QuoteVitalsFive-year cost of ownership for medical equipment
The purchase price is the number on the first page of a capital quote, and it is often only part of what the hospital will pay for the equipment. Service after the warranty, software that renews, and consumables that only one vendor can supply add up over the life of the purchase. A five-year total cost of ownership puts all of it in one figure, so the committee compares what each option will really cost.
What goes into five-year cost
- Capital: the normalized purchase price from the bid tab, including installation, training and freight.
- Service after the warranty: a service agreement, or the cost of time and materials, starting when each vendor's warranty ends. Against a 12-month warranty, a 24-month warranty saves a year of service.
- Software: annual subscriptions, maintenance on a perpetual license (often a percentage of the license price from year 2), and renewals at "then-current list price", which are unpriced until you ask.
- Consumables: sets, sensors, probes and other items the device needs, at your expected annual volume. Proprietary consumables lock in a price for the life of the equipment.
- Anything else the quote names as recurring: interface fees, hosting, battery replacement programs.
The same three quotes, over five years
These are the invented infusion pump quotes from the bid tab guide, after Vendor B answered the freight question ($3,000) and the software question (a $12,000 a year subscription). Vendor C's $36,000 software is a three-year subscription that renews at $12,000 a year. The volume assumption is 10,000 administration sets a year.
| Five years | Vendor A | Vendor B | Vendor C |
|---|---|---|---|
| Capital, normalized | $394,500 | $337,800 | $390,600 |
| Software beyond the capital price | $13,440 12% maintenance, years 2 to 5 | $60,000 subscription, years 1 to 5 | $24,000 renewal, years 4 and 5 |
| Service after warranty | $36,000 years 2 to 5 | $32,000 years 2 to 5 | $28,500 years 3 to 5 |
| Administration sets | $310,000 $6.20 a set | $355,000 $7.10 a set, proprietary | $300,000 $6.00 a set |
| Five-year cost | $753,940 | $784,800 | $743,100 |
Vendor B has the lowest capital price and the highest five-year cost, $41,700 more than Vendor C. The difference is almost all recurring: the software subscription and the price of a proprietary set, repeated every year. Year 1 alone would not show it ($420,800 for Vendor B against $450,600 for Vendor C).
Show the work
- State every assumption on the page: the volume, the start year of each cost, and whether figures are inflated or flat. A committee can disagree with an assumption; it cannot check one it cannot see.
- Keep unpriced items visible. "Renews at then-current list price" belongs in the five-year cost as a flagged question, not as zero.
- Compare against the approved budget as well as against each other. A budget is often approved for capital alone, while much of the five-year cost is operating expense.
In QuoteVitals. QuoteVitals works out year-1 capital, annual service and software, and the five-year total for every vendor, shows the gap to your approved budget, and flags the costs a quote leaves unpriced. See it on the worked example (no sign-up), or start a free trial: 30 days, a worked sample plus one capital request of your own, no card.