early 1990s.
There are several answers to that. The first is that until recently tariffs have been set at a level which enables even inefficient operators to make money. Secondly, if you allow physician preference, then there is little point in calculating TCO, as physicians will tend to go for the latest and snazziest piece of kit, no matter the cost. Thirdly, most provider markets are so fragmented that few operators have had the management capability to measure something as complex as TCO consistently. In fact, we were told by one large imaging supplier that often they find operators do not even know what and how much equipment they have on their premises!
But the caps on budgets and cuts in tariffs mean that we are now in a new world and one in which hospitals, labs and imaging service providers who don’t understand TCO will lose out badly.
We would welcome your thoughts on this story. Email your views to Max Hotopf or call 0207 183 3779.
