Speaker 1: Welcome to Contract Administration at Stanford Medicine. A shared service of Stanford Health Care, Lucille Salter Packard Children's Hospital at Stanford, Stanford Health Care Valley Care, and other Stanford Medicine entities.

Speaker 2: Contract Administration aspires to be the national leader in healthcare contract administration by providing exceptional and timely contract negotiation and legal review services. One way we achieve this is by providing you, our stakeholders, with training and education on matters relating to the contracting process. In this video, you will learn about significant issues relating to contracts for the purchase of medical equipment. To help guide you in future transactions, this video will cover internal approval issues, business issues relating to the initial purchase of the equipment, business issues relating to warranty service and support, legal issues, key takeaways, and resources available for your use on a 24-7 basis.

Speaker 1: Let's first focus on internal approval issues. Capital approval is required by finance for purchases of equipment that are treated as capital assets, rather than expenses incurred in the ordinary course of business. Capital approval is generally required for purchases of equipment with a minimum depreciable life of two years, and a purchase price of at least $2,500 for Lucille Salter Packard Children's Hospital at Stanford, or $5,000 for Stanford Health Care. If capital approval is required, you should follow the approval process established by the appropriate entity's finance department. IT approval may be required in connection with medical equipment purchases. If the equipment interfaces with a Stanford Medicine entity's IT networks, Clinical Technology and Biomedical Engineering, or CTBE, review may be needed for certain equipment purchases. For high-value major capital items purchased by hospitals, California Office of Statewide Health Planning and Development, or OSHPD, approval may also be needed. OSHPD is a state agency that, among other things, has jurisdiction over major hospital construction or capital improvement projects. Next, let's discuss business issues relating to medical equipment transactions, beginning with issues regarding the initial equipment purchase. Quotes for medical equipment purchases can be quite extensive and detailed, and generally, the more complex the equipment, the greater the level of detail. You should ensure that the vendor's quote accurately describes what will be purchased and that the items on the quote are consistent with your understanding of what you are intending to purchase. There are numerous tools and resources available to you to optimize equipment pricing and purchase terms. Purchasing under Vizient or Other Group Purchasing Organization, or GPO, contracts can often provide favorable pricing and other contract terms. Price benchmarking resources, such as the ECRI Institute's Price Guide Service, can help ensure you are obtaining favorable pricing. The vendor should provide standard warranty terms, which include at least a one-year warranty on parts and labor for equipment. For sales through distributors, the distributor should commit to passing through any manufacturer's warranties and should also provide support to assist you in enforcing those warranties or contractual obligations on the part of the manufacturer. Because installation is linked to warranty start, the vendor will likely require installation shortly after delivery. Stakeholders should be sure to schedule deliveries for the appropriate time. Also, site preparation work, such as radiation shielding, may be needed for larger or specialized items, so work with the Project Management Office or Planning, Design, and Construction on any construction-related considerations. For most items, invoicing will be upon shipment. For high-value items requiring specialized components or custom work, the vendor may ask for a 10-20% down payment upon placement of the equipment order. This is reasonable, but down payments in excess of this amount should generally be avoided. If installation is required, you should consider a 10-20% holdback until installation is complete and the system is placed into service. This is to ensure timely and satisfactory vendor performance of installation and related tasks. Vendors may agree to make orders cancelable prior to manufacturing for low-value items. The Stanford Medicine entity will likely have to accept responsibility for non-standard custom items. Let's now review business issues related to warranty, service, and support. For equipment that is not being installed on site by the manufacturer, the warranty will generally commence upon acceptance by the Stanford entity. If the vendor is installing, the warranty commences upon completion of installation and related testing to confirm the equipment is ready to be placed into service. For certain situations, such as new facility construction, we have been able to negotiate an extended warranty start that is linked to first patient use of the equipment. Post-warranty service commences at the time of purchase or warranty expiration. Vendors offer post-warranty service plans that may cover both preventative maintenance and unanticipated breakdowns. When purchasing a service contract, you should carefully review the terms and conditions of the service plan to determine what is covered and whether certain items, usually high-value replacement parts, are excluded from coverage. Also, review to determine if any software or hardware upgrades are included. Lastly, consider the availability of a third-party service provider who may offer comparable service to the original equipment manufacturer at a lower cost. For more complex, heavily used items, the vendor should provide an uptime guarantee and minimum service time response commitment for critical failures. This provides an incentive to the manufacturer to maintain the equipment properly and maximize uptime, which should reduce unanticipated downtime and associated disruptions in procedure scheduling and patient care. Failure to achieve an uptime guarantee usually results in a credit against service contract fees. Many service contracts also offer bundled pricing, which enables the Stanford entity to obtain the right to receive hardware and software upgrades. Be sure to review the terms of the upgrade program against future needs, the likely desirability of available upgrades, and the remaining useful life of the equipment. Technology obsolescence protection requires the vendor to maintain equipment to essentially new or current standards by upgrading as new features and enhancements are released. In many cases, this enables equipment that has been in use for some time to function in nearly the same manner as the vendor's current generation of product, which should enhance equipment functionality and reliability over time. This form of protection may commence at the time of purchase, prior to delivery, or after the equipment is installed. Vendor-provided training can be very important and is often necessary for new and complex systems. Training may be provided without charge and bundled into the equipment purchase price. Alternatively, the vendor may require training to be purchased as a separate line item. In some cases, bundling training or providing training without charge can be negotiated as a price concession or discount. The vendor's warranty and related obligations may also be conditioned on use of the equipment only by properly trained and qualified personnel. Next, we will turn to key legal issues that you should be aware of when purchasing medical equipment. The vendor must indemnify for product liability, negligence in personal injury, and property damage. This indemnity makes the vendor responsible for personal injury caused by product defects or malfunctions for which the vendor is responsible. Equipment vendors should carry commercial general liability insurance and product liability insurance. The Stanford Medicine entity should be named as an additional insured under the vendor's general liability policies. Cyber liability may be needed if the vendor hosts data containing protected health information, or PHI, or has access to a Stanford Medicine entity's IT networks. If the vendor accesses PHI for customer support service or hosts PHI, the vendor is likely a business associate and a business associate addendum with the vendor will be required. Some vendors may have only incidental access and therefore are not business associates. There are also other instances of access to PHI by equipment vendors that are exempt from the business associate requirement, including presence during procedures performed with their products and post-market surveillance and reporting to the U.S. Food and Drug Administration. In summary, here are the key takeaways regarding medical equipment purchase contracts. Ensure necessary internal approvals have been obtained. These include capital approval, clinical technology, and biomedical engineering and IT. Address business issues proactively with equipment vendors. Leverage GPO pricing and take advantage of other available resources. Contract administration will take the lead on negotiating legal issues. Significant vendor-requested revisions to insurance, indemnification, and limitations on liability provisions may require additional approvals.

Speaker 2: With an exceptional team and an innovative process, contract administration has truly revolutionized the way contracts are reviewed, negotiated, and managed within the healthcare industry. Contract administration has created a variety of educational tools that provide step-by-step instructions, guidance, and answers to questions to help make your job easier. You'll find helpful training guides on numerous relevant topics on the contract administration website. We hope you found this video helpful. If you have any questions, please don't hesitate to contact us.