Picture Perfect: Securing Cutting-Edge Imaging in a Cost-Conscious Healthcare Environment
May 06, 2021
Technological advancements in medical imaging are moving at a break-neck pace ushering in a transformation of patient care and allowing healthcare providers to more effectively – and efficiently – diagnose and treat their patients. Yet with any improvements in technology, imaging providers and healthcare organizations are increasingly challenged to balance the need of providing state-of-the-art imaging services in a budget-conscious environment.
While it’s undeniable that technology is increasing the capabilities of imaging equipment, hospitals and clinics across the U.S. are weighing their options when it comes to upgrading. Often, with the costly price tags associated with introducing new technologies into the patient care environment, organizations heavily weigh the need to invest in new equipment against the threat of obsolescence and loss of market share.
Imaging has become a critical component of preventative care. Taking breast cancer screening as an example, a recent study by the U.S. Department of Health and Human Services revealed that 72.8% of women aged 50-74 years had a mammogram within the past 2 years to detect breast cancer. As the Department works toward its goal of increasing the number of screenings to 81% as part of the Healthy People 2020 target, greater demand will be placed on the system.
Breast cancer screening is just one in-demand screening niche. As advances in computed tomography (CT), magnetic resonance imaging (MRI), nuclear medicine, including bone scans, PET scans, thyroid scans, MUGA scans and gallium scans permeate the landscape, providers will be challenged to keep pace.
For some who choose to make do with existing technology, the likelihood of obsolescence is increased and challenges patients’ and providers’ confidence in accurate test results and the ability to provide digitally based imaging options to allow providers anywhere, at any time to read results and provide insights. With patients’ best interests in mind, physicians and providers may choose to direct patients to facilities with the most advanced technologies.
Budget Challenges Within the Healthcare Industry
Perhaps the single-most limiting factor in almost all decisions is cost. Budgets are facing unprecedented headwinds in the health industry. From overall budget cuts and lower reimbursements to decreased funding from grants and philanthropic donations, as well as recent decreased earnings from postponed elective procedures driven by COVID-19 restrictions, healthcare and clinic budgets are under seemingly constant stress and pressure.
The Drive to Stay Current
As varying imaging technologies evolve, for many providers, staying current will mean evaluating needs and understanding capacity. Specifically, being able to right-size the needs of a practice by understanding the true demands within a market for a specific type of technology.
Health providers need to balance the quality of the diagnosis a new machine may provide with its cost and the reimbursement provided for the analysis or image. For example, if a new MRI scanner provides a 2% better image quality, but will cost $1.5MM to install, does lead to a better diagnosis? It is these fiscal and operational questions that need to be posed before any high-stakes purchasing decisions are made.
While budgets are tight, access to capital becomes increasingly important. The healthcare industry has myriad options available to facilitate the upgrade of equipment if the internal litmus test of need is met. Some of the most common options include:
Purchasing equipment – Outright purchases of equipment often become impossible for the overwhelming majority of clinics due to high price tags of equipment. It is also one of the least financially sensible options given the pace of change in the industry and the need for liquidity to avoid being stretched too thin. In addition to being outperformed by clinical competitors with more advanced technologies, investing a large sum of cash in hand into imaging equipment can create increased risk if imaging-generated revenue is lower than expected and can be met with high repair costs as equipment ages.
Leasing equipment – Choosing to invest in either brand new or refurbished equipment is one of the most sensible approaches to financing equipment. Fiscally, since the IRS does not consider a lease to be a purchase, it is a tax-deductible expense, reducing the net cost of the lease. As well, leases typically do not require down payments, which allows clinics to reserve the on-hand cash that would have been used for a down payment and reinvest.
Leasing is one of the most flexible options available to clinics, allowing them to upgrade or add new technology at any point during the term as their facility grows and needs change, especially in the long term as technology depreciates. Since a good number of imaging facilities run their equipment for long-term use, leasing can provide valuable cash flow strategies where monthly payments are minimized to match usage and profitability. Skilled equipment finance advisors can also help negotiate flexible end-of-term options that allow the facility to either return, purchase or extend the lease depending on their needs.
Renting equipment – While renting equipment may seem like a practical approach that allows facilities to test-drive equipment or prepare for unforeseen demand, it’s important to recognize that rentals can be financially onerous. While some would argue having access to a large inventory of diagnostic equipment without the burden of ownership is a benefit, rental costs often far exceed leasing and terms are often much shorter than leasing.
Making the Right Decision
While the benefits of imaging may be black and white, understanding the investment facilities are making is certainly not as straightforward. Using newer and more technologically advanced equipment can be a gateway to generating new revenue, but only where it makes sense.
While technological advancements will continue to drive change as facilities race to provide the latest and greatest in imaging services, their ability to keep pace will depend on making smart, informed and financially sensible decisions to remain competitive. A key strategy of competitiveness is ensuring that facilities are tapping into the right resources and capital, particularly as healthcare continues to be a major economic driver.
Solid banking relationships with teams that are knowledgeable about not just the healthcare industry, but also real-world uses, demands and constraints of equipment are vital to ensuring that a clinic or healthcare group can seize opportunities and quickly translate them to revenue.
Learn how Western Alliance Bank’s Equipment Finance Group can provide valuable resources to help you realize your clinic’s potential now and well into the future, especially as demand for more specialized services grows. For more information contact:
Western Alliance Equipment Finance, a national banking group within Western Alliance Bank, Member FDIC, specializes in delivering capital markets solutions in equipment financing for clients wherever business happens. The group’s relationship banking experts blend in-depth experience in a wide variety of industries and sectors with responsive service and innovative banking options to help clients meet their goals. Part of top-performing Western Alliance Bancorporation, with more than $65 billion in assets, the Equipment Finance team has the reach, resources and deep industry knowledge that make a difference for customers.