Plugging Profit Leaks

How to detect and prevent profit leaks in equipment maintenance plans

As a property owner, one of the worst sounds to hear is drip, drip, drip. Everyone knows just what the sound means: water is leaking from somewhere and needs to be addressed quickly in order to circumvent any property damage. Similarly, an unidentified profit leak can wreak havoc on your organization’s annual budget. Is an ineffective or poorly managed equipment maintenance plan draining your profits in your healthcare organization?

Some of the usual suspects are buying service contracts without negotiating on price and terms; choosing not to buy coverage on equipment that has a high frequency of breakdowns; or buying service agreements on equipment that is underutilized or in storage. How much money is wasted each year by not properly managing the maintenance of your electronic equipment? Is there a steady drip, drip, drip of profits that has gone undetected? Fortunately, these leaks can quickly be identified by taking a closer look at your current buying practices and then putting controls in place to plug the leaks.

Inventory Check

The first step is to determine if you have a leak. When was the last time you collected all of your service agreements and completed an inventory? If it’s been more than two years, it’s time to revisit it. Begin by creating an equipment asset list and then identifying which equipment is covered by a service agreement and which equipment is not. The next step is to check the coverage levels of the equipment under a service contract, e.g. is it full service, preventive maintenance only, labor only, depot service, inspection/calibration only, etc. You will also want to collect any warranty information for new equipment that still may be under the manufacturer’s warranty period. Don’t forget to include the effective dates of these agreements. Depending on the size of your organization, you may need to ask for cooperation from other staff members to collect all of the information needed to complete the inventory. This process can be time-consuming, but it is a critical first step in identifying and plugging profit leaks.


After the equipment inventory and asset list is complete, you will need determine what requirements are necessary for each piece of equipment. Here are some things to consider:

  • Coverage hours: Do you need 24 hour emergency service or would 8 a.m.-5 p.m. Monday through Friday work for you?
  • Preventive maintenance (PM): How many PM visits does the equipment require? Think about how many you bought and actually completed last year. Are there CMS PM Regulations in place for this equipment?
  • Response time/uptime guarantees: What are the consequences to your facility if this equipment is inoperable? Do you have more than one of the devices? You may be required to pay more for faster response times; so it is important to determine if this is a necessity. Also, you will want to find out what the vendor’s definition of response time and uptime are because the definitions can vary greatly from vendor to vendor. Response time could be considered fulfilled simply by the vendor returning a phone call or email, not the actual equipment being repaired. You will also want to know what the penalty is if the vendor’s service department fails to meet their response/uptime guarantees.

Service Vendors

Poor-performing service vendors can have a significant impact on your business and your bottom line. The consequence is inoperable equipment, which leads to lost revenue.

Here are five elements you should expect from a high quality service organization:

  1. Open communication that is clear and straight forward
  2. Respectful of your time
  3. Prompt attention given to questions and concerns
  4. Contract commitments are met and or exceeded (uptime, response time, parts replacement, etc.)
  5. Work is guaranteed

Remember, choose your vendor partners wisely. You may want to start tracking the level of service you are receiving from your current vendors today. This information will help make informed decisions on which vendors you wish to utilize in the future. Also, be wary of long-term service contracts that lock you into utilizing one service organization for the duration of the contract. Companies change over time; corporate mergers, acquisitions, reorganizations, and staff reductions can dramatically affect the quality of the service provided. Likewise, your center’s needs and requirements will most likely change over the next several years.

Early Detection

Become a leak detective; read the fine print in your service contracts and get verbal promises in writing. Inspect every service report before you sign it and review invoices carefully before paying them. Never hesitate to question any unusual or confusing charges. While it makes both economic and operational sense to implement organization-wide equipment management procedures, it may be time-consuming and difficult to accomplish without help. Fortunately, there are professionals who can help business owners like you analyze their current equipment maintenance situation and offer advice and support on controlling expenses now and in the future.


Be wary of the naysayers. Change never comes easily. Getting support from the business owners or higher management will be vital in order to sustain the new way of buying maintenance. Keep everyone in your organization informed on service option decisions. You may want to assign one person in your office as the point person for all contracts and paperwork related to equipment maintenance and service.

About The Author