The Art of Evaluation

How to Determine If a New Product Is Right for Your Business

Change is vital to progress, and it's important for providers to stay attuned to market demands. Technology also can help providers meet long-term plans and stay competitive in today's market. But before adding a new technology, it's important to weigh the benefits and risks from all sides: for your business, your staff and your patients. Here are some tips to determine if a new product will meet your needs.

1. Do Your Research

It might seem like a no-brainer, but one of the most important steps to evaluating new technology is to find out as much about the product as possible. Talk to product managers about the features and see the product in person. Ask about clinical research associated with the product, and if possible, talk to anyone who's used the product: other providers, respiratory therapists and patients.

Then compare those facts with your business needs.

"I would start out by identifying who all is going to benefit from the equipment — the patients, the company, or both, and then of course the referral source," says Jacki McClure, BS, RRT, FAARC, McClure Connection, Melbourne Beach, Fla.

McClure says it's important for providers to make sure they understand what the manufacturer states that the equipment will do. For example, if a manufacturer says a piece of equipment does X, then don't expect it to do Y. "Is what you're asking it to do reasonable and can you accomplish it?" she says.

2. Talk to Your Staff

When choosing a new product, it's important to get opinions from in-house resources. Collect data from purchasing staff who will know acquisition and operating costs, from respiratory therapists who will know the benefits to the patient and what the equipment can accomplish clinically, and from service technicians who have insight on maintenance and repair.

Ike Odum, president of Regional Medical Supplies, Ypsilanti, Mich., says that before he buys an oxygen concentrator, he first consults with his respiratory therapist. Since his RT is female and she does the initial setups, he says the concentrator must be light enough that she can easily lift it and put it into a small car without assistance and without injury. A side benefit of a lightweight concentrator is that patients also can easily move the product, Odum says, which eliminates many service calls.

Odum says he also asks his repair techs how easy the equipment will be to service and repair, and if the equipment is known to be reliable.

It's also important to consider educational components of a product. How easy will it be for staff to learn new products, both instructions for use and routine maintenance and repair?

McClure says staff considerations play into the operational costs of acquiring a product. Providers should consider if the product requires a staff person to deliver the product, if it increases or reduces labor, if the setup requires a professional, such as a respiratory therapist, and if it helps RTs achieve better clinical outcomes. "You also need to consider how do the staff like it? Is it something that excites them, gets them passionate, allows them to do their job easier? That's where I would look at cost efficiencies," she says. "Technology is supposed to help we humans do something either better (or) quicker. So, does it do that for them?"

Forming a committee of key staff members is a good idea, McClure says. The committee can establish criteria for evaluating a new product and expected outcomes.

3. Conduct a Field Test

Field-testing products before increasing inventory is always a good idea. Send a few products out to patients and get feedback to help determine if a product meets patient and company needs.

"When (providers are) looking at technology decisions, I put the patient at the center and make sure the patient is getting the right product for their needs and a product that is defensible to a referral source," McClure says. That means listing the patient benefits for the referral source and then doing a test run to see if the equipment accomplishes those things.

McClure says for respiratory products, specifically oxygen equipment and ventilators, criteria to consider during field-testing include evaluating the number of trips to the home, how well the equipment saturates the patient and prevents physician visits, and if the equipment is less burdensome for biomedical technicians when checking out the equipment.

For patients, factors to consider include noise level, weight and convenience. "Find out between the customer and yourself how convenient it is," Odum advises. "If it's easy for you to install and take down and use, it will be easier for the customer as well. If it's a little complicated or much too difficult for you, it will be just as difficult for the customer."

Odum says his patients are also concerned about power consumption. "Is it going to cost too much money in electricity? Those are factors we're weighing, too, in making that decision. Some of those clunky, bigger (concentrators) are power hogs. … We've actually looked into how much energy they're consuming. That way we're saving the customer money because they're using it round the clock."

Odum says he also considers how easy it is to give follow-up instructions about the equipment over the phone. "You have to be able to tell them what to do over the phone without having to make a service call and spending time and money that you don't have," he says.

4. Consider Maintenance and Repair

Because maintenance and repair factor into acquisition costs, it's important to look at the manufacturer's policy and your own in-house policy. For example, one of the most important questions to ask is what the return policy is for a new product. Many manufacturers have 30-day return policies for CPAP masks, for example, and that's important since mask returns could eat up a lot of dollars.

Consider a service agreement, especially for new technologies. "If you're talking a new technology, you're better off having the manufacturer do the repairs because they probably don't have the service manuals or don't have the infrastructure to train others to do it yet," McClure says.

Ask about the warranty of a product and what a manufacturer does to fulfill the conditions of the warranty. Odum says he prefers to do business with manufacturers that immediately send out a new product, even if the products are more expensive.

"When I call and say, 'Look, a customer is complaining. The headgear is not working.' Right then and there, the replacement comes in and then they take care of that. That offsets some of the extra costs," he explains.

Other companies may send the equipment out for repair, which may take some time. That could put added strain on your business financially and on customers who need their equipment.

McClure says providers also must consider the costs associated with repairs. "Am I going to have to ship it back to the manufacturer? Can I share that cost with the manufacturer?" she questions. "I put that all down on paper."

One factor to consider is how quickly your own technicians can respond to a problem. Can they easily repair little things rather than having to send the product out for repair? How often will the equipment need to be serviced and how much will you have to pay for that service?

Reliability is something that can be easily determined in a field test. If the technology is established and you have reliability issues, then you'll probably want to avoid purchasing the product, McClure explains. In addition, she recommends asking manufacturers for service reports and the failure history of the product. "The manufacturer has that information," she says. "They have to keep track of those things to meet FDA regulations."

5. Determine Financial Feasibility

Before investing in an expensive technology, it's important to evaluate financial variables. Develop a business plan that includes a financial analysis that proves adding the new technology is economically viable. Consider how much the product will cost in the short-term and how long it will take you to recoup those costs. How much will the technology save you in the long run? How much of your business will need to change to incorporate the new technology? Will you need to add new staff or provide additional training?

Reimbursement must play a role in the decision. Odum says he considers if the cost of the product is reasonable when looking at the Medicare projections for that product category. He also does comparative shopping. "You don't want to pay too much for it when you can get something else that would work," he says.

Also consider cash flow. Will the new product impact cash flow positively or negatively? McClure says examining cash flow also helps providers determine if they should lease or purchase the equipment.

"Something may have a high acquisition cost but it may also have a higher cash flow potential," McClure says. "(Providers) may get more referrals. They may increase their patient volume, which they were not doing with what they had before."

Acquisition costs encompass much more than just the price of the equipment. McClure says providers should look at shipping costs, installation costs, new supplies and if space is available in the facility to house the product. Most importantly, she says, providers must consider operational costs. Be sure to calculate labor and training. Look at the useful life of the product and whether the product is an inventory addition or a replacement for older equipment.

McClure recommends using a worksheet for looking at new capital. But she cautions, "I would look at my top line more than my bottom line. So, first look at the patient, the right product, and then I would look at my top line potential."

This article originally appeared in the Respiratory Management Jan/Feb 2009 issue of HME Business.

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