Devising an imaging-center strategy and choosing a piece of technology take the imaging-center operator only halfway toward the successful conclusion of a technology plan of action: Further decisions and additional initiatives will be necessary before a piece of technology is successfully deployed.An imaging-center operator must determine whether to lease or buy its equipment, although center operators in certificate-of-need (CON) states have an additional regulatory layer that can drive the overall technology strategy considerably. Because a new piece of technology is not only costly but, in many cases, represents an improvement in the community standard of care, a strategy to market the technology is also important.Finally, imaging-center operators are well advised to draft an implementation strategy and assign someone to oversee the process, often given surprisingly short shrift.
To Buy or Not to Buy?
Debate will always surround the question of buy versus lease, whether the desired object is an automobile or an MRI scanner. Richard Townley, president and CEO, AGI Healthcare Group, San Ramon, Calif, believes that the automobile lease serves as a good analogy when considering finance options in medical technology. AGI consults with hospitals, radiology groups, and imaging-center operators. “The question always comes up: Are we better off with a dollar buyout or a lease?” Townley notes. Although there are different names and terms for a lease, sometimes called a fair-market lease, it effectively has a shorter term than a purchase, Townley says. At the end of the term, the lessor has the opportunity to have the vendor do a significant upgrade and then restructure the lease, or to buy it out at an agreed fair-market value rate or a not-to-exceed rate. Townley professes a neutral position in the debate.“We’ve penciled them out from an economic standpoint both ways,” he explains. “The advantage with the fair-market-value capital lease is you have a lesser payment each month because it is like a car lease, you are not buying all of the car. Unless you pay them a balloon payment, you have to turn the car back in. Same with the MRI, CT, or PET, versus a scenario in which we would have a dollar buyout.”
According to Jim Yanci, senior manager, Charis Healthcare, LLC, Hudson, Ohio, which specializes in helping hospitals and physicians develop services in the outpatient setting, hospital clients operating in the outpatient imaging arena primarily are choosing 2- to 5-year leases to avoid technology obsolescence. “From the hospital’s perspective, depending on how much capital they have and how robust the system is, we are seeing a lot of leasing of equipment due to the fact that technology is turning over so rapidly,” Yanci says.Technology obsolescence, however, is not a major factor in the lease-versus-buy decision for Townley, tipping his hand as a fiscal conservative. “Typically, we finance our equipment over a 7-year period, but at the end of the 7 years, you own it,” he notes. “We find that—and this is part of our decision-making on technology—we don’t go with vendors we don’t believe are going to be around strategically, and the upgrade path, the type of equipment you are buying, and where it is in its product life cycle all come into play. Normally, for us, technological obsolescence is not an issue that drives the financing in and of itself; it is just one of those issues.”
CON: A State Unto Itself
The imaging-center owner that operates in a certificate-of-need (CON) state is subject to specific operating stipulations that are likely to drive technology strategy significantly.Located primarily east of the Mississippi River, CON states differ widely in their specifications, so it is important to research the dollar thresholds and what they include carefully, Townley advises.“State CON stipulations, if applicable, can drive your strategy significantly,” Townley asserts. “You will go with what you believe is necessary to meet the dollar thresholds, which in some states include the equipment, tenant improvements, etc. In other states, there is a $1 threshold on all high-end imaging services. This can be a very political process, and may prompt parties who would not otherwise consider doing so to come together in a venture.”The lower the threshold, the greater the politics, Townley says, so in states where there is a $1 threshold on any MRI, such as North Carolina and Michigan, the process is extremely political. In states