Impact of Federal Interest Rate Increase on Used Medical Device Sales & Liquidation

“Blueprint for recovering from financial losses caused by used medical device liquidation”

Hospitals rely on liquidation, vendors and auctions to sell unwanted and no longer needed older medical devices. 

These companies enable hospitals to get older devices removed from premises and generate revenue.

For the most part, generated revenue covers liquidation expenses and leftover balance is added into hospital’s overall budget.

However, this year, many hospitals using this model began reporting decrease in revenue from used device sales and liquidation. 

Since cost of liquidation is seldom a budgeted expense, there's a growing concern that soon revenue will not be enough to cover liquidation expenses and hospitals will have to pay to remove older equipment.

Let's explore why this situation transpired and what hospitals need to do to fix it.

No 1: Change in Banks’ Lending Practices

In March of 2018, Federal Reserve raised its key short-term interest rate. It was raised again in September. 

The second increase makes business borrowing costs even more expensive. This marks central bank’s fifth rate increase in 12 months with 1 more projected by the end of 2019.

In addition to rate increase, US banks prefer larger loans. However, majority of companies that buy used equipment are small-mid size businesses seeking loans under $250,000. These loans are less profitable and riskier for banks.

Together, increased rate and bank’s inclination for large loans cap buying power for small-mid size businesses that purchase older medical devices in United States.

International companies, also key players in used medical device industry, are also finding it tougher than ever to get loans. 

SME Alliance (UK group representing small and mid-sized enterprises) reports that big banks are reluctant to lend money and small banks follow classic business model which is averse to lending to small businesses.

Result: Small-mid size companies don’t have enough capital to buy older and less profitable equipment.

No 2: Cheaper and Comparable Chinese Alternative

Not too long ago, companies from Middle East, India and Asia chased US hospital-owned older equipment manufactured by GE, Siemens, Stryker and Philips. 

Today, they are less interested in paying premium for brand names because they can acquire comparable and newer equipment manufactured in China.

Chinese manufactured products range from patient monitors, anesthesia machines, X-ray machines to OR lights. They initially cost a fraction of the price charged by their brand name competitors.

These products are yet to break into US market and given the current tariffs situation may not any time soon, however they penetrated Indian and European markets.

Hospitals that purchased Chinese products 5-7 years ago began replacing them. This created an opportunity for Middle East and Indian companies to buy newer and less expensive devices locally and avoid paying excess taxes, customs and shipping costs for imports.

Result: Older US hospital-owned equipment is less desired by international buyers.able for companies overseas.


Shift No 3: Globalization and Accessibility

Surge of online websites that specialize in selling used medical devices created a buyer’s market.

In US, there are dozens of websites for auctioning and reselling used medical devices. They are competing among each other as well as big rivals, eBay and Amazon.

In addition to US based websites, in the last 2 years, UK, Saudi Arabia, France, Mexico, Ukraine and India created their own online marketplaces to sell and auction used medical devices.

There is no more scarcity of devices. 

Buyers have more device options and places to buy them. 

Participation in scheduled auctions/liquidations has been declining and as a result auction companies are scrapping larger volume of devices than ever.

Result: Greater supply and access to equipment caused decrease in demand and interest.

Current Scenario

With less buying power, both US and international buyers are paying less for older equipment. 

They are saving money to buy newer devices that are guaranteed to be more profitable for them. 

In addition, international buyers who bought almost 80% of US hospital-owned older devices are now shifting to local products.

Vendors, who within the last 12 months, bought older devices from US hospitals are suffering from inventory surplus. To generate cash flow, many of them started selling off accumulated devices at a loss further reducing already low prices.

Meanwhile, US hospital are seeing revenue decrease from older device sales and having more equipment scrapped than sold.

Cost Opportunity Proposal

Financial analysists do not anticipate this trend to reverse in the near future.  Additionally, forecasted instability in the stock market and enacted tariffs will compound this situation.  

However, there is an option hospitals can exercise to hedge and improve sales revenue from medical devices that were removed from clinical use.  

To learn more about this option contact our office for the remainder of this article.  

You will receive a copy of viable and easily attainable solution your facility can implement to alleviate financial loss created by globalization and current surplus of older medical devices on the market.

EcoMed works exclusively with hospitals, surgery centers, imaging centers and independent healthcare providers by managing resale and transportation of used medical devices. Contact us for COMPLIMENTORY recommendations, resources, support and medical device industry insights that will help your organization make the right decision on how to handle medical devices removed from clinical use.  

Internal Habits Are Hard To Break

Adviser: A person who gives advice in a particular field
~Oxford Dictionary~

Most companies in used medical device space operate as brokers, dealers or remarketers. 

They buy, sell, broker or market used medical devices.

It's a sensible business model that’s practiced in many industries.

This model, however, does not solve an internal problem many hospitals have related to used medical devices.  

As devices age and get replaced, hospitals often
 

• Practice "out of sight, out of mind" approach where devices are stored until they become obsolete and require liquidation.
•  Trade-in below market value. A popular method where supplier of the new device offers “nominal value” for the old device. Works just like trading-in an old car for a new one. Hospitals give up revenue in exchange for convenience.
•  Sell to vendors who email them proposals that read "Sell us your equipment. We buy all equipment. We beat any offer. We pay top dollar!" Every proposal reads the same.   

And, every Department within the same hospital, has their own preferred way of handling devices they no longer need. 

 

Rather than taking advantage of this disorder, I've always advocated for hospitals to address this problem internally.

 

Until each facility and Department follows the same protocol, hospitals will lose revenue and never capture the true cost of equipment life-cycle.

 

It has become my mission and passion to help hospitals fix their internal process. And, to educate them about used medical device industry so they can make informed decisions. 

 

Reselling used medical devices became a byproduct of advice and recommendations that resulted in consistent revenue for our clients. 

  

In my last post, I offered to share 5 reasons that make EcoMed an adviser rather than a traditional broker, dealer or remarketer. 

 

With our mission to improve the internal process being Ground Zero, here are 5 reasons that set us apart:
 

Reason #1. Sales, Sales, Sales

 

Our expertise is managing resale of used devices. We refrain from offering hospitals products to purchase.

 

Why?

 

Because we prefer to represent best interests of facilities and ensure transparency.
 

Reason #2. Please don’t ask to buy your equipment

 

Buying devices from hospitals will put us in the same category as other brokers/dealers and violate our principle of transparency.

 

It also means that unless there's a buyer for your device right now, you will receive a low offer because of high acquisition costs (transportation, storage, refurbishing, uncertainty if/when the devices will resell and insurance just to name a few).

 

Reason #3. Remarketing is insufficient

 

Unlike remarketers whose objective is to market device until there’s an offer, we follow a thorough discovery process where we collect data from Department, service engineers, OEM and FDA if applicable.

 

To resell unique devices, we partner with leasing companies, medical associations and technology startups all over the globe because traditional resale methods are not sufficient.

 

Our marketing plan and selling strategy are determined by device type and not online platform with lowest fees.

 

Reason #4: Complimentary Services

Routine inventory of devices removed from clinical use costs our clients… $0.

 

Clients who need appraisals pay... $0.

 

Recommendations on what to do with devices removed from clinical use - sell? auction? trade-in? recycle? We analyze, our clients pay... $0.

 

Reason #5: Compliance is Everything

 

Are you sure device sold from your facility will not end-up in one of the countries with trade sanctions?   

  

Will your facility be protected if sold device caused injury or death to a future patient?

 

To protect your facility, it is imperative to have the right paperwork in place and we make sure it is.

 

In summary, there are several ways hospitals can handle used medical devices. 

 

Despite their preferred method, it all starts with internal organization, understanding of used device market and what each vendor who deals with used devices will offer your facility.

What are your thoughts on fixing internal process? Do you think it's attainable?  Will it improve efficiency and increase revenue generated from sale of used medical device?

 

 

 

EcoMed works exclusively with hospitals to resell medical devices removed from clinical use. Even if your hospital has another service provider, you may still have questions, need validation, or resources. Contact us with any questions you may have about reselling your medical devices. 
  

To learn more about benefits of being an EcoMed client, send us an email or visit www.ecomedhtm.com.

Who Are You?

"Is EcoMed a medical equipment broker, dealer or remarketer?"

I hear this question a lot.  

Whereas most companies in used medical device space fall into one of these three categories, EcoMed does not.    

EcoMed works exclusively with healthcare facilities to resell medical devices removed from clinical use. 

However, our services, business model and principles significantly differ from traditional brokers, dealers, and remarketers of used medical devices.  

I decided EcoMed must support healthcare facilities after studying used medical device market for few years. 

During that time, three facts became clear to me:    

• All hospitals upgrade/replace medical devices.  Most hospitals have no defined process for removing devices they replaced.  
• Most hospitals either traded-in replaced devices to OEM or used "liquidation" to resell them. The hospital staff were seldom pleased with results of either option. 
• Brokers/dealers who bought used devices through "liquidation" all claimed to "pay the most." Some offered cash. All offered free pick up. 

If all brokers/dealers were paying the most (and cash, and free pick up) then why were hospital staff not pleased?  

 

This question sent me on a quest to interview Hospital Supply Chain staff, contract specialists, surgery center owners, department managers and biomedical technicians.
  

 

I discovered the top 2 reasons hospital staff were not pleased with OEM trade-in and broker/dealer liquidations were

1. Lack of transparency
2. Limited trust  

The other consistent issues noted during interviews were:  

• Hospital staff had limited knowledge about used medical device industry.
• Most hospitals were understaffed and employees were juggling too many projects. 
• Staff often agreed to vendor's offer to buy or consign devices without any data to support their decision.   

During one interview, the Director of Purchasing for TN-based healthcare system said:

"When the same vendor who sold us equipment 3 years ago gave a quote to buy it back, it seemed like we were taken for a ride."  

Hospitals lacked partners to guide them through the process of reselling used medical devices.

They didn't have anyone representing their best interests. 

Some hospitals had 10,000+ vendors in their database.  But all these vendors wanted were to either sell an expensive product or service, or buy hospital's devices or supplies for pennies on the dollar.   

Most hospitals followed an outdated approach to reselling devices that gave mediocre results.

They've been stuck in this cycle for decades because there's never time, resources and budget to explore alternatives.   

All these findings lead me to conclude that EcoMed must be established as an advisor and a trusted partner to hospitals. 

We had to become the company to represent hospitals' best interests when it came to reselling medical devices.   

With EcoMed's mission redefined, we embraced the following 3 principles:         

1. ALWAYS advocate for internal redeployment of devices.  Not many vendors will ask "Have you checked if other Departments can use this device?" when you contact them about selling it, but we do.
2. Educate hospital staff how to resell equipment.  Only STANDARDIZED resale process will improve efficiency and revenue.    
3. Provide UNBIASED advice, customized service, and solutions.    

EcoMed is not a broker, dealer or a remarketer. 

 

EcoMed is a healthcare advisers that specializes in medical device resale and decommission. 

Our mission is to empower hospital staff to make decisions that are right for their organizations and patients.

Do you agree that our principles and services place us in a league of our own?

If you're still not convinced, keep an eye out for the next post where I will share 5 reasons that illustrate how EcoMed's business model and principles set us apart from traditional brokers, dealers, and remarketers of used medical devices.

EcoMed works exclusively with hospitals to resell medical devices removed from clinical use.  Even if your hospital has another service provider, you may still have questions, need validation, or resources.  Contact us with any questions you may have about reselling your medical devices.  

To learn more about benefits of being an EcoMed client, send us an email or visit www.ecomedhtm.com.

Personal Attachment: 10 Minutes of Unlicensed Therapy

Who’s got attachment issues? It’s remarkable to what extremes people go to hang on to their dated belongings. The “I cannot let this go” phenomenon clutters our homes, our minds and certainly generates a few dollars for Hollywood when shows like Hoarders has viewers glued to the screens with mouths wide open.

It’s almost endearing to have a collection of sorts. And trust me, I know as my “good luck charms” paraphernalia is starting to overpopulate the shelf it calls home. 

 

However, for those of you working in a medical setting and exhibiting profound attachment to underused medical devices and supplies, this type of behavior can be filed under an "expensive and unrewarding" hobby.    

 

You see, unlike personal collections that may increase in value or be resold directly to other collectors, auctioned off (watch out for those fees!) or brought to consignment stores, medical devices simply depreciate in value and eventually become almost worthless.

 

This was a tough lesson recently learned by two Chicago area physicians who decided to retire and sell all the assets from their private practice. They were proud of their established, 20 year old clinic that was heavily stocked with barely used medical equipment, supplies and furniture.  They had no doubts that buyers will be lined up outside their door ready to pay premium for well-maintained products.  

 

Among items that ranged in age from few months to 20 years, were two “once-upon-a-time” very valuable and expensive diagnostic devices. Both devices were purchased at a sticker price, directly from OEM nine years ago.  

 

Sadly, for various reasons, both devices were completely under-utilized and sat around practically untouched throughout most of their longevity. Truth is, physicians should have sold them years ago when reimbursement rates for procedures performed on these devices were more rewarding and equipment was still young.  

 

But, they didn’t sell them, or any of their other acquisitions.  On the contrary, even though physicians seldom used the equipment, they rented storage space and paid a local service company to have it preventatively checked and regularly cleaned. They kept all of the original boxes, purchasing agreements, technical spec brochures and sales rep’s business cards.

 

They were hoping their amassed collection and due diligence will pay off and they will be able to sell all equipment by discounting it 25% from original purchase price. What, really?

 

As good and lucrative as this plan sounds, here’s why it’s not realistic:

1. Technology evolved and these devices are missing standard options desired by today’s market
2. Software is now outdated and considering the age of equipment is not worth the upgrade
3. Some of the devices are no longer supported by their manufacturers
4. Some of the supplies used with these devices are no longer being manufactured
5. End-users such as medical facilities will not purchase equipment without at least a 90 day warranty and do not want to pay any associated de-installation fees
6. Dealers/Refurbishing Companies are looking for bargains and despite working condition & good cosmetics, they still have costs associated with refurbishing process and warranty

The two physicians learned an expensive and eye-opening lesson. Not only did the recent volatility of the stock market negatively impacted their IRAs, their overall retirement portfolio dropped by more than $24,000 due to poor planning, inherent industry misconception and weak market demand for complex and dated medical equipment.

 

So how can you help your facility from getting caught in same situation? Simple, if you know of any device not being utilized, advocate to sell it! The longer it sits around and collects dust, the less rewarding will be its’ decommission.  

 

Unless devices used in your facility are entirely made of gold, they will not increase in value with age. And if they are made of gold, please snap a selfie standing next to one of them and send it to me. I will frame and add it to my collection of “good luck charms”!

 

 

If you would like to learn more about the benefits of centrally managed, in-house Medical Equipment Decommission Program, please visit www.ecomedhtm.com. 

Reflection and Few Words of Gratitude

Yesterday was a very special day for my family.  It was my son's second birthday.  Yes, he was born on 11.12.13 and as he grows up, his friends and those who learn of his birthday will likely think that it is the coolest birth date ever. 

However, two years ago today, instead of celebrating his birth, we were praying for his survival because shortly after being born, his left lung collapsed and he was intubated. 

That was the hardest time of my life and I do not want to relive it.  However, I do want to express my deepest gratitude to doctors and nurses that went above and beyond the call of their profession to care around the clock for my son.  Within ten long and painful days, they nursed him to perfect health and he was able to come home. 

I cannot articulate the gratitude and appreciation I feel each day when I look at my little boy.  Words also cannot express the honor and exuberance I felt when I found out that EcoMed was retained for a project by the same hospital that saved my son's life.  

"As we express our gratitude, we must never forget that the highest appreciation is not to utter words but to live by them"

~ John F. Kennedy

 
It was bittersweet to walk through the main entrance of this hospital for the first time since two years ago.  And, although I didn't have to be on the second level, I couldn't help but take the East elevator up and stand in front of the NICU hoping that all the babies that are there now can follow my son's journey and go home. 

 As my mind drifted away to that breezy and sunny November of 2013, I quickly forced myself to regain composure because this time I was here for a different purpose.  There was a monumental task at hand and it required concentration and undivided attention.   
 
I took the elevator to the ground level and reunited with my crew in Radiology Department.  As always, expertly and with scientific precision they were already dismantling one of the imaging systems that had served its purpose.  With great ease, they swiftly worked with simple tools and within hours parted out an imaging table, a gantry and removed overhead ceiling rails. 
 
Dismantled parts were laying in several meticulously arranged piles on the floor.  Later, each pile will be taken to an appropriate recycling plant where it will be stripped of oils, harsh metals and reprocessed.  But now, the hallways were buzzing with patient traffic and my crew had to work around these piles.  It wasn't until 8pm that a first handmade dolly made its way out of the hospital carrying all the dismantled parts of a system that once was used for patient diagnosis.    
 
I mention simple tools and handmade dolly for a reason.  Certainly, not because I would want anyone to think that my crew operates with cavemen technology, but because I want everyone to know that we carefully choose where and how we allocate resources.  While our tools may not be as shiny and new, they function extremely well. 

It is not the tools that do the job, but the crew who expertly know how to use them.  In a race to have the latest and greatest technology, simple facts such as this one are often forgotten.  I firmly believe the reason we were awarded this project is not because of my patient experience or because my crew had the latest technology but simply because we were able to provide quality, value, timely service and deliver significant savings. 
 

After two, grueling eleven-hour days, phase one of the project was completed.  I was left alone, standing in an empty hospital hallway overwhelmed with a business sense of accomplishment and an authentic, human feeling of gratitude.  I am convinced that those who have found their true calling in life, strive to execute it with meticulous precision and the last 24 hours proved that I was on the right path. 
 
The gift of working on a project for a hospital that saved my son's life was nothing short of a blessing.  I always inspire EcoMed team to take ownership and responsibility in everything they do, but for this project in particular, I aspired to supersede even my own expectations.  I'm overjoyed to say that it was a privilege to help and improve a hospital that saved my son and I could not have done it without the help of EcoMed family.