Faced with Recession, Hospitals Innovate to Reduce Equipment Costs

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U.S. Healthcare Facilities Reduce Equipment Purchase Costs with New Business Model from Texas Firm MEMdata

Group purchasing has perhaps played a valuable role with supplies and consummables for years, but equipment is a different story

As lawmakers and the Obama administration debate how to pay for national health reform, U.S. hospitals are not waiting for the outcome to reform their bottom lines. Many hospital executives are enacting comprehensive expense reviews and cost reduction measures to ensure they are prepared for the new economy.

Texas based MEMdata, a performance-based equipment procurement firm that claims to reduce hospital equipment costs by as much as 18%, today announced that new hospital client signings were on a significant upswing.

"We are experiencing a dramatic increase in the number of hospitals seeking to reduce the cost of new equipment," said MEMdata CEO Bob Yancy. "While the nation struggles with the issue of healthcare costs, it's gratifying to play an increasingly pivotal role in the cost reduction process."

According to MEMdata, hospitals spend approximately $35 billion annually to purchase new medical technologies and other equipment necessary to care for patients and operate facilities. Before MEMdata, traditional procurement methods involved buying equipment through a commodities contracting process managed by hospital Group Purchasing Organizations, or GPOs. In contrast, MEMdata uses a competitive bidding process utilizing an electronic platform. The process is called electronic Request For Proposal, or eRFP, which MEMdata claims reduces equipment purchase prices dramatically.

"Whether through GPOs or government procurement contracts, the old method of contracting was designed for repeat scheduled purchases of supplies and consummables, as opposed to capital equipment," says Yancy. "Capital equipment investments are unique and happen sporadically, and require a unique approach to ensure competitive pricing for our hospitals."

To achieve best-in-class pricing for it's hospital clients, MEMdata's equipment purchase process calls for increased focus on transacting, rather than contracting. Yancy explains. "Consumers wouldn't sign a five year contract with a local car dealership which establishes prices and limits the brand they can buy, yet that is what has been happening in healthcare for years. This limits hospital access to discounts that occur as a result of competition, new technology, special promotions, and economic downturns like the one we're in now."

MEMdata's eRFP electronic bidding process yields millions of dollars in savings for hospitals each year for assets ranging from CT scanners and MRI machines to commercial kitchen equipment for hospital cafeterias. In June of 2009 for just one New Jersey hospital client, the process achieved $43,218 in cost reduction on the purchase of anesthesia machines and over $280,715 in savings on the purchase of a CT scanner, both of which were originally contract prices.

Despite the difference in approach, MEMdata's process seamlessly integrates with any hospital GPO, and the company supports hospital GPO memberships, if the client prefers, by ensuring equipment is purchased on GPO contract but at prices dramatically lower than the published GPO contract prices.

"Group purchasing has perhaps played a valuable role with supplies and consummables for years, but equipment is a different story," says Yancy. "The contracting method maybe does a good job for supplies, but relative to equipment purchases our hospitals need the best pricing they can get. Our future depends on it."

MEMdata is based in College Station, Texas and provides best-in-class pricing on hospital equipment for over 500 medical facilities nationally. MEMdata services are performance-based, with MEMdata's fees guaranteed to be offset by savings achieved. For more information see http://www.memdata.com, or contact Corporate Communications Director LeeAnna Butler by calling 979.695.1950 x109.

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LeeAnna Butler
MEMdata
979.695.1950 ext. 109
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