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. In this guest post, Patrick Kelly, CEO of a healthcare service partner for buying and selling medical equipment, offers one way facilities can do that.
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.
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Top 10 Negotiating Strategies
Skilled negotiators are like musical virtuosos. They have an extensive repertoire of tactics from which to draw, and they know when and how to make them a part of their performance. But negotiating healthcare contracts for capital, purchased services, and IT services can test the artistry of even the most masterful negotiator.