The main issue with purchasing assets that has led to a surplus of leasing is the lack of ready cash. Many practices find themselves with low cash flow due to revisions in lending practices brought about by current economic conditions. Legislative actions, such as the Deficit Reduction Act of 2005, which decreased reimbursements, also have played a role. "Most practices do not have the ready cash, and some are finding themselves deeper in debt, with less ability to take out a loan," according to Dan Zink, Experienced Radiology Consulting.

The growth in leasing is phenomenal. Leasing has increased at about a 40 percent year-over-year rate. "More recently, there has been a 50 percent increase in the number of leases and the number of people looking at leases," explains Mr. Zink. The first quarter of 2009 saw more activity in leasing than the entire 2008 year. Recently, though, as health care reform has taken center stage, even leasing activity has slowed.

As for the transaction itself, leasing is highly beneficial and preferred by the seller. The seller, working with a leasing financer, receives money upfront and the seller does not hold the note. The seller then does not need to wait the typical 90 day or longer period for reimbursement. The seller has the cash and can go on with business. The buyer holds the note, but also has the necessary equipment to go on with business.

For the buyer, there are some additional financial benefits that may increase the attractiveness of leasing, such as the ability to deduct lease payments from taxes. However, "Practices are also finding themselves in a less financially sound position and sometimes are not qualifying for the leases for which they apply," Dan Zink warns.

Clinicians who are strapped for cash find themselves already highly leveraged. On the other hand, the money for lending has begun flow a little more compared to this time last year; however, deals are still not happening as fast as the industry would like.

In the end, most practices are trying to do more with less, and trying to find any way they can to extend their business to get past this lull in reimbursement, and leasing provides one carryover solution.

More Voices