It is nothing new that healthcare facilities always seem to be in a budget crunch.
Very few institutions — if any — have enough financial resources not to pinch pennies wherever they can when purchasing new or pre-owned equipment. To manage the dollars and cents more efficiently, wise buyers must explore the costs beyond the initial price and determine the best financing plan, relative to the equipment, its use and the situation.
As a result, equipment vendors have a challenge — to devise innovative financing methods for hospitals, clinics, medical imaging centers and other institutions to stretch available dollars.
On the menu are traditional financing avenues, such as:
• A straight loan to finance an equipment purchase;
• A fair market lease, which also can carry options to buy the equipment, return it or upgrade to higher technology at the end of the lease;
• A “dollar out” lease, which allows the user to buy the equipment for $1 at the end of the term;
• A usage-based or fee-per-use arrangement, whereby the equipment user is charged on a per image or per exam formula; and
• A lease arrangement, which includes a full service and maintenance package.
Fee-per-use options
Usage-based or fee-per-use options — utilized primarily in the past in medical imaging equipment leases — are beginning to find their way into the area of image management. A PACS (picture archiving and communications system) or HIS (hospital information systems) vendor could finance or lease a system based on the cost of stored images and/or utilized archive space.
Financing terms are crafted to a facility’s individual requirements, based on factors such as storage demands, system cost and an analysis of overhead costs of existing film storage needs.
“You have to create models to save money through the storage of images on an image management system,” says Philip Schneck Jr., president of the Picker Financial Group within Marconi Medical Systems Inc. (Highland Heights, Ohio).
The financing formula “is fairly sophisticated,” he adds, “and is not as simple as cost-per-image.”
Part of the attraction with financing image management systems through a usage-based formula is the flexibility it gives healthcare providers who still are trying to determine the actual costs and savings of a PACS or HIS.
How long image storage-related, per usage financing will remain a viable option may depend greatly on those cost factors.
“Once the cost of image management systems becomes more identifiable, I think there will be a shift back to traditional types of financing,” says Schneck. “As long as a facility can do it for less cost than what it is charged now through the traditional methods of storing images, a per-usage program will be preferable.”
Pre-owned equipment
Standard financing options remain the same for the purchase of refurbished equipment. For the most part, the only differences are the length of the agreement — a shorter lease term for pre-owned equipment — and lower monthly payments, because the market value of the equipment is less than a new system.
Pre-owned equipment that is a year or two old likely would carry financing terms of five to eight years, while equipment that is five years old probably would have a three-year agreement. And, because the cost is less, used equipment doesn’t take as many scans to cover the cost of used equipment under fee-per-scan.
Interest rates for pre-owned or refurbished technology are no higher or lower than interest rates for other commodities and depend on the creditworthiness of the applicant.
Catherine Estrampes, marketing manager for GE Healthcare Financial Services (Brookfield, Wis.), sees upgrade options on leases for used equipment as popular as they are in new equipment financing.
The ability to upgrade to more advanced technology as part of a lease can be an important feature, as facilities try to keep pace with the rapidly developing product lines. If an upgrade in software, new MRI coil or new platform is launched within a modality, the borrower could receive the next-generation technology without increasing the monthly lease fee.
The Web factor
Like many facets of healthcare and the general business world in general, financing is positioning to take its place on the Internet.
By the end of the second quarter, GE Healthcare Financial Services plans to have up-and-running a Web site where prospective equipment buyers can view a range of financing, lease and loan options. Customers also could apply for and obtain a decision for a line of credit.
Eventually, GE plans to include cost justification models on the Web site, so would-be borrowers can enter information — such as equipment cost, anticipated patient volume and exam revenues — to determine a break-even point.
GE is working with an external accounting firm to develop the financial model and to prevent a “skewed” or biased results relative to the equipment purchase.
Future prospects
As for the future, Marconi’s Schneck says financing is a “resilient business,” one which derives its innovation, in part, to changes in reimbursements, in accounting for capital equipment or whether someone wants to finance a purchase off of their balance sheet or not.
“Out of those changes,” he says, “everybody gets creative and develops new products.” 
