Optimizing Capital Equipment

Many physician group practices struggle over whether to buy or lease equipment. While purchasing has been the traditional method of acquiring equipment, leasing often can be more cost-effective. Conducting a lease-versus-purchase analysis can help group practices arrive at the most cost-effective

decision. Careful consideration of the alternatives can lead to the best use of the group’s resources to meet its financial goals.

Whether to lease or buy medical equipment is not always a clear-cut decision. Purchasing is the traditional method of equipment acquisition for most group practices, and many continue to use cash to acquire needed equipment.

The pressure to reduce healthcare delivery costs, however, has made more stringent reviews of capital equipment acquisitions imperative. As a result, more group practices are choosing to lease medical equipment. The advantages of leasing include flexibility, convenience, and protection against technological obsolescence. And, in many cases, leasing can be more affordable than purchasing.

Decision Factors

Analysis of major capital equipment acquisitions needs to go beyond a simple return on investment (ROI) or hurdle rate analysis and consider other factors, including the estimated technological life of the equipment and the group’s financial position.

Technological life of the equipment. The equipment’s useful technological life should be considered in light of the group’s long-term goals. Equipment that is projected to become obsolete over an anticipated period of use is a good candidate for leasing. A properly structured lease allows the user to shift the risks of technological obsolescence to the lessor and acquire new technology at the end of the lease term. The lease also allows the user the flexibility to purchase the equipment or renew the lease if the group decides the equipment can continue to provide the required level of performance .    Click here for more.

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