Dr. Shravan, Director, Ehrlich Laboratory, Chennai, is also an independent management consultant for in-vitro diagnostics, life sciences, and IT companies. A physician from Madras Medical College, India, and an award winning graduate in health administration from Cornell, he has addressed international audiences on topics ranging from automation to clinical outsourcing.

Once demand for a particular type of medical equipment is established, purchase decisions should be steered mainly by quality of clinical outcomes, total cost of ownership, service efficiency, and return on investment. While, I strive to be such an objective decision maker I often tend to make decisions based on personal relationship and convenience, and I am probably not alone!

In an industry which is increasingly competitive, with latest technology being rampant, there is usually only a fine line that distinguishes one vendor's offering from another. In order to retain some objectivity in the purchase decision, key stakeholders set certain constraints to shortlist the vendors. To establish the decision criteria for the choice of equipment, let us first analyze the key stakeholders and what they want from the equipment:

CEO: I am most concerned about return on investment...how soon can this new equipment pay for itself?

CFO: Lease versus buying... what should I choose? Or is it cheaper to outsource?

Lab director: Will it meet my quality standards? Will the referring physicians be satisfied with the clinical outcomes? Does it meet my accreditation norms? Can it handle my capacity?

IT manager: Can it be interfaced with the existing lab information system?

Marketing manager: Are there any new tests that can be promoted?

Laboratory technologist: Is it easy to operate? What is the down-time? I would like a relatively hands-off operation.

The list can go on, and while all stakeholders have valid points, it boils down to balancing cost and performance. Here is a list of questions that we ask ourselves before making the final purchase:

New equipment or outsourcing. Occasionally, it is cheaper to outsource tests to reference laboratories. But, choose your reference laboratory carefully because its quality reflects on yours.

Capacity of analyzers. The rule of thumb for estimating the capacity of your new analyzer is that its capacity (i.e., number of tests performed per hour) should be about 20% less than the peak hour capacity. That is, if your laboratory requires 100 tests to be performed during the peak hour (say 9-10 AM), then get an analyzer which can perform about 80 tests an hour. The work can be distributed to the off-peak hours where there will be excess capacity. Serial processors are invariably more efficient than batch processors, but can be more costly.

Outright purchase or reagent rental. The total cost of ownership is almost always lower in the case of outright purchase since you are not locked in to a closed system of instruments and consumables. However, many laboratories choose reagent rental contracts, since, the up-front spending is low, and also for less tangible reasons like, perceived improvement in service quality.

Accreditation requirements. Laboratories that are serious about accreditation tend to go in for analyzers that are commonly used by other accredited institutions.

Connectivity. Almost all recently introduced equipment come with ports for connectivity with hospital management system, laboratory management system, and PACS.

Finally, after going through all these analyses, and filtering through to the list of equipment that satisfy the requirements, we still buy the equipment from the sales person we like the most! We're human after all!