Medical equipment dealers will need GPO contracts to compete

July 18, 2013
by Loren Bonner , DOTmed News Online Editor

Jeff Weiss, CEO of Atlantis Worldwide , has been in the refurbished medical equipment business for over 20 years. His company has survived many changes in the market. He shares his opinions on some of the challenges facing dealers and sellers in today's shifting health care environment. Here's an edited version of our conversation.

DMN: Many business owners and executives see the changing health care environment as chaotic. What's your opinion?
JW: I wouldn't say it's chaotic. Is it ever changing? Yes. It's the change that's been going on the past 20 plus years I've been in business. Health care is always changing. There are changes in reimbursement, changes in competition and technology. Change is inevitable. I try my best to understand what the changes are and remain competitive.

What have you noticed lately with capital spending in health care?
JW: Health care capital spending seems to be at a standstill. As hospitals try and understand the requirements being placed upon them to convert from Integrated Delivery Networks to Accountable Care Organizations, they take a very cautious stance. On top of that, when you consider that 33 percent of the sequester cost reductions are coming out of the health care marketplace, you see very little capital spending on new equipment, service line expansions and acquisition ventures in health care at this time. So it is a very flat market where capital spending is concerned.

DMN: What do you see as the biggest shake-up for medical equipment dealers and sellers from health care reform?
JW: For medical dealers — for all of us — it's going to be your ability to weather the storm in order to remain viable as things change. We have to contend with the ramifications of the Affordable Care Act. Frankly, I still think we're dealing with the ramifications of the
DRA in 2006, when the government began lowering reimbursements for imaging centers. But what I've noticed in the past several years is the purchasing decisions leaving the hands of the radiologist and department director, where they used to be. Now those decisions are being made at the corporate level. Mostly, we see decisions being made in the world of ISDNs. And we see that as a huge change. Moving forward, you are seeing ACO's adopting centralized purchasing for all members of the ACO. Supply chain management now has tremendous power within a delivery network. Equipment dealers, both OEMs and resellers, are going to need GPO contracts to even compete for a health care provider's business from now on. Product standardization, volume purchasing power, and volume discounts will play even more of a role as we move forward. Supply chain management is where the power is.

We have a contract with the Greater New York Hospital Association for refurbished equipment and our safe CT dose reduction product. That puts us in a great position here in New York. And we're pretty close with three other major GPOs nationally, so that's how we focused our strategy.

DMN: How does refurbished medical equipment fit into the changing health care landscape and what opportunities are out there for sellers and dealers?

JW: Long ago, whatever was presented at the RSNA people went out and bought it. There was easy money out there and entrepreneurs could open up an imaging center next to a hospital and do well. Those days are long gone. Today, people are looking at return on investment and if you don't get that, you won't buy equipment — be it new or refurbished.

The Affordable Care Act should have a purely positive effect on refurbished equipment sellers and dealers. It is all about driving costs down for the hospital-based providers. Do you really need a new 128 detector CT? Do you really need a new 16 channel MRI or a new 3T to make a differential diagnosis? Do you really need to replace your angiographic and special procedure labs? For the most part, the answer is no. If you do need to replace a piece of imaging equipment, is a new product really worth up to twice as much as a refurbished product? Ask yourself the question: will CMS reimburse me more for having a new CT? A new MRI? Again, the answer is no. So, if you want to compete as an ACO, you are going to need to find ways to maintain a lower cost basis. Refurbished equipment, or extending the life of your current equipment, combined with aftermarket add-ons and excellent lower-cost service contracts on your equipment answers the need for a lower- cost basis perfectly well.

DMN: Any final advice for facilities who are preparing for large equipment purchases?
JW: Again, you'd better take a hard look at the overall costs of ownership between buying new technology versus quality refurbished products. Understanding that you don't get one cent extra from CMS just because you have a new piece of equipment should give you pause as a buyer.

Where you still see private imaging centers, and the number is shrinking fast, the trend over the past several years is for the radiologists to purchase refurbished rather than new equipment for their centers. This same mentality should also be a viable solution within the ACO.

Finally, one should also consider cost effective, efficiency-producing aftermarket products like CT IR solutions and dose monitoring solutions.