By Scott Schrader
Increasing budget constraints are forcing more and more healthcare facilities to seek innovative ways to gain access to cutting-edge medical technologies while staying cost-efficient. One increasingly popular option is to lease medical equipment.
Leasing enables practices to provide proper patient care while conserving cash and remaining flexible. As facilities grow and adapt to the ever-changing landscape of the healthcare industry, leasing grants them the flexibility to add or upgrade technology at regular intervals. To help you consider the options for your facility, we have compiled a list of benefits that explains why an increasing number of hospitals and health systems are choosing to lease, rather than buy, their medical equipment.
Financial Costs Are More Manageable
Medical equipment allows for flexible financing, with options including:
- Fair market value lease: This is a lease structure that allows the lessee to use the equipment for a specified time period (usually 36, 48, or 60 months) by paying a fixed monthly rate. At the end of the lease term, the lessee has the option to either buy the equipment at the assessed fair market value, extend the lease month to month for short-term flexibility, renew the lease for another predetermined term, or return the equipment to the lessor. Fair market value leasing is the most popular option for medical equipment.
- Single-payment lease: Also known as a one-pay lease, a single-payment lease requires payment for the full lease at the beginning of the term. This is best for those who have the capital budget for the full payment but still want the other benefits a lease offers, such as protection from equipment obsolescence and off-balance-sheet financing.
- Project financing lease: This is a specialized lease option that is tailored specifically for a particular project to maximize returns, allowing you to meet budgetary requirements while avoiding a large capital outlay.
- Step lease: A step lease begins with a fixed term of monthly payments that will eventually adjust—increase or decrease—at a predefined period. Step leases are great when building a service line and matching expenditure to revenue.
- Lease lines: After the initial lease terms are set, lease lines function similar to a line of credit by allowing equipment to be added on an as-needed basis. Costs are evaluated on a monthly or quarterly basis, providing added flexibility.
- Early termination lease: Plans change, technology advances, or maybe you need to go in a different direction. Early termination options give you a little more flexibility, and we will work with you on an upgrade, early buyout, or termination.
By splitting up a large capital outlay into smaller installments, or by providing extra flexibility to the payment schedule, every lease model acts as a financing option that can make the cost of acquiring medical equipment more manageable.
Capital Can Be Reinvested
Lower initial costs associated with lease models mean that more capital can be reinvested into a business. Instead of an outright purchase that leaves you with negative returns in the short term, leasing medical equipment allows you to avoid a down payment, thus conserving capital that can be reinvested into your business.
Equipment Will Not Become Obsolete
The high rate of technological innovation is decreasing the lifespan of any given machine; depreciation and obsolescence are common concerns in the medical community, especially for facilities that require technologically advanced medical equipment such as MRI machines or CT scanners.
By leasing, and avoiding direct ownership, you are not affected by the equipment’s decreasing value and are hedged against the potential of obsolescence. At the end of a lease, you have many choices including upgrades, extensions, and returns. The end-of-lease option is yours to decide so that you can make the best decision for your practice.
Greater Access to the Latest Technologies
Just as it mitigates depreciation and obsolescence, medical equipment leasing also comes with the added advantage of access to the latest technologies. This makes leasing a very attractive option for facilities that want the latest technology available to expand their clinical capabilities and attract more patients. For example, while for many purchasing would mean deferring an upgrade or replacement until more funds are available, leasing provides the flexibility to upgrade the equipment at the end of the term. That way, you always have the most up-to-date equipment and technology.
There are many reasons healthcare organizations choose to lease medical equipment instead of purchasing it outright. For some, it is because they do not have enough cash or new service lines, or they may prefer to build their referral base before making a purchase. In these situations, they can start with a lease for low monthly payments while building the business. For others, it is because they want to acquire the latest technologies without worrying about costs of ownership, such as depreciation and obsolescence, that go with it.