This article is from in the November 2007 issue of DOTmed Business News. A list of registered users that provide sales & service can be found at the end.

Back in the good old days of the late 1960s, Medicare reimbursed 100 percent of its share of leasing medical equipment.

"It was like getting a big discount on equipment over the life of the asset," says Martin E. Zimmerman, President/ CEO, LFC Capital, Inc. In the 1980s forprofit hospitals also enjoyed an investment tax credit, subtracting 10 percent of the cost of the equipment from hospital taxes. "Many hospitals were unaudited and didn't borrow tax exempt. They went to their banks and did very little leasing," Zimmerman said.
The world of healthcare financing has changed. No more government freebies. The feds now require increased transparency around transactions and financial reporting. Hospitals are under pressure to cut operating costs. Imaging centers face reduced reimbursements. And accelerated technology lifecycles can make an MRI or PET scanner obsolete in a nanosecond-all factors influencing the medical equipment leasing market.

According to the Equipment Leasing and Finance Association (ELFAonline.org), healthcare leasing grows about seven percent each year, expected to top
$8 billion in 2007 with gains mostly from sales versus lease penetration. In fact, lease penetration is fairly low at 12.6 percent (2005), according to ELFA. Diagnostic imaging equipment represents the largest asset category with deals mostly concentrated between $250,000 and $5 million.

Meanwhile, today's savvy CFOs know their options in financing medical equipment and shop around for financial packages from banks, original equipment manufacturers (OEMs), and an assortment of niche leasing companies.

Your First Choice: Loan or Lease?

Financial firms play no role in a hospital's selection of what equipment to buy, or the price. That's up to the team of clinical, operational and financial decision-makers handling negotiations. It's important to know if the money for the acquisition comes from the operating budget as a simple expense or is it financed from the capital budget, which puts debt on the books and requires cash allocations. Which budget is used, however, affects which lease arrangements are allowed by law.

Whether to lease or finance (buy) the equipment depends on the type of institution, particular equipment and usage. If it's an imaging center, smaller
hospital or facility in a suburban or rural area, equipment upgrades occur less frequently so financing through a loan and eventual ownership might make more sense. On the other hand, a research and teaching hospital must stay on the cutting edge of technology so they might opt to lease.

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