Hospital executives mulling new equipment buys and used medical dealers trying to do business in an increasingly stormy market ought to pay closer attention to global economic trends and the expected shakeup from accountable care organizations, according to presenters at the 20th annual meeting of IAMERS held in New York on May 2.

"The real question is, how do we thrive in chaos?" Wayne Webster, a long-time IAMERS member and consultant with Proactics, told attendees at the two-day event, which ran May 2-3 at the Crowne Plaza Hotel in Midtown.

The keynote speaker, Dr. Giuseppe Ammendola, an economics professor at New York University, offered a rough sketch of the world economy, and pointed to events that could have knock-on effects around the globe, such as how China's growth is eroding its advantages as a cheap labor source, and the dangers to countries like Greece if it drops out of the Euro Zone, as some analysts predict it might over the summer.

"Everything we wear, everything we do, is related to this," Ammendola explained. "Even if your business takes place in a radius of 10 miles from your base, you're part of the global economy."

Map your portfolio

Broader trends aren't just macroeconomic. Providers should also keep tabs on equipment lifecycles if they want to avoid serious financial losses, according to a talk by Charles Gauthier with Shared Imaging.

Hospitals often don't follow OEM product lifecycles and end up buying equipment right as the manufacturer releases a more powerful upgrade, resulting in a sharp depreciation in value of their expensive, new machine, he said.

In his talk, Gauthier shared a series of "horror stories". One hospital he described bought a 0.7-tesla MRI, when the manufacturer released a 1.0-tesla while it was being installed. Another facility bought a CT scanner six months before the OEM released a 16-slice model that was four to six times more powerful. And yet another saw an MRI lose $250,000 in value right after it was upgraded.

"That is career-altering for a CFO," Gauthier said.

He recommended hospital executives and service managers consider a witch's brew of market forces, changing demographics, debates in Washington, device competition and other factors when preparing for equipment buys. He also suggested that hospitals, dealers or servicers plot out maps for purchases to gauge risks affecting the real value of the equipment.

They can also keep an eye on the FDA's 510(k) premarket notifications through the agency's website to learn about upcoming equipment and get a feel for the rhythm of the product cycles to know when to buy, or went to rent an interim, or "bridge", device and hold out to purchase a new release.

As for his own life cycle predictions, Gauthier hazarded that "CT detectors will go flat panel, mark my words." He said this was because they could possibly provide lower doses, and also weighed less and could allow smaller scanners to fit in tighter spaces.

Overall, from his work, Gauthier estimated that upgrades fell short about 60 percent of the time.

"You can get technology obsolescence very quickly," he said.

ACOs and speed

The speed of obsolescence was a point echoed later in the conference by Webster, who described how advances in technology have accelerated the rate at which devices become obsolete (Disclosure: Webster sits on the editorial advisory board of DOTmed).

"We went from machines that were routinely good from five to seven years. Now, it's three years if we're lucky. Technology was moving so fast that we got used to replacing everything rapidly."


But in Webster's view, arguably the biggest shake-up facing dealers and servicers can be captured in three words: accountable care organizations.

In ACOs, which were set up by the Affordable Care Act, hospitals pledge to drive down costs to treat populations of Medicare patients, and share a part of whatever savings they bring with the Centers for Medicare and Medicaid Services.

"You must pay very careful attention," Webster warned. "It will drive how (providers) make all their decisions. It's totally upside down from the way we ever looked at everything."

He said that ACOs, approved in three-year terms by CMS, are not quite like the HMOs or managed plans they're frequently compared to, and could have more powerful effect on shaping how providers buy and manage equipment.

For instance, an April New York Times article found that a hospital drove down admissions 6 percent in an effort to control costs, after it had joined an ACO.

"Their only goal is to do one thing: reduce expenses," Webster said.

In any case, even if business factors don't convince administrators or dealers to pick up The Economist every week, Ammendola suggested a rather social advantage to being well-informed on world economics issues.

"Clients love to talk with people who have intelligent things to say," he said. "The better informed you appear, the quicker you understand broad trends, the more clients will think, 'What a smart man, what a smart woman, I better trust his person.'"