EVA Of Ultrasound Alpha Source White Paper
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An evidence-based approach to considering the economic benefits
of comprehensive service contracts compared to billable hourly
service (T&M) and in-house biomed resources.
ECONOMIC VALUE ANALYSIS (EVA)
ON THE TOTAL COST OF OWNERSHIP
OF GE HEALTHCARE LOGIQ 9
ULTRASOUND IMAGING EQUIPMENT
BY DARLENE KOBER AND DON SMITH
ALPHA SOURCE, INC.
SEPTEMBER, 2015
WHITE PAPER
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ECONOMIC VALUE ANALYSIS (EVA) ON THE TOTAL COST OF OWNERSHIP
OF GE HEALTHCARE LOGIQ 9 ULTRASOUND IMAGING EQUIPMENT
BACKGROUND
Many hospitals and other healthcare facilities are migrating away from original equipment manufacturer
(OEM) support of medical equipment through an annual comprehensive service agreement. The de-
facto initial purchase of the service contract and subsequent annual renewals are increasingly being
replaced by less comprehensive service options available from both OEMs and independent service
organizations (ISOs). In addition, many facilities are staffing up their clinical engineering departments
and budgets to in-source equipment maintenance and service with in-house staff. The need to
reduce hard costs from increasingly squeezed budgets is encouraging healthcare facilities to change
procurement strategies and accept more economic risk when considering their various options for post-
warranty equipment service and support.
An evidence-based approach towards equipment maintenance and service is valuable to guide HTM
professionals in decision-making that best balances economic risk and costs. Getting a clear picture of
the overall long-term total costs of ownership for medical equipment such as imaging equipment can be
challenging. For example in ultrasound imaging equipment, variations in maintenance practices, age of
equipment, multiple service providers, and the quality of preventative maintenance practices all factor
into the overall total costs of ownership of this equipment. Detailed reporting of all parts purchases and
service calls associated with each unit serial number can be challenging to obtain.
In short, a fact-based approach that considers actual field experience of a specific model of equipment
would help inform and advise health technology management professionals to choose the best method
for their facility: OEM or ISO comprehensive service contracts, billable hourly service by OEMs or ISOs,
or transferring service completely to in-house HTM resources.
TOTAL COST OF OWNERSHIP EVA STUDY
Alpha Source, the service provider for certain models of GE Healthcare ultrasound imaging equipment,
conducted a retroactive data study of the Logiq 9 installed base of equipment using the actual service
experience of units under a contract from GE Healthcare. The purpose of this study was:
• To determine the overall average annual cost to support the Logiq 9 model of ultrasound imaging
equipment during the period of 2011-2014. This average annual cost, which includes OEM services
provided under annual contract including service calls and associated travel fees, phone technical
support, and replacement parts furnished by the OEM, is defined to be the total cost of ownership
for Logiq 9 equipment.
• To compare this average total overall cost of ownership to a competitively priced annual
comprehensive coverage service contract offered through an ISO specializing in ultrasound
modality (such as Alpha Source).
• To determine the likelihood that customers will experience a net gain or net loss on the annual
cost of the comprehensive coverage service contract compared to competitively priced hourly
billed (T&M) service.
• To monetize the economic risk and financial exposure that the average Logiq 9 customer might
experience without relying on the comprehensive coverage service contract to smooth out the
annual parts and service expenditures on their ultrasound imaging equipment.
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ECONOMIC VALUE ANALYSIS (EVA) ON THE TOTAL COST OF OWNERSHIP
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METHODOLOGY
The study was based on a retrospective review of the 3-year service and parts history of a significant
portion of the GE Healthcare Logiq 9 installed base of ultrasound imaging equipment. The installed
base for this study consisted of 673 ultrasound units used in hospitals, physician offices, and imaging
centers across the country during the period 2011-2014. Each of the units in the study was under a
GE Healthcare contract and serviced either by GE Healthcare or by Alpha Source. Every service event
including on-site service calls, travel time, preventative maintenance, phone support, and replacement
parts was tracked by unique equipment ID within a robust database. For purposes of assigning a value
to each service event under an annual contract, a market-competitive hourly rate of $250.00/hour was
assigned to each service call, travel hour and phone support hour. Replacement parts used to repair or
maintain each unit were valued at the OEM list price.
Each of the units in the study had a service history for a complete 3 years. Tracking service history within
a consistent time period is essential to normalize the naturally wide variations in service expenses from
year to year. This average annualized expense or the total cost of ownership on the combined service
and parts usage was then compared to the annual fees offered by OEMs and ISOs for comprehensive
coverage service contracts.
RESULTS
The analysis of annual expenses from the 3-year parts and service history of the Logiq 9 ultrasound
equipment revealed the following:
• On average, a Logiq 9 user can expect to spend $9,800 per year in parts and service fees to
support the unit. This is a total annual combined spend on both parts and service.
• Of this total, $6,300 is spent on replacement parts which include transducer probes, electronic
parts and other miscellaneous replacement parts.
• On average, customers experience 14 billable hours of combined service labor, travel costs, and
phone technical support per year. This is valued at $3,500 per year based on a $250.00/hour rate
for billable
hourly service.
• Although the average total annual spend in service and parts is $9,800 per year, the range of
expenditures is wide. The high end of this range is over 5 times (5X) the average annual spend or
$51,230 per year.
• The year-to-year variability of customer spending is high. The results of this study showed that
23% of customer units required a spend that was 50% higher than the average and 10% of customer
units required double or more (2X) the average annual spend in any one given year.
• About 30% of customers would spend less and 70% of customers would spend more on a
competitively priced comprehensive coverage service contract compared to purchasing parts and
T&M service without a contract. The Alpha Source Logiq 9 contract list price of $12,410 was used for
this comparison.
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CUSTOMER EXAMPLES
To further explore the economic value of an annual contract, the actual combined parts and service
spending for five sample customer units during the period 2011-2014 was examined and is shown
in Figure 1. This actual customer spending is compared to a competitively priced comprehensive
coverage service contract. (The Alpha Source list price for a Logiq 9 Comprehensive Coverage Service
Contract of $12,410 was used for this comparison.)
Figure 1 shows the potentially wide variations in customers’ spend from year to year. Customers #3,
#4 and #5 spent 2X more than the contract price of $12,410 in 2011 and 2012. Customer #2 spent
70% more than the contract price in 2013. In some years, Customers will spend less than the annual
contract; in fact, all Customers except Customer #1 had at least one year where spending was below the
contract level. However, when totaling these customers’ actual expenditures over this time period, all 5
customers would have spent less with a fixed priced contract compared to equivalently purchased
parts and service without a service contract.
FIGURE 1: Sample customer Logiq 9 parts and service expenses
30,000
25,000
20,000
15,000
10,000
5,000
0
2011 2012 2013 2014
Customer 1
Customer 2
Customer 3
Customer 4
Customer 5
Average Annual Expenses ($)
CONCLUSION
The competitively-priced comprehensive coverage service contract is a cost-effective method for
maintaining EOSL GE Healthcare Logiq 9 ultrasound equipment based on a 3-year historical review
of actual customer expenditures. These contracts act as financial insurance against widely varying,
unpredictable annual maintenance expenses. Contracts offer peace of mind not only for meeting your
financial budget responsibilities but also for maintaining your equipment by a team of qualified service
engineers with ultrasound expertise. Comprehensive contracts often provide priority response times and
24/7/365 technical support to minimize equipment downtime. Maintaining the equipment with proactive
preventative maintenance and quality replacement parts will reduce your total cost of ownership, reduce
equipment downtime and maximize the value of your asset for many years.
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ALPHA SOURCE COMPREHENSIVE COVERAGE SERVICE CONTRACT
The Comprehensive Coverage Service Contract from Alpha Source offers significant economic value
compared to T&M or in-house resourcing of ultrasound equipment maintenance and support. The price
of a Logiq 9 contract offers an attractive value based on the average customer’s experience in the Logiq
9 installed base.
FIGURE 2: Value Components of the Alpha Source Comprehensive Service Contract:
The Alpha Source Comprehensive Coverage Service Contract is designed to help you achieve maximum
productivity and uptime for your ultrasound imaging equipment. It provides parts coverage, proactive
scheduled preventative maintenance, probe care and replacement, priority response, after-hours phone
technical support and documentation support to meet both American College of Radiography (ACR)
and The Joint Commission requirements.
Average Annual Expenses ($)
Service Labor Including:
• Billable service
• Travel costs
• Phone technical support
Service Labor
$3,500
Financial insurance:
• Predictable expenses
• Controllable costs
$2,610
Added Value of
Service Contract
Replacement Parts
Including:
• Transducers (probes)
• Electronic components
• Miscellaneous parts
Parts
$6,300
$12,410
Alpha Source
Comprehensive
Service Contract
Comprehensive Contract
• Proactive service to
maximize uptime
• All parts in a fixed
monthly fee
• One probe per year
• All service labor
• Travel costs
• Proactive PM (2x year)
• 24/7/365 phone tech
support
• Priority response
• ACR documentation
support
Cost Component
$9,800
Plus
Replacement Parts
Including:
• Transducers (probes)
• Electronic components
• Miscellaneous parts
Service Labor Including:
• Billable service
• Travel costs
• Phone technical support
Average Annual
Expenditures
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The features and corresponding benefits of the Alpha Source Comprehensive Coverage Service
Contract are as follows:
FIGURE 3: Alpha Source Comprehensive Coverage Service Contract
CONTACT ALPHA SOURCE AT 1-800-654-9845 to learn more about how our nationwide team of
trained and certified service engineers and our stocking inventory of parts can help you achieve the
highest economic value from your ultrasound equipment.
Notes:
1. All repair data is tracked by individual equipment serial numbers. Individual units were de-identified
and the data was made anonymous prior to analysis.
2. GE Healthcare did not sponsor, conduct or participate in the study, the analysis of the information or
the drafting of the findings. All statements and representations made herein are solely those of Alpha
Source.
Feature Benefit Impact on Patient Care
All parts and labor in a fixed monthly fee,
includes one probe per system
Predictable monthly expenses acts like an
insurance policy
Controllable, predictable costs keep care
costs down
Alpha Care™ Expert care to extend the life of your
aged equipment
Confidence and peace of mind in EOSL
equipment
Proactive, preventative maintenance
2 x year Catch issues early to prevent downtime Smooth patient scheduling with less
downtime
ALPHA PM™ Documents image quality and equip
performance
Image quality suitable for excellent
patient care
PM and service documentation meets
ACR/JC needs
Cuts time you need to prepare
documentation
Maintain accreditations. More time for
patient care.
Priority service response time; 24/7/365
phone support Restore uptime quickly Return to normal patient scheduling
quickly
Cloud-based data storage Secure and available documentation Supports accreditation requirements
25% off list prices for replacement probes Cost reduction Lower costs meet cost reduction goals
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ABOUT THE AUTHORS
Darlene Kober, MBA, BS ChemE, is marketing director of Alpha Source, Inc. Ms. Kober has more than 25
years of experience in leading marketing and sales for medical devices, industrial products, engineered
products and chemicals. She has extensive B2B marketing experience in creating value-add programs
that grow revenues, lower total system costs and improve outcomes for customers.
Don Smith, BA, is vice president of service for Alpha Source, Inc. Mr. Smith has over 25 years of service
leadership expertise with medical equipment manufacturers. He builds and leads national teams of field
service engineers and customer service representatives to deliver excellence in customer experiences.
ABOUT ALPHA SOURCE, INC.
Located in Milwaukee, Wisconsin, Alpha Source, Inc. provides innovative solutions in healthcare
technology management to customers around the world. Established in 1986, Alpha Source is an
ISO13485:2003 certified and FDA GMP compliant medical device manufacturer with an emphasis on
medical equipment service and biomed parts distribution and logistics. Alpha Source has been one of
the INC 5000 fastest growing companies for the past five years. For a complete company description,
VISIT WWW.ALPHASOURCE.COM OR CALL 800-654-9845.
