Healthcare providers are charged with healing the sick and sustaining wellness, while healthcare financial executives are charged with maintaining a healthy balance sheet. The impact of the Affordable Care Act on the revenue side of the balance sheet remains an unknown variable. The scramble to organize into comprehensive accountable care organizations can result in increased access to services for patients and potential monetary impact to providers for keeping patients healthy. But the initial investments, including such items as diagnostic equipment and electronic health and medical record systems, require capital. Shoring up the balance sheet may be achieved by adding additional points of entry for patients.
For example, physician offices and hospitals often refer patients to other providers for diagnostic imaging, dialysis and laboratory services to name just a few services. Outsourcing these services was preferred to purchasing the equipment or technology for an in-house option. As the cost of technology declines, and procedures become more reliable, providers may be poised to selectively bring once outsourced services back in-house. How can that be done without breaking the bank? The answer may be in equipment financing.
The initial cost of entry plus ongoing costs for upgrades are often big barriers for healthcare providers. The dilemma is not unlike a personal decision to purchase higher-priced household items – do you pay cash or finance? What type of financing is best? Budget decisions and benefits to consider include:
No (or low) Money Down – One hundred percent financing can preserve precious capital and budget dollars. Also, with a lower initial investment in new service lines, leasing can allow your new offering to become profitable faster.
Improved Cash Flow – Negotiate customized terms with an affordable monthly payment plan that fits your budget. Ask about flexible end-of-contract options.
Upgrade to New Technology Every Few Years – Flexible structures, such as leases and structured loans, can allow you to pay for what you use rather than tying up capital in a rapidly depreciating asset. The owner carries the burden of depreciation, not the lessor. Equipment financing also provides possibilities for early replacement and changes where traditional financing can fall short or add significant expense.
Generate Long Term Revenue – The new services/capabilities can be put to work for you. While offering the service to your own patients, it may provide an additional source of revenue by welcoming patients from other nearby providers without the same capability.
Equipment finance is not just a finance structure. It is a plan that supports the need of healthcare providers to remain on the leading edge of technological advancements by acquiring the necessary assets in the most cost-effective manner. Equipment financing offers an opportunity to add a new revenue stream to improve the overall well-being of your balance sheet.
Once you determine that equipment financing to fund additional services or capabilities is a viable alternative to increase revenue, choosing the right financial institution is critical. An appropriate financial resource must demonstrate capital strength, broad product offering and, perhaps most importantly, depth in experience within the healthcare sector.
Ralph Swanson is senior vice president of PNC Healthcare in Florida and can be reached at ralph.swanson@pnc.com.
This content has been prepared for general information purposes and is not intended as legal, tax or accounting advice or as recommendations to engage in any specific transaction, including with respect to any securities of PNC, and do not purport to be comprehensive. Any reliance upon any such information is solely and exclusively at your own risk. Please consult your own counsel, accountant or other advisor regarding your specific situation.
