Let's Make a Deal

What to know and consider when buying and selling used equipment.

Philip F. Jacobus

Buying and selling preowned medical equipment used to be the domain of used equipment brokers who depended on the lack of transparency in the markets. That often meant buying low, in many cases quite low, from uninformed sellers and selling high, again in many cases quite high, to the new owner. Sellers, as they do today, had the option of trading in, but selling rather than trading in often brings them greater gain. However, buying and selling used equipment is not easy; the transaction takes time, effort, and know-how. The Internet is making transactions easier and more transparent. Even so, when selling on one’s own, there are still a number of factors to take into consideration.

For starters, a good deal of up-front work is required, beginning with the proper description of the equipment to present it to the market. The seller must think like a buyer and describe the equipment in great detail so that buyers can feel like they are making an informed decision. The more complex the equipment, the more important this is. For instance, with a CT scanner, buyers need to know the number of slices, or “scan seconds,” on the gantry and on the x-ray tube as well as the enabled software options. With an MRI, buyers need to know the model of the coils the machine comes with, eg, arm, chest, extremity, and the protocols enabled. With an operating room table, it is important to know what accessories are included and if the table is radio translucent. The marketing descriptions can go into great detail, and for some would-be sellers, this is daunting.

Describing and disclosing the condition is also part of the process. Is the system currently in use, is it under warranty, is it still installed, or is it in storage? Was it removed from service, and how long ago was it removed? If there is anything not functioning correctly, it is important to disclose those details. It might be worth getting someone from the biomed department to get involved to shape up these descriptions and identify historical issues.

There is also a hassle factor. Unless someone is hired to sell the equipment, the seller will be saddled not only with photographing, inventorying, and describing the equipment but also with notifying the market that an item is for sale. If this is not enough, fielding phone calls from serious buyers and tire kickers alike can be very time-consuming. When the unit is sold, the seller must handle the logistics associated with decommissioning the equipment and deinstalling it. MR and CT scanners are extremely heavy, sensitive, and complicated to move, requiring specialists and specialty equipment. Most hospital managers simply don’t have the time to deal with all the responsibility. On top of everything else, someone has to be responsible for collecting payment. Today, with the Internet, it is easier to investigate people, but unless you’ve done business with someone before, it just might be easier to trade equipment in. Then there are the mavericks who think outside the box and are willing to invest the time in order to increase the residual value on a retired asset. For those people, the Internet is a great resource.

Valuing Equipment

For those who wish to forge ahead, there is the issue of valuation. With the transparency that is provided by the Internet and its vast amount of information about transactions and listings of all kinds, valuing one’s equipment has become considerably easier. Today, a simple Google search should provide a good baseline of comparables. By typing in “Used (“Manufacturer” “Model”) ? For Sale,” almost instantaneously listings will appear of entities selling the same or a reasonable facsimile of that unit and pricing. What the unit eventually sells for, which is much less knowable, is a different matter altogether, but this will give the seller a ballpark idea of value.

Once one has an idea as to the general range, then the equipment can be offered for sale perhaps anonymously on the Internet or to a list of brokers and dealers that has been developed. It is important to invest some time to build information to understand if an offer is fair and one that can be accepted with confidence. Keep in mind that buyers who are not end users and will resell will most often attempt to pay less than what they think the actual value is. It is important to recognize in the negotiation that when the buyer sells it, they usually need to provide after sale service, a warranty, and installation. It is also possible that the buyer will have to visit the seller facility to deinstall and remove the unit. They have legitimate costs that they must bear going forward, and this is factored into their offer.

Contracting Boils Down to Logistics

There are a good many variables that make it difficult to develop and use a standard contract for selling used equipment. Frequently, agreements can come down to some very nuts and bolt issues often having to do with deinstallation logistics. Be warned though that attempting to craft the perfect, ironclad contract to sell a single unit, be it expensive or not, may not be worth one’s time or money. There are a number of considerations to take into account when putting together a contract, and an appropriate department manager can help with this with a minor amount of time and effort. That department manager can develop a list of the issues that must be included in a sales document. Once completed, this list can be discussed, negotiated, and agreed upon with prospective buyers. Although seemingly rudimentary, the following are considerations that often can cause most of the issues outside of the actual performance of the equipment, which is usually covered by service and warranty contracts.

Do doors have to be removed? Perhaps even walls? Who will be responsible for putting it all back together?
What special rigging will be needed?
Is there potential to interrupt patient flow that would require the deinstall to happen after hours or on the weekend? If so, that should be a condition of the sale.
Are there specific challenges, issues, or restrictions about using the parking lot or loading dock?
Can the unit be moved by elevator or is it too heavy? What methods will be used to bring it to ground level otherwise? How would all of this be insured in case of property or personal harm? Who will cover that?
When will payment be made? What sort of deposit will be required? Under what circumstances will the deposit be refundable?
Who is responsible for deinstallation and on what day will deinstallation take place?
If there is a delay in receiving the replacement equipment, what happens?

All of this needs to be spelled out, and buyers with integrity actually welcome putting together as detailed an agreement as possible within reason. They are more comfortable and know that conflict can be avoided if provisions are made up front and expectations are clear. Much of this is common sense and does not require the help of an attorney. Thinking through the deinstallation process is half the battle. Asking for payment in advance is always advisable. Buyers expect to pay in advance for used equipment and sellers should require it.

It is important to consider what needs to be included in the agreement signed with the buyer. Do not be in a hurry. Here’s a list of things to keep in mind:

Reviewing your list of important issues 2 to 3 days later after having a chance to digest it and share that list of issues with colleagues will help to develop an ideal agreement.
Remember to sell “as is, where is,” without any warranty expressed or implied.
DOTmed’s Standard Terms of Sale can be found online at: www.dotmed.com/legal/legalnotice.html. As mentioned, there is not a standard contract that applies to every sale, but this can provide a general guide and be customized to fit specific needs.

Reputation Matters

Hospital/clinic in-house or outside counsel have many ways to investigate, but it?s often not necessary to go to the time, expense and trouble. It is possible to call up public records of lawsuits and judgments free of charge online, and there are a number of services that charge to do so. Lexis, a subscription service, is also another source for looking up to see if an individual or a company has a history of commercial misdealing, payment issue, or any number of other problems. Running a credit check is a logical step that might provide some insights into the individual or company?s financial conditions and practices. When it comes down to performing these kinds of checks, however, frequently people never get around to doing it. The easiest way to investigate potential buyers is sitting right on your desk. The Internet is reasonably simple and straightforward to use to investigate a buyer, but it helps to search in creative ways. First, do not necessarily search by the whole company name because sometimes people abbreviate their name. Try conducting a search by a phone number and see what comes up. It?s actually more alarming to not find some kind of history and that should be a red flag.

Like social and consumer forums that have gained steam over the years, there are now good and useful industry forums that can shed light on an individual’s and organization’s reputation. DOTmed offers dealer-to-dealer ratings and an Honest/Dishonest Dealings Forum on the Web site for those who list equipment for sale. The company has also developed a Blacklist for those who have been thoroughly investigated and determined to have violated the company Code of Ethics. The old-fashioned method of asking for references is also productive. A reputable dealer will be proud to provide references; lesser dealers will be circumspect.

Protection When Buying Used Equipment

There are a few important practices to keep in mind when purchasing used equipment including:

Never pay for the machine in full or in advance. Certainly, there are many reputable companies that sell preowned equipment, but there are also those that are unethical and they are typically repeat offenders. If buying the machine as is/where is, send someone to pick it up and turn over the payment. If the purchase includes installation and a warranty, make a down payment only after it?s clear that the company is reputable and qualified.
As with any expensive item like a used car, yacht, or airplane, have the piece of equipment inspected. Some buyers do this themselves if they have the necessary knowledge. Many buyers have neither the experience nor time and should hire an experienced, specialized service engineer. Such a specialist will be able to determine the number of hours used, service and fault history, and problem areas, and will be able to validate seller information. One could expect to pay between $2,000 and $3,000 for the inspection of a major imaging system that should include travel expenses and incidentals. OEMs will be on the higher end of the scale and independents on the lower. If the same specialist is used to install the machine and perhaps provide the service, the fee might be discounted or waived.

The purchase and sale of used equipment has increased and even the OEMs have embraced the concept. It is now universally recognized that the purchase and sale of used equipment is not only a viable option in some cases but in every case can impact the bottom line.

Philip F. Jacobus is president of DOTmed.com Inc, a medical equipment marketplace where health care professionals and medical equipment manufacturers, brokers, and dealers can buy and sell equipment, parts, and services online.