Technology: Should You Buy or Lease?<

by: Robert Anthony

Be careful how you answer. Many medical practices make buying and leasing decisions in the dark, lacking information about either the product or the lease agreement, or sometimes both. Worse yet, they never ponder the differences between leasing and buying a piece of equipment. Do you know which option is best for your practice? Or will today’s seemingly thrifty decision end up costing you more tomorrow?

A critical question to ask

Most practices have a “buy small, lease big” mentality, meaning that they pay cash for less costly equipment while leasing bigger-ticket items, such as imaging equipment. Others buy everything, either with available cash or a hefty bank loan. Practices such as these are asking, “How much money do we have right now?”

But that’s not the right question.

“The main thing is the technology,” says Fran Lavallette of Healthcare Facilitators in Orlando, Fla. His company consults with medical practices about purchasing and leasing decisions on a regular basis. “When the practice is looking at the equipment, how long do they think it’s going to stay relevant?”

In other words, stop worrying about how much it costs, and ask yourself this: How long is this piece of equipment going to be useful?

The answer to this question will largely determine whether you should sign a lease or a purchase agreement.

To illustrate, consider your ultrasound or EKG machine. Yes, it will function for more than a decade. But will you still want to use the same machine in 10 years? Any piece of equipment that the industry is likely to update often — either its hardware or software — is a good candidate for leasing.

It’s true that you’ll pay less in the short run if you simply buy the equipment, admits Lavallette, but don’t think you’ll recoup any of the cost when you decide it’s time to dump it. Resale values for older medical equipment and software is negligible. “If you try to sell this stuff, it has no return value.”

That was one of the primary concerns for Boise Orthopedic Clinic when it purchased an MRI three years ago. “With MRIs, generally the equipment doesn’t become too outdated,” says Connie Kniefel, the practice’s administrator, “but the software that drives it has to be continually updated for the protocols.”

A lease with an option to update the equipment at the end of the term gave Boise Orthopedic the kind of flexibility a bank loan couldn’t.

Kniefel doesn’t believe in leasing only really big items. The practice also leases smaller equipment, such as photocopiers, with flexibility built into the agreement. At one point, the practice leased a number of copiers, which they placed in a variety of places to save staff the time it would otherwise take to walk to a dedicated copy room. As the practice migrated to an EMR and needed scanning equipment, the lease allowed them to swap the copiers for more sophisticated machines that could both scan and copy.

So be sure to keep in mind how your practice’s needs might change in the futur<

For Healthcare Professionals