Whether you’re managing IT for a pharmaceutical company, a large healthcare facility, or a small private practice, acquiring the right technology can be the tipping point to providing the best patient care or making the most groundbreaking research and development possible. On the other hand, paying for and managing this technology can be one of the most nerve-racking and time-consuming tasks.
Many companies turn to leasing to help ease this burden. This also holds true for medical technology. As more and more medical equipment becomes IT-based, the boundaries between medical technology and information technology are disappearing right along with the benefits of ownership. Leasing MRI, CT, and PET scanners as well as ultrasound machines and other equipment often makes sense, especially when considering the prohibitive cost and associated risks of purchasing.
Controlling Cost
As many in the industry opt to finance equipment, organizations have found that leasing technology enables them to reduce costs, simplify budgeting and planning, preserve cash and lines of credit, and remain competitive in the marketplace. Still, many questions arise. What options are available? When is ownership and cash payment the right choice? When does financing make more sense?
Preservation of capital, increased cash flow, and the desire to maintain technological advantage are among the top reasons organizations turn to leasing. Reducing large up-front expenses to affordable monthly payments is especially important if you want to free up dollars for other priorities.
Aurora Health Care (Milwaukee), a provider of health services in 13 hospitals and more than 100 clinics throughout eastern Wisconsin, did just that. By leasing its IT infrastructure, the organization was able to preserve capital for other priorities. Despite the budget demands of this rapidly growing, midsize nonprofit, Aurora saved a minimum of 10% on its leased assets and funneled the savings into research and development projects. The result was pioneering a better way to repair damaged mitral valves and such initiatives as transmitting X-rays electronically and introducing handheld devices that transmit prescriptions.
Leasing previously owned systems provides an even lower cost alternative. A variety of quality, preowned diagnostic imaging systems can be a great option for the cost conscious. When working with a lessor, be sure to find one that has expertise in remanufacturing, buying, and selling used equipment. Also, look for a lessor with a network of dealers and brokers that can provide an assortment of preowned systems from leading manufacturers.
Perhaps the greatest factor to be considered in making the decision to purchase or finance your equipment, software, and services is technology obsolescence. As a general rule, any systems that support applications with heavy performance and security requirements are good candidates for leasing, whereas fairly static applications are probably better candidates for purchase.
The rapid advances that continue to occur in the industry compel many organizations to upgrade their IT equipment every 24–36 months and upgrade medical modalities every 48–60 months. Often, financing can act as a management strategy to facilitate the systematic replacement of equipment with increasingly short life spans so that you can remain competitive.
If you’re thinking about whether to lease or buy, consider more than just the sticker price at the time of purchase. Other significant costs include the price of any integration that needs to take place, consulting fees, equipment maintenance, software upgrades, and removal.
As a first step in the decision process, a lease-versus-buy analysis should be performed to understand the overall financial implications and ensure that they map to the company’s financial and capital management priorities.
The Risks of Ownership
Several risks are associated with owning IT and medical equipment. One of the most crucial is the challenge of disposal. When purchasing technology, keep in mind that eventually, it will outlive its usefulness and require disposal—a crucial consideration that isn’t always top of mind in the purchasing decision.
The growing issue of disposal for unwanted or obsolete diagnostic imaging systems, PCs, or other technology equipment is an especially important concern for companies in the health industry. Data confidentiality has always been an issue of ethical concern, but with the recent enactment of laws to protect the privacy of individuals’ health records, it has become a legal concern as well.
According to a recent survey of business executives conducted by Granite Research Consulting (West Windsor, NJ) on behalf of IBM Global Financing (Armonk, NY), 95% of healthcare industry respondents rate the importance of proper disposal in light of data security very high—whereas, only 75% have corporate or organization-wide strategies for disposal of technological equipment in place. These statistics certainly represent a step in the right direction, but still show discrepancies between intention and action.
The survey also found that although companies rate data security as the top concern of PC disposal—even over cost—most are not complying with regulations or truly protecting their customers’ privacy. More than 90% still simply clean or wipe disks in house before disposal.
Too many companies just reformat their hard drives, often believing, incorrectly, that data is destroyed in the process. The only way, other than destruction, to prevent inadvertent file sharing is to sanitize the hard drive before it reaches its next owner. By working with an experienced technology lessor that provides asset disposition, organizations can take advantage of data overwrite services that will, in fact, clean the hard drive.
Even if technology is at the end of its useful life and the hard drive can be destroyed, companies still need to be cognizant of environmental regulations and dispose of equipment in a responsible manner. A lessor that abides by all local, state, and federal laws, as well as provides a certificate of destruction, is the optimal partner.
When analyzing the purchase-versus-finance decision, the benefits of financing often outweigh the risks of ownership. The costs of owning technology can add up quickly, and savings realized through leasing are often substantial. When it comes down to it, your facility is acquiring the most up-to-date technology at the most affordable price and in the most manageable and flexible way.
Terry Trierweiler is the business development executive at IBM Global Financing (Armonk, NY).
