News
13.12.2022

LIFE CYCLE CONTRACTS: INNOVATION IN THE FIELD OF MEDICAL EQUIPMENT

The main principles of the healthcare system are a patient-oriented approach. In today's realities, the life and health of a patient depends not only on the knowledge and experience of a doctor, but also on accurate analyzes and studies of medical equipment. This means that the quality and proper operation of equipment directly affects the level of healthcare. So, in many countries an innovative approach in the field of medical equipping has long been practiced.

Not so long ago, a new concept appeared in the field of economics - life cycle contracts or LCC. In other words, this is a transaction that includes a full range of works: project development, operation, repair and disposal.

The first life cycle contracts were concluded in the UK in 1992, under the terms of the project agreement, the private partner carried out the design, construction, financing, operation, repair and maintenance of the railway line.

Over the past decades, many developed countries have accumulated quite a lot of experience in the use of LCC, created a legal framework, developed institutional mechanisms that set the framework for interaction between the state and private sector entities. Every year this practice is gaining more and more popularity. The most common areas of its application were and still are transport and infrastructure, education and healthcare.

In Kazakhstan, this innovation is only gaining momentum. The concept of LCC is described in the Law on Public-Private Partnership, adopted in the Republic of Kazakhstan in October 2015. To date, the most actively used in the republic is contractual public-private partnership, which is implemented, among other things, in the form of life cycle contracts. Public-private partnership projects in the field of education account for more than half of the total number of public-private partnership agreements. In second and third place are the healthcare and housing and communal services sectors.

The mechanism of operation of the LCC, in contrast to traditional procurement, within which short-term contracts are concluded separately for the supply of equipment, for the procurement of spare parts, consumables and equipment service, provides for the supply and installation of equipment, training of personnel in working with equipment, as well as subsequent maintenance, repair, procurement of spare parts and consumables, i.e., a complete list of works provided for in one contract.

This is the main difference from the usual public procurement procedure, when equipment was procured separately, and then a tender for service work was announced. They had to wait quite a long time, and the qualifications of third-party performers raised questions.

A simple rule works here: if someone procured and delivered medical equipment, this person must also provide subsequent service/repair. If this procurement was successful, then there is a savings in maintenance, if it is bad, this person will have to repair it.

As part of life cycle contracts, technical requirements are written in such a way that only advanced medical equipment can meet them and manufacturers give big discounts. And this is perhaps the most pleasant, because in 7-12 years such equipment is less likely to become obsolete.

According to information from local health departments, over the past 10 years, the cost of servicing and repairing expensive medical equipment has amounted to more than 11 billion tenge, of which 7 billion tenge for maintenance and service of equipment, 3 billion tenge for repair and replacement of spare parts. The concept of the life cycle can reduce costs by up to 40% and increase the efficiency of the healthcare system.

Let's take a simple example.

Imagine that the clinic needs to procure modern equipment. To do this, the customer must first hold a tender for the supply, and often the choice is made in favor of a low price and fulfillment of basic requirements, rather than high quality. Then the medical institution needs to prepare a room for equipment that must meet all technical requirements. Also, it is required to train staff or find specialists.

After a certain period of work, which is covered by a guarantee from the manufacturer's factory, a number of problems appear. Routine maintenance is necessary, and if any part fails, then an expensive device will be idle for a long time.

One reason for this downtime is legislation requiring a separate tender for supply, service, part procurement or repair. It is possible that these procedures take months or that there are no funds in the institution's budget for them. And patients, in turn, are forced to look for the necessary service in other medical institutions.

Hence the conclusion - the main value of the life cycle contract lies in the fact that the state gets the opportunity to use the LCC facility to provide high-quality services to the population on the basis of its uninterrupted operation or restoration of working capacity in the shortest possible time, as well as satisfaction of a real need (long-term benefit for the population providing basic needs population (PEOPLE FIRST PPP - the principle of "value for people", recommended by the UNECE).

At present, the Single Distributor has studied the world experience of concluding the LCC in terms of equipping medical organizations with medical equipment, in particular, Russian, European and American equipment procurement practices.

And the reason is simple: it is the most cost-effective and efficient approach in the field of medical equipment today. Impressive volumes are procured under life cycle contracts, for example, Moscow only in the field of transport, housing and communal services and medicine concluded them for more than 500 billion rubles.

Considering international experience and available statistics, the Single Distributor is carrying out systematic work aimed at taking measures to reduce budget costs and minimize the downtime of equipment due to its malfunction, as well as improving the service support of medical equipment.

To implement this service model, the Single Distributor, together with the Ministry of Healthcare, has prepared a draft amendment to the Rules for procurement organizing and conducting, which is undergoing a series of approvals. As part of the project, it is planned to introduce a life cycle contract mechanism for the procurement of expensive medical equipment such as magnetic resonance imaging, computed tomography and angiography.

Decisions of the Public Council of the Ministry of Healthcare, conclusions of Atameken NCE RK, accredited organizations and associations, scientific anti-corruption expertise, public discussion from the Internet portal of open regulatory legal acts were received.

Work is underway to train technical specialists, including the involvement of medical equipment manufacturers in personnel training (large medical equipment manufacturers have their own training programs for specialists, for example, GE Academy).

Thus, amendments were made to the regulatory legal acts, which provide for the requirement to train the technical staff of medical institutions in the basic level of service with the issuance of a supporting document.

The Healthcare held a number of meetings with manufacturers of medical equipment (General Electric, Philips, Roche) on the issues of direct procurement of medical equipment and the opening of training centers for medical personnel and service engineers on the territory of the republic. Currently, manufacturers are forming detailed proposals on these issues.

In addition, the Ministry of Healthcare, together with the Ministry of Science and Higher Education, technical and multidisciplinary universities, is considering the possibility of implementing joint educational programs for training technical specialists involved in the repair and maintenance of medical equipment.

In addition, as part of improving the after-sales service of medical equipment, the Single Distributor held an online meeting with representatives of the Service Association. During the discussion, the need to approve such mandatory requirements as a clear definition of criteria and requirements for service companies providing services in medical organizations was considered.

MedTech II International Forum on Medical Equipment has become an effective dialogue platform for discussing the development of after-sales service for medical equipment. At a major event, strategic and business sessions were devoted to the development of domestic production of medical equipment, where experts and participants discussed the equipment of healthcare organizations and the level of depreciation of the existing fleet of medical equipment, the organization of service maintenance of medical equipment in the Republic of Kazakhstan and the shortage of biomedical engineers (both in healthcare organizations and in the market), as well as the lack of a reserve of spare parts for medical equipment in the service departments, which causes an increase in downtime during repairs.

By concluding life cycle contracts, the mechanisms for selecting private operators will be improved, the intensity of interaction between the state and the LCC operator will increase, and they will also contribute to the involvement of end users to assess the quality of contract application.

As a result of the procurement and maintenance of medical equipment through the conclusion of the LCC - a significant increase in the volume and quality of medical services provided to the population and a reduction in the cost of their provision through the effective use of medical equipment by healthcare organizations.

Thus, everyone wins: medical organizations, manufacturers, and most importantly, patients who undergo diagnostics on high-quality and smoothly operating medical equipment.

With such an innovative approach in the field of medical equipping, it will be possible to increase the level of the country's healthcare, as well as the efficiency of planning and spending budgetary funds related to the long-term maintenance of such expensive procurement objects as medical equipment, which requires significant financial costs for operation and maintenance.

This, in turn, makes it possible to cure as many patients as possible, which is a priority value.

Source: Press Service of SK-Pharmacy LLP
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