High Cost of Low Price
MedWrench recently spoke with Ted Lucidi, CBET from Innovatus Imaging, about some of the recent trends affecting price in the repair industry.
Mon Mar 01 2021
PRICE IS NOT JUST A STICKER NUMBER
There are many variables that create the real cost of repair.
Since the pandemic, are you seeing the impact of price more influential than in past years?
A trend that we are seeing become more prevalent since the start of the pandemic is a shift to a more cost-conscious, price-driven, consumer. This may come in the form of technicians and decision-makers shopping-around for the most competitive price for repair or replacement of supported devices through alternative, after-market, suppliers. There is no doubt that the pandemic has caused all of us to examine our expenses and do more with less. The challenge is not sacrificing quality, customer satisfaction, and ultimately the patient outcome, while doing so.
What variables do you see having the most influence on pricing at the current time?
Just like medical device repair processes are complex, so too is the reality of pricing for repairing and maintaining all the products that we support today. There are many variables that need to be factored into the final price or true cost of a repair or replacement. More often than naught, we do get what we pay for. Just as there are reasons for why device manufacturers (OEM’s) charge premium prices for their services, there are reasons why some providers charge low prices. Let’s look at some of the factors that can affect the high cost of low price. Three of the top influencers of the actual price paid for maintaining a device are: warranties, data, and sources for replacement parts. Below are summaries of how each of the above items factor into the full price you are paying, sticker value or not.
The warranty period can contribute to overall price?
Recognizing the impact of warranties on price is not as simple as it may seem. Some suppliers offer a purchasable extended warranty that can significantly affect price. Others offer free short-term warranties for low priced services that only pay off for them as the coverage period falls short of the typical lifetime of their repair. I have seen some repair providers that only offer 30-day warranties. All-in-all, the above impacts price. Consider:
A repair with a minimal warranty period signals a vote of low to no confidence on the part of the supplier as they may have repaired the device as quickly as possible. Often times, this leads to compromising the quality of the parts, materials, and processes used as they relate to availability or cost. Let’s face it, healthcare facilities face increasing demand to meet budgets and maintain device uptime. A supplier offering low-cost solutions with minimal warranty periods will gladly take your device back again when it fails and repeat the same cycle, making them money and losing you more money and more time to care for patients.
Warranties that help to lower the total cost of ownership are usually those that last for 6 – 12 months after a device has been repaired, exchanged, or purchased. A solid product should last at least this long.
Can this really affect overall price?
Calculate what you are really paying for repairs and replacements: Look up the number of repairs that lasted less than 6 months. Add the cost of each subsequent repair to the cost of the original repair to find the true average you are paying for “each” repair. Apply this true cost to your bottom line for all devices you manage and see for yourself just how much you are losing to the high cost of low price. Now calculate what you would have paid to repair that device once because it was backed by a 6 – 12 month warranty. The above exercise shows you the pricing difference you actually realize when you partner with a supplier that will stand behind their work. If you add in your lost opportunity costs, the price you are paying is exponentially higher. Usually, you end up paying twice for device repairs than you should have. Go figure.
So what is Data-Driven Repair and how does this impact price?
When it comes to third-party solutions, consumers may not understand that OEM’s do not provide schematics, bills-of-materials, or replacement parts for certain devices. How do suppliers get data? It’s about years in the industry, technical expertise, and solid engineering. In reality, each supplier uses different methodologies based on what they have learned and documented (or not learned and documented) over the years. Just like data got a man on the moon, data can get you a repair solution you can depend on to last much longer than industry norms. In our industry, the difference between a repair performed once, and one performed multiple times, is historical and verifiable data about what lasts and what does not.
Providers with decades of experience, those with staff experienced in product design, and those with in-house engineers are those best qualified to provide quality, robust solutions. Data they collect and analyze over time include major things like the correct parts and sequences to use for technical procedures that optimize efficiencies, and seemingly smaller things like how many times a cable can flex before performance is compromised. It all adds up to repair accuracy and sustainability. While new players might charge less, you may be paying for a lot less proven and verifiable knowledge. In the long-term you will likely pay more than you should for each repair and add to the total cost of ownership which won’t reflect well on your ROI.
So how can replacement parts affect the price of a repair solution?
Like above, many in the HTM industry do not realize that OEM’s do not provide schematics, bills-of-materials, or replacement parts for certain devices. It should go without saying that all replacement parts are not equal and not every provider qualifies their replacement parts. For instance, for some it is common practice to harvest broken products for valued components, assumed good. In other cases, some components are unable to be harvested and alternative solutions must be used. Yet doing so without controls in-place potentially sets the device up for increased risk, latent failures, subsequent repairs, and additional downtime. A key question to ask any repair provider is how replacement parts are sourced.
In short, we’ve become accustomed to compare prices by what’s on the stickers or price sheets when shopping for professional and personal goods and services. Yet, when you don’t look under the hood of your car, or beyond the sticker price for repairs, you might miss the actual price you are paying to keep your car or medical device running smoothly.