Buying used medical equipment: Does it make sense?

October 1, 2005

Two significant trends are having an impact on most urology practices today. First, most practices, including my own, are experiencing a decrease in reimbursement and rising overhead expenses. This ultimately translates to a decrease in net income.

Second, more practices are moving from hospital procedures to office procedures and ambulatory or outpatient procedures. As a result, many of us will invest our precious capital resources in costly medical equipment. Certainly, the sales representatives and vendors can always make their products look great and can show us break-even analysis spreadsheets that make the return on investment appear very attractive. However, one consideration that many of us may have overlooked is the purchase of used medical equipment.

Is new equipment worth it?

Medical equipment depreciates about as fast as a computer-as much as 50% the first year. Combine this depreciation with the interest you owe on the lease of new equipment, and you can easily find yourself in an extremely negative equity situation when you're ready to upgrade your next capital equipment purchase.

In many cases, you will pay 30% to 50% more for a new piece of equipment than you would for a piece of used equipment. Buying new equipment does entitle you to training and customer support from the vendor or manufacturer, and there is little doubt that in most cases, the customer support from the manufacturer is superior to that of the pre-owned or used equipment broker. But is it worth 30% to 50% more? The truth is that the used equipment vendor often outsources technical support to an independent trainer and consultants and is tapping into the exact same network of independents that the manufacturer uses.

I suggest that you become selective in the used equipment you consider buying. After all, an exam table or a 17F sheath and obturator doesn't change very much from year to year. Begin by buying equipment that doesn't wear out or wears out slowly.

Used vs. refurbished

There are usually three sources for used medical equipment, according to Dan Mason, president of Special Surgery Resources and Repair (SSRR), the vendor who sold me the used scope. The first is through exhibitors at conventions and trade shows who sell slightly outdated or demo units; second is through dealers who are liquidating their inventories; and third is through hospitals and urology practices that are closing or selling their outdated equipment.

Randy Reichenbach, general manager of the medical division of Medical Resources, a supplier of reconditioned equipment, suggests that the difference between used and refurbished equipment is huge. Used equipment may be spray painted and made to look new or better than its unpainted version, but is really not in good working order. In the trade, this is referred to as "spray and pray."