By Mike Kintner
?As new equipment makes its way into your facility, you still must contend with the old equipment that has outlived its usefulness. Should you sell it? Trade it in? Dispose of it? Redeploy it? Even if a facility no longer needs the device, that old equipment can still benefit your department or organization. Whether you call it end-of-life, retired, or simply kaput, we will explore disposition options and opportunities for yielding value out of that outgoing medical equipment.
Recent research revealed that 58% of retired medical equipment is traded in to original equipment manufacturers (OEMs) to offset the cost of a new purchase. This process works much like trading a used car for a new one and it is definitely the easiest option, but not one that is guaranteed to reap the best financial return. And, like car dealerships, it is no secret that manufacturers can provide subpar value for the trade-in toward the purchase of new equipment.
Although OEMs position the trade-in credit as being in your facility’s best interest, the OEM may seek to recover that credit and expense relative to de-installation by embedding those costs into the capital equipment purchase price. In addition, hospitals rarely have someone in place who understands the true value of the equipment compared to the OEM’s trade-in offer. This fact alone often can result in your organization losing money by choosing the trade-in option.
|You might be surprised by the abundance of potential buyers looking to buy the very equipment you may have sitting in a closet.|
Similar to many of your peers, you likely have old medical equipment in storage. Yet according to research, 57% of sites do not have a structured process to track and monitor which devices are kept in storage. As the saying goes, “out of sight, out of mind,” and those devices can be quickly forgotten. It is not unusual to run into equipment in storage that no one knew was there.
Like those television shows that uncover hidden treasures in old attics, your facility could benefit from matching retired devices that are still functional with the needs from other facilities or departments. For example, one health system identified more than 3,000 devices in storage at a total estimated value of $1.7 to $3.5 million! If the health system had a process in place to track those devices, it could capitalize on equipment that no longer serves its needs and recirculate those funds toward repairs, replacement, and the purchase of new equipment. What treasures are hiding in your storage closets?
In some cases, older equipment will not have any marketable value, nor will it be usable within a health care facility. However, the materials used in constructing the equipment will still have some residual value in the scrap market. While identifying quality vendors and coordinating timely de-installation and removal can be difficult for facility personnel, it can be a pain-free process once you identify someone who truly understands this market and can capitalize on the sale of scrap materials. It can even be a profitable move as you may be able to offset or eliminate any de-installation costs that may occur.
You might be surprised by the abundance of potential buyers—ranging from health care facilities to medical parts merchants—looking to buy the very equipment you may have sitting in a closet. While selling can bolster your finances, determining a fair market value for equipment does represent a challenge. Without extensive experience in this arena, health care providers could get far less than the device’s fair value.
|Profitable end-of-life equipment management requires a considerable amount of logistics, know-how, and decision points.|
Like buying a new pair of sunglasses just to find the ones you lost months earlier under your car seat, many providers end up with duplicate purchases and contracts when the device they are looking to buy already exists in the health care system. It is easy to see, then, why redeployment of equipment within a health care system is such an advantageous option. Having a redeployment program eliminates unnecessary capital expenditures and frees up funds for other purchases.
The challenge lies in matching up supply with demand, and managing the logistics of de-installation, shipping, and installation—all of which can be time-consuming for a facility whose workload and staffing levels are already at capacity.
Donating medical equipment to nonprofit organizations qualifies for a tax write-off as a depreciated asset. In addition, it can sometimes be more advantageous to donate and write off the asset than continue to maintain a near-obsolete piece of equipment. There are dozens of organizations that accept medical equipment donations, such as PROJECT C.U.R.E, World Medical Mission, MedShare, and MediSend. These organizations provide equipment, installation services, and support to hospitals and clinics in developing nations around the world.
Admittedly, profitable end-of-life equipment management requires a considerable amount of logistics, know-how, and decision points. If your organization wishes to redeem value out of your retiring equipment but is not equipped or willing to deal with it all in-house, consider partnering with a vendor-neutral third party that can facilitate and carry out your decisions without limiting your time or resources. Building on practices and marketplace relationships that have benefitted other health care providers, they can help you establish a process for tracking the equipment you have in storage, or keep it from going to storage in the first place.
Your partner can also guide you through a long-term disposition plan to include both large equipment (such as MRI machines and CT scanners) and small biomedical devices (infusion pumps, bedside tables, fetal monitors, and the like). That plan will likely focus on redeployment, the strategy that typically delivers the most value to health providers.
Five Steps to Recovering Value from End-of-Life Equipment
Profitably transitioning end-of-life equipment requires a substantial amount of time. The steps below can lay the groundwork to ensure successful end-of-life equipment planning.
Most importantly, partnering with a third party may mean financial savings for your organization. Recently, one hospital in Jacksonville, Fla, partnered with a third-party organization to sell a four-slice and 16-slice CT machine. The OEM offered $86,000 for a trade-in. The third party found a buyer and sold the equipment for $153,000, resulting in a savings of $67,000 for the hospital.
Another hospital in Austin, Tex, had two OEC C-Arms. A local buyer offered $96,000. The service provider was able to find a buyer—who was not local—and sold the equipment for $116,000—a 21% increase in residual asset value.
It is estimated that approximately 90% of the time service providers that specialize in redeployment are able to obtain a higher value for the equipment than the OEM offers. Using an independent third party to assess open market options ensures you have made a data-driven decision in the rare cases where the OEM offer is the highest.
Whatever mix best fits your organization, end-of-life management remains a vital part of an effective equipment life cycle management process—one that can generate revenue from unexpected places. 24×7 February 2013 Service Solutions
Mike Kintner works for TriMedx, a health technology management firm. For more information, contact the editor.