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The importance of medical equipment in healthcare cannot be undermined. Whether it’s a hospital or a smaller healthcare practice, everyone needs the right equipment for providing quality care to the patients. Technological advancements and improvements are taking place at a rapid pace, there is a new machine in the market every year or so. Even though upgrading the old machines or buying the latest ones is ideal, it’s an expensive investment. So, is it wiser to buy or lease medical equipment? The answer to this question depends on certain factors. This article explores some important considerations you should keep in mind before taking the decision.
Firstly, you need to consider how beneficial the new equipment will be for your practice. Is it worth the investment? Is there a significant cost advantage to it? Will it be helpful for your existing practice? Will it help you attract new patients? If yes, then it’s probably worth the investment, and you should by all means go ahead and purchase it. Otherwise, it will only add to your cost due to underutilization.
Buy v/s Rent – Cost Analysis
Once you have zeroed in on the right medical equipment for your business, assess the costs involved in purchasing medical equipment on loan and getting the same on lease. If the cost of leasing/renting is equivalent to the cost incurred with a medical equipment loan, then it is advisable to go with the latter. And, if you are not able to get a line of credit or are unable to meet the down payment, then it’s best to take the equipment on lease. The idea is that your working capital should not become negative as it may impact your everyday operation.
Productivity and value
Your new equipment should be worth the amount spent on it. It should result in better diagnosis and monitoring, faster turnaround and increased productivity. Before leasing the medical equipment, estimate its power consumption and associated costs incurred in running the equipment. Apart from enhanced patient care, it should also result in an increased revenue flow.
Cost of maintenance
Specialized machinery needs special care and maintenance. Before you decide to rent or purchase, it is important to know the cost of servicing and maintaining the medical equipment. You might need to execute a servicing contract with external agencies for its upkeep and servicing.
Therefore, you need to know the actual cost of maintenance in advance and how it is going to impact your finances. This knowledge will help you in selecting the best equipment as per your financial capacity.
Evolution of technology
According to Moore's law, the speed of computers and its capability doubles every two years, and it costs much less than earlier. The same is also true in the case of medical equipment. For example, sensors and wearable technology have made health monitoring of individuals much easier and is highly cost-effective.
Rapid evolution in medical equipment technology, results in higher depreciation cost of older generation equipment and obsolescence.
Therefore, before getting one, you should always check the trends and life cycle of the medical equipment renting /leasing helps to protect against obsolescence as it enables the exchange of older generation medical equipment with the latest.
There is no right or wrong option here, and it all depends on the financial capability of the user. Both purchasing and renting medical equipment has its own advantages and disadvantages.
Getting medical equipment on rent is a suitable option for those who have limited financial means and find it difficult to get a loan. However, purchasing medical device on rent becomes expensive in the long term. You also need to incur a fixed monthly cost towards it.
On the other hand, when you purchase medical equipment, you do not just own that machinery, but it also becomes a part of your capital assets. In the long term, the cost of ownership is lower, and you can also get a tax rebate on a medical equipment loan.
There is also the fact that buying medical equipment through a loan saves you from some tough negotiations with the leasing agency.
The act of paying out money for any kind of transaction is known as disbursement. From a lending perspective this usual implies the transfer of the loan amount to the borrower. It may cover paying to operate a business, dividend payments, cash outflow etc. So if disbursements are more than revenues, then cash flow of an entity is negative, and may indicate possible insolvency.
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