Budgeting for medical equipment Implementing equipment development plan

Budgeting for medical equipment • Implementing equipment development plan • Budgeting for equipment acquisition, operation and maintenance Unit B 9. 2 Planning for medical equipment Module 279 09 B Medical Equipment Management and Maintenance HTM Guide 2, p. 99 © dr. Chris R. Mol, BME, NORTEC, 2016 Budgeting for medical equipment

Exercise Budgeting What is your budget for the next term, term 5 ? Please spend 20 minutes individually to write down the amounts of money that will be required for your various activities during your Term 5 at NORTEC. This is followed by making a collective, typical/average budget for a student at NORTEC, to be made on the white board. Important is to first identify the categories that require money and subsequently the amounts. Add the whole thing up. © dr. Chris R. Mol, BME, NORTEC, 2016 Budgeting for medical equipment

Budgeting: planning in terms of money ! 1. Identify all activities that are part of the plan 2. estimate the cost of each activity as good as you can 3. add up the costs and compare to the available funds (income) © dr. Chris R. Mol, BME, NORTEC, 2016 Budgeting for medical equipment

Budgeting example: hidden cost in bulk goods (In this estimate) Total HTM Guide 2, p. 108 © Costs = almost 50% over bulk price dr. Chris R. Mol, BME, NORTEC, 2016 Budgeting for medical equipment

Elements of the equipment budget Capital budget • Equipment Replacement cost • Equipment Extension cost • Transport and Installation cost (for new equipment) • Support activity cost (for new equipment) Recurrent Budget • • HTM Guide 2, page 99 © Maintenance Cost Consumable operating cost Administrative Cost Ongoing training cost dr. Chris R. Mol, BME, NORTEC, 2016 Budgeting for medical equipment

Eq. Replacement budget Before you can think of extending the equipment in a hospital, you must take care that the current level of equipment is kept in place: every year, some equipment will need to be replaced because it has reached its endof-life. You can estimate roughly how much replacement budget is needed by dividing the total value (current price for new equipment) of your current equipment stock by the average lifetime of the equipment (depreciation). If we assume that the typical equipment lifetime is 10 years (range 5 -20 years) then the replacement budget needs to be roughly 10% of stock value each year. You can make a precise replacement budget for the next year by identifying in your inventory what equipment is end of life in the coming period and needs to be replaced. HTM Guide 2, page 103 © dr. Chris R. Mol, BME, NORTEC, 2016 Budgeting for medical equipment

Example of Equipment Stock Values for a 120 -bed District Hospital (in 2003) © dr. Chris R. Mol, BME, NORTEC, 2016 Budgeting for medical equipment

Example of Equipment Stock Values for a 120 -bed District Hospital (in 2003) © dr. Chris R. Mol, BME, NORTEC, 2016 Budgeting for medical equipment

Budgeting for equipment acquisition: Equipment Extension Put your Model Equipment List next to your Inventory Now you can derive: What new equipment is necessary: Equipment extension budget What equipment you do not need: Generate income by selling ? © dr. Chris R. Mol, BME, NORTEC, 2016 Budgeting for medical equipment

Budgeting for equipment acquisition: Transport and Installation costs Pre-conditions ◦ Make sure there is enough space ◦ Water supply ◦ Electricity supply ◦ A flat floor ◦ Door that is big enough ◦ Removal of old equipment ◦ Hiring lifting equipment Cost estimates: ask manufacturers on estimates of site preparation, unloading, etc. ask suppliers on estimates of warehousing, transport, etc. Installation cost estimates examples: ◦ ◦ ◦ MRI unit US$ 70, 000 (10% of equipment price) ECG recorder US$ 0 Water heater US$ 20 (10% of equipment price) very much depending on type of equipment transport, storage, lifting needs, labor costs, etc. HTM Guide 2, page 111 © dr. Chris R. Mol, BME, NORTEC, 2016 Budgeting for medical equipment

Support Activity costs Supporting Activities ◦ ◦ ◦ ◦ ◦ © Receiving on site Unpacking Installation Commissioning Official acceptance Initial training Entering stocks into stores and records Payment complaints dr. Chris R. Mol, BME, NORTEC, 2016 done by internal staff: ‘free of charge !’ If paid for by external support Budgeting for medical equipment

Exercise: reading a budget Zambia Government Budget 2015/2016 What numbers do you find surprising? HTM Guide 2, page 133 © dr. Chris R. Mol, BME, NORTEC, 2016 Budgeting for medical equipment

Recurrent budgets the recurrent budget contains: ◦ Maintenance Cost ◦ Consumable operating cost ◦ Administrative Cost ◦ Ongoing training cost you should only own/purchase those items that you can afford to maintain … HTM Guide 2, page 133 © dr. Chris R. Mol, BME, NORTEC, 2016 Budgeting for medical equipment

Maintenance budgets include the money to maintain and repair the equipment, and thus ensure that the equipment remains functional for as much of the year as possible. Experts suggest that maintenance and repair costs should be estimated approximately as follows: • for medical equipment, 5 -6% of the ‘new’ stock value • for buildings, each year 1 -2% of the construction costs • for service supplies and plant, each year 3 -4% of purchase and installation costs. it may be uneconomical to continue to try to repair very old equipment. Maintenance will not generate cost but save you money HTM Guide 2, page 133 © dr. Chris R. Mol, BME, NORTEC, 2016 Budgeting for medical equipment

Maintenance budget: Rough estimates ideal estimate (what a ‘model’ hospital should have) HTM Guide 2, page 133 © realistic estimate (what your hospital requires for good operation) dr. Chris R. Mol, BME, NORTEC, 2016 reduced estimate (what your hospital requires to get along) Budgeting for medical equipment

Maintenance budget: precise estimate More precise estimate, per equipment item (i. e. not using standard percentages for the various costs) 1. 2. 3. 5. 6. 7. 8. 9. 10. HTM Guide 2, page 133 © evaluate spare parts and maintenance materials needed Look up cost of spare parts and maintenance materials Check on service contracts Look up cost for care and repair of workshop test tools and tools See if any new equipment is planned Plan the cost of those new equipments Review and prioritize all mentioned above Adjust figures if it’s more than the available budget dr. Chris R. Mol, BME, NORTEC, 2016 Budgeting for medical equipment

Consumables budget Recurrent budgets covering equipment-related consumable items are required to ensure that equipment continues to function. Equipment-related consumable items are: ◦ equipment consumables (electrodes, gels, paper) ◦ replacement accessories (handpieces, probes, lenses) ◦ spare parts (filters, o-rings, bearings) ◦ maintenance materials (lengths of pipe, paint, paper for the record system) ◦ cleaning materials (cotton wool, detergents, disinfectants) ◦ safety materials (protective clothing, refilling fire extinguishers, calibrating test instruments) ◦ energy supplies (fuel, oil, gas, electricity) HTM Guide 2, page 144 © dr. Chris R. Mol, BME, NORTEC, 2016 Budgeting for medical equipment

Consumables budget Rough estimates HTM Guide 2, page 133 © More precise estimate, per equipment item dr. Chris R. Mol, BME, NORTEC, 2016 Budgeting for medical equipment

Administrative budget Rough estimates HTM Guide 2, page 133 © More precise estimate, per equipment item dr. Chris R. Mol, BME, NORTEC, 2016 Budgeting for medical equipment

Ongoing training budget Ongoing training needed throughout the year to cover: • induction training – when staff are newly placed in post, move to a new department/facility, or move to a new location with different responsibilities • refresher training – to update and renew skills throughout the working life of staff. Training topics • good practice when handling equipment – basic ‘dos and don’ts’ • how to operate equipment • the correct application of equipment • care and cleaning • safety procedures • planned preventive maintenance (PPM) for users • PPM and repair for maintainers • other, such as procurement, stores management, financial management, … HTM Guide 2, page 156 © dr. Chris R. Mol, BME, NORTEC, 2016 Budgeting for medical equipment

Ongoing training budget Rough estimates More precise estimate per equipment item • Plan and budget for ongoing training costs by using a percentage of staff costs (the salary budget): 2% of payroll costs. • Plan and budget for ongoing training costs by using a percentage of the equipment stock value: 5% of the stock value. HTM Guide 2, page 133 © dr. Chris R. Mol, BME, NORTEC, 2016 Budgeting for medical equipment

Equipment acquisition, operation and maintenance © dr. Chris R. Mol, BME, NORTEC, 2016 Budgeting for medical equipment

Contingency Budget You can not plan for everything What happens if there is a epidemic? We always make a contingency budget for unplanned work/materials Roughly, this should be 5 -10% from the total budget © dr. Chris R. Mol, BME, NORTEC, 2016 Budgeting for medical equipment

END The creation of this presentation was supported by a grant from THET: see https: //www. thet. org/