Friday, June 22, 2018

Used Medical Equipment Fair Market Value is Unfair

Let’s talk about used medical equipment fair market value, or FMV.  At some point, almost every healthcare provider needs to establish FMV of their used medical devices. 
If you engage an appraiser to establish FMV, most likely you will receive a value that is unrelated to price at which your device will sell.

While this value is suitable for the accounting purposes, it is unfortunately useless in the real world.
If you try to establish FMV on your own using Google or any other search engine, you will discover that value of the same device can vary by as much as 60%. 
So, if FMV provided by an appraiser cannot be used as a benchmark and online FMV results are inconsistent, how can you establish appropriate resale value of your medical device? 
In reality, FMV depends on basic economic principles of supply and demand.

For example, during shortage of respiratory devices during a flu season, price of respiratory devices available on secondary market skyrockets regardless of FMV reported by an appraiser or found online.

In addition, FMV has a different meaning to each buyer, their situation, and location. 
A buyer who makes an offer on any device for their inventory will assess its FMV lower than if they were purchasing that device for a prospective end-user (party that will use the device). 
And, if that end-user was to issue a Purchase Order, that same buyer may significantly increase their offer
True Story (and actual photos of the system):

This situation took place in our office while we were selling a GE Lunar Prodigy Bone Densitometer for a client.

A buyer submitted an offer that was below resale value range assessed for this system.

Buyer justified their offer by indicated that system lacked a key technological feature, was expensive to de-install, crate, and transport across the country to their facility. 
We presented the offer to our client.  As anticipated and per our recommendations, client rejected the offer
Three weeks later, the same buyer inquired if the system was still available.

After learning that it was, they increased their offer by $8000.

It turned out, they were now working with an end-user who was in Latin America and despite the absence of a key technological feature still wanted this system. 
So, with FMV being arbitrary and purchase price carrying little weight on the secondary market, how can you establish at what price to sell your medical device?
Here are 9 suggestions to help:  
  1. Resale value will depend on supply and demand of “like” or similar devices. Study the market and determine if there’s a surplus or deficit of equipment you’re selling.
  2. Look for buyers who need (not want!) your device. 
  3. Avoid buyers who purchase for inventory or will resell device to another buyer instead of an end-user.
  4. Refrain from selling to a service company that fixed your device… for obvious reasons.
  5. If soliciting bids, engage as many buyers in the US and abroad as possible. Don’t limit yourself to 2-3 companies.
  6. Establish a resale price range. This will help you analyze offers. Email us if you need help. This service is FREE and without any obligations.
  7. If you decide to auction, be mindful of fees. They
    drastically reduce profit. For example, eBay collects 10% from the sale of “Healthcare, Lab & Life Sciences” equipment. You will also incur 3% fee from PayPal for payment processing. Your profit is down 13% and you still must deal with packing & shipping, thus cost of your time. If you engage auctioneers, again, be mindful of fees. In addition to 40%-60% profit split, auctioneers may charge for pickup, cleaning, PHI eradication and so on. Also, buyers who purchase from auctions pay up to 20% premium. This reduces the total amount they’re willing to bid.
  8. Avoid selling to buyers who advertise they "buy everything and pay top dollar". Historically, these buyers make the lowest offers. Because they buy everything, they need a big facility for storage and that comes with big overhead. These buyers usually resell equipment to other buyers. See suggestion number #3.
  9. Build an international network. Approximately 80% of equipment is sold overseas. Privatization of healthcare in Africa, India, and Pakistan lead to a surge of new hospitals and clinics opening in those regions. International buyers are the biggest players in used medical device industry right now.  
While used medical equipment FMV is an unfair and arbitrary number, these 9 proven suggestions will help you resell your medical devices on the secondary market at reasonable prices.
EcoMed works exclusively with hospitals, surgery centers, imaging centers and independent healthcare providers by managing resale and transportation of medical devices removed from clinical use. If you have medical devices that are no longer being used, contact us and we will provide you with resources that will help you make the right decision on how to sell them.
To learn more about benefits of being an EcoMed client, visit us at, send us an email or call Toll-Free 855.234.5600

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