Maintenance Versus Replacement of Medical Equipment: a Cost-Minimization Analysis among District Hospitals in Nepal

Background About half of all medical devices in low- and lower-middle-income countries are currently non-operational because equipment maintenance is lacking. Thus, choosing a cost-efficient equipment maintenance approach has the potential to increase both the quantity and quality of important health services. Between 2010 and 2014 Nepal’s Ministry of Health chose two of its development regions to pilot the contracting-out of maintenance services to the private sector. We develop a cost model and employ different data to calculate the cost of this contracted-out scheme. The latter we compare with two additional common approaches to maintenance: in-house maintenance and no maintenance. Methods We use invoiced pilot program costs, device depreciation estimates from the literature, and hospital case numbers from Nepal’s Health Management Information System. We estimate net-present values for a three-year horizon, incorporating both fixed and operational cost. Operational costs include downtime cost measured as lost revenues due to non-working equipment. Results The contracted-out maintenance scheme shows a strong relative cost performance. Its cost after 3 years amount to 4,501,574 International Dollars Purchasing Power Parity (I$ PPP), only 90% of the cost with no maintenance. The contracted-out scheme incurs 670,288 I$ PPP and 3,765,360 I$ PPP in fixed cost and operational cost, respectively. The cost for replacing broken devices is 1,920,467 I$ PPP lower with maintenance. In addition, after 3 years total cost of contracted-out maintenance is 489,333 I$ PPP (11%) below total cost of decentralized in-house maintenance. After 10 years, contracted-out maintenance saves 2.5 million I$ PPP (18%) compared to no maintenance. Conclusions We find that contracted-out maintenance provides cost-efficient medical equipment maintenance in a lower-middle income context. Our findings contrast with studies from high- and upper-middle-income countries, which reflect contexts with more in-house engineering expertise than in our study area. Since the per hospital fixed cost decrease with scheme size, our results lend support to an expansion of contracted-out maintenance to the remaining three development regions in Nepal.