Thursday, June 29, 2017

Mistakes Hospitals Make When Selling Used Medical Devices

With great uncertainty looming over the future of healthcare, hospitals are revamping internal processes to save money. 

One of the least discussed processes and most mismanaged is the resale of end-of-use medical devices. 

These are not  the "end-of-life devices" with obsolete technology and zero market demand.  These are working devices, supported by OEM, just no longer needed by the hospital, with moderate-to-"I REALLY NEED IT!" market demand.   

To generate revenue from end-of-use medical devices, hospitals either auction them, trade-in to OEM or resell to vendors.  

Each of these methods has its flaws and benefits, but the underlying problem is the absence of a dedicated person trained to resell equipment.  

Person tasked with reselling equipment usually joggles multiple projects.  Reselling equipment is seldom a priority.  Without proper training, this person likely follows an antiquated formula for reselling to vendors that goes like this: 

"Email at least 3 vendors to buy equipment.  Get 3 bids. Pick the highest.  Show it to the Boss.  Get Boss's approval.  Notify highest bidder.  Get paid when bidder picks up equipment.  Deliver payment to Finance.  Light up a cigar for a job well done... well, maybe no cigar"
In a nutshell, most hospitals across the nation use this antiquated formula to resell used medical devices.
Let's review 7 reasons why this formula doesn't work.
1.  Wrong Start:  How do you decide which vendors to email?  Do they need to be "in the system"? Are they current service providers?  Or, do you go to DOTmed and select top 3 companies?  By the way, those companies pay to be displayed at the top, that doesn't mean they pay fair value for used devices.   
Used medical device industry is GLOBAL.  Emailing 3 vendors you know, found on DOTmed or Google is the wrong way to start this process.  Before finding vendors to bid on equipment, you must determine average global resale value of your device. 
2.  Three Vendor Dilemma: Asking same 3 vendors in your digital rolodex to buy your used equipment is like going to the same hairstylist you don't particularly like but you go because it's convenient.   
In reality, unless your vendors specialize in refurbishing, warrantying and reselling equipment to an end-user, they will give you a low, below market bid.  Only vendors described above know true value of equipment and have the confidence of reselling it later.  These 2 elements are essential in attaining the best bid.    
Also, if you only contact 3 vendors, it's very likely that they know each other.  Used medical device industry is a small, niche market and most vendors work together and resell equipment to each other all the time.   
Have you ever wondered why sometimes, received bids are identical?  
Could it be a coincidence... or a scheme?  You will never know unless you expand your vendor network.     
    3.  Vendor vs. Real Estate Agent: Asking your vendors to buy your equipment is like asking your Real Estate Agent to buy your house. 
    Imagine how devastated (and pissed and foolish) you may feel if you sold your home to a Real Estate Agent, who sold it for $15k more the following month?! 
    Houses don't appreciate by $15k in 30 days, but equipment does in the hands of someone who understands used equipment market. 
    Of course, this will never happen with your house because Real Estate Agents are governed by state laws and follow strict NAR code of ethics that prohibits them from conducting certain transactions. 
    Vendors that buy medical equipment directly from hospitals are not bound by any laws or code of conduct and can do as they please. 

    For this sole reason, it is safer to outsource resale of end-of-use medical devices to an independent company that works for your hospital instead of approaching vendors directly!
4.  Trade-in Drama.  During equipment upgrade, you ask OEM supplying new equipment to give you a trade-in value for old equipment.  You do know, that the value OEM offers is not market value, right? 
OEMs are not obligated to offer fair trade-in values.  According to OEM documents, trade-in value needs to be nominal. (Hint: If it's not in OEM Master Agreement, then it's in the Service/Product Agreement OEM has with your GPO.) 
So what's a nominal value and how do they arrive at it? 
In most cases, information about your old equipment goes to OEM "trading desk" which is just a fancy description of an obscure process that follows. 
Trading desk personnel share information about your equipment with OEM contracted dealers and distributors and asks them to bid on your equipment. 
After bids are received, OEM will take their slice off the top bid and Voila, you have your nominal trade-in value!
5.  Negotiations, what's that? Bids vendors submit to purchase used devices are seldom, if ever negotiated. 
You hustle over new equipment pricing, service terms and other perks to add into Purchase Agreement, but somehow negotiating best price for the same equipment you are selling years later is not of interest
Sure, if you are selling a run-down Cyto Tek Centrifuge, it's not worth the effort.  You should scrap it and not waste time on finding someone who will buy it. 
But, if it's desirable equipment such as C-Arm, why are you giving it away for a top bid of $5000?
6.  Top Dollar Marketing Bait.  All vendors claim to pay "Top Dollar, Highest Value, Best Price for Your Equipment".   
In reality, no vendor will pay top dollar unless they need your equipment at the moment you are selling it.   
Vendors buying for inventory WILL NEVER pay top dollar.  

To get top dollar, takes time, patience and large network of vendors in United States and overseas. 
Is it worth the time building that network?   
Definitely not if you plan to sell Level 1 Fluid Warmers or its equivalents. 
But if you're serious about generating revenue and selling Hospital Beds, Infusion Pumps, Surgical Equipment, Ultrasounds, yes, it is absolutely worth it. 
You will generate double or triple the trade-in value offered by OEM by selling to US dealers, or get 4x as much by selling the same devices to vendors in Africa and Latin America.
7.  Missing Paperwork:  More hospitals are getting into trouble with  CMS, FTC and EPA for making mistakes when reselling equipment.   
Because in this industry, almost every vendor who buys equipment from the hospital (again, unless they specialize in refurbishing, warrantying and reselling) will resell it to another vendor.   
Equipment can exchange 4 sets of hands until it finds its second permanent owner.   
Not every vendor will remove patient information from an EKG machine.  Not every vendor will check whether their buyer is located in the country that has trade sanctions imposed by US Department of Treasury.   
Failing to have proper paperwork and lack of due diligence, lands hospitals in hot water with governing authorities.   
When that happens, time required to correct mistakes and fines for hustling are astronomical. (Fact: Medical Center in New York was fined $113,000 by EPA because vendor retained to de-install an obsolete imaging system improperly disposed oil from the generator.)
Selling end-of-use medical devices to vendors has been practiced by hospitals for decades.  When it's done properly, it's a great way to supplement budget deficits and create additional revenue. 

The problem is that 90% of the time it's done haphazardly and without much thought put into the process.  The process is either broken or doesn't exist

If you truly want to act in the best interest of your hospital and have C-Suite sing you accolades at the next Town Hall, stop hustling and using an antiquated formula that yields mediocre results and can get your facility in trouble.
Fix the process, stop segmentation that occurs when each department does its own selling, identify key person (and please, not the overloaded, swamped and frustrated Contract Specialist or Buyer in Purchasing) who will manage the process FULL TIME.  Train them!  The results will be unrivaled. 

We are here to help you decide the best way to decommission medical devices your organization no longer uses. Even if you work with another service provider, have questions, need suggestions, looking for validation or resources, EcoMed is here to help. 
To learn more about benefits of a managed Medical Equipment Decommission Program, please visit or send an email to  

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