Sponsored by Photo courtesy STERIS Corporation


SELF-STUDY SERIES


for example. Departments ben- efi t from high effi ciency systems that improve department work-  ow and productivity. Replacing obsolete equipment with newer models also allows facilities to expand their surgical or proce- dural options and attract physi- cians who use more modern instrumentation that could not be processed in the obsolete systems.


Favoring the use of a washer-disinfector with green and red status lights over a traditional washer-


disinfector without lights is and example of a style/ aesthetic obsolescence


instruments or specialty sets were hot com- modities last year but are barely requested today? As procedures change and new instrumentation becomes available, doc- tors may prefer one type of instrument or set over another. This change in preference results in effectively obsoleted instruments and sets left unused in inventory. Finally, we have economic obsolescence, which is “the loss of value resulting from external economic factors to an asset or group of assets.”4


Simply stated, economic


obsolescence occurs when an asset is at an economic disadvantage due to events out- side the control of the facility. Regulatory changes, scarcity of necessary resources to run the machine, and equipment valuation by the market are a few factors that create an economic disadvantage. All sterile pro- cessing equipment experiences economic obsolescence simply by getting old. Just like a car, the value of equipment goes down as the equipment gets older and the number of procedures or processing cycles it has experienced increases.


The benefi ts of replacing obsolete equipment


Obsolescence is often perceived as a negative event: expensive equipment that can’t perform the desired reprocessing parameters or is forced to retire through recall and regulation turns into a useless hunk of metal. However, if you look closer, there are meaningful benefi ts connected to obsolescence.


Productivity and recruitment gains Obsolete equipment provides an oppor- tunity to upgrade to newer models with increased effi ciency and more useful fea- tures. Newer equipment may have faster processing times or meet the processing requirements for new instrumentation,


Some newer cart washers offer reduced utility consumption and include


specifi c cycles for instruments and rigid sterilization containers.


Reduced maintenance and repair costs The financial benefits go beyond util- ity savings. Older equipment costs the department more to use. Higher service contract costs and increased repair costs coupled with more downtime results in higher department spend and possible lost surgical revenue. Downtime has the additional effect of reducing department productivity and causing backlogs and potential overtime expense. Comparing these costs to the cost of purchasing and


Utility and sustainability improvements


Obsolescence supplies an oppor- tunity to improve department spend and reputation. Utilities such as water and electricity are part of every department’s budget. Newer equipment is typically designed to reduce utility usage. This can save departments thousands of dollars over the life span of the equipment. By reducing the use of resources, newer equipment can also help reduce the depart- ment’s carbon footprint and environmental impact.


Photo courtesy STERIS Corporation


using the newer equipment can show a benefi t from obsoleting the older equip- ment and investing in new equipment.


The subtle benefi t of depreciation Depreciation is a factor applied to capital purchases that shows the loss of value that an item incurs over time. A familiar example of depreciation occurs when you purchase a car. The resale value of the car steadily decreases each year you own the car, based on the car’s age, mileage, and condition. At some point in the future, the car will have negligible value. The differ- ence between the purchase price and the market value is its depreciation. Depreciation is calculated and used in


accounting to represent the declining value of an individual’s or organization’s major assets over time, which is counted against its income. Applying depreciation will reduce the overall income reported, which in turn means less taxes paid. However, there is a fi nite time during which depreciation can be used. The method of calculating depreciation is decided by the accounting team but is typi- cally spaced over a specifi ed useful lifetime for the equipment. Once the useful lifespan is reached the equipment can no longer be depreciated and will no longer count against the income. Obsoleting equipment and purchasing new systems creates a new opportunity for depreciation. Although this is the weakest benefi t of obsolescence, it is a crucial consideration when discuss- ing obsolescence planning for department equipment.


Develop an obsolescence plan Obsolescence planning is a proactive approach that manages the timing and impact of equipment obsolescence. Ideally, the planning should start before any equip- ment is installed in the department, but this is unrealistic in most cases. For most departments, planning starts by assessing the current situation.


Assess what you currently have Assessment identifi es the current condi- tion of existing equipment and the risk of this condition to the department. For example, newer equipment has less chance of breaking down or becoming techno- logically obsolete, so it has a low risk of obsolescence. However, older sterilizers, washers and other system models may no longer be manufactured and are more likely to be made obsolete by the manu-


hpnonline.com • HEALTHCARE PURCHASING NEWS • January 2022 35


Self-Study Test Answers: 1. A, 2. A, 3. C, 4. D, 5. A, 6. B, 7. D, 8. C, 9. A, 10. C


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52