Healthcare News & Insights

Unlock hidden revenue stream: Get top dollar for used equipment

Falling inpatient volumes, decreasing Medicare and Medicaid reimbursements, and rising wage inflation are putting pressure on health systems’ top and bottom lines. In response to an increasingly complex and competitive healthcare environment, hospital CFOs are under tremendous pressure to find new ways to rein in costs and improve revenue.

As the second largest expense in a hospital’s operating budget, following only labor, the supply chain is typically the first area where opportunities to reduce costs are identified. But to the discerning eye, the supply chain can also return significant revenue stream opportunities.

Value of capital equipment

Mention the words “supply chain” and most people think of costs. This is especially true when discussing capital purchases. This mindset is understandable considering that hospitals spend millions of dollars each year on big-ticket items including MRI machines and defibrillators, as well as other supplies that quickly add up, such as infusion pumps. The average 500-bed facility spends an estimated $33.5 million on capital expenses annually according to data compiled by TractManager’s research analysts. This number includes capital equipment and the service contracts related to that equipment; capital construction is not included. With the right data, supply chains (both unused and used capital equipment) can also create new revenue streams.

Three percent to 6% of capital spend can be recouped by recovering assests. For a 500-bed facility, asset recovery can result in an estimated $1.5 million of additional revenue. While all hospitals should set and track the 3% to 6% recoup goal, very few do. As a result, this revenue opportunity is frequently missed.

Too often, capital equipment either sits idle in a warehouse or can’t be located (because it’s not where the asset management system indicates it’s supposed to be). Meanwhile, equipment further depreciates.

Sometimes hospitals have a sense of urgency to dispose of equipment that is deemed no longer useful; especially when larger items are taking up valuable space. As they look for opportunities to rid themselves of this equipment, it’s not uncommon for hospitals to trade equipment in to vendors – even if the return is a fraction of its value – because it’s the easiest thing to do. Another missed opportunity occurs when hospitals contract with third parties to pick up equipment for resale, unaware of the hefty cost associated with shipping. In each of these instances, hospitals lose out on the asset value and revenue stream they could have generated had they had accurate assets inventory and a proactive strategy in place to leverage their off-the-floor or warehoused equipment.

Secondary market opportunities

Expanding the perspective and reach of the supply chain with a proactive approach to asset disposal and replacement of capital equipment can uncover new opportunities for revenue. Accurate inventory and an analysis of what can potentially be replaced is an essential place to start. Partnering with a certified secondary market expert provides insight into replacement capital which is necessary to more precisely determine equipments’ value in both resale and trade-in. This insight also helps determine the best method of equipment disposal to ensure maximum return with increased operational efficiency.

Secondary market solutions enable hospitals to correctly determine fair market value of equipment. These solutions offer insight into resale value, including data on what similar used medical equipment currently sells for on the secondary market. Some secondary market solutions will even connect hospitals with qualified buyers. With data in hand, hospitals can  achieve the desired return of 3% to 6% on a facility’s capital budget which can represent hundreds of thousands of dollars in residual value of older equipment that’s no longer in use.

Evidence-backed information and a comprehensive understanding of secondary market trends leads to more informed decisions. For example, the ability to identify patterns and behaviors as to the way original equipment manufacturers (OEMs) buy back their equipment and other vendors’ equipment can make it easier to negotiate with manufacturers to get the highest return for used equipment. This data is also necessary to devise a plan for assets so they aren’t simply sitting in a hallway or warehouse.

Proactive planning across buying cycles provides the necessary time to choose the right options for disposing of equipment that return the most revenue or value. A long lead time can also minimize the cost of moving equipment multiple times. Proper planning and secondary market research can greatly increase the chances of getting top dollar for used equipment and add to a hospital’s revenue stream. For hospitals that don’t have the time or manpower to manage this process internally, partnering with a secondary market expert is an easy solution that yields excellent financial results.

Patrick Kelly is the CEO of BidMed, which he built to address the hospital industry’s need for a better asset management system. A long-time advocate for helping hospitals enhance asset utilization and reduce capital budgets, Patrick leads BidMed’s partnership with TractManager to bring integrated software and unparalleled pricing data to clients of both organizations.  


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