7 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.   

Why?   

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 www.ecomedhtm.com or send an email to med@ecomedhtm.com.  

Negotiating Strategies or Excuses?

3 Minute Read | Decision Factors

“Asking price is too high. We buy same pumps for half the price.”

“Market is saturated with these modules. They are almost worthless.”

"System is old and worthless. Removal will be expensive."

 

Healthcare Providers and Supply Chain Professionals, do any of these sound familiar? 

How many of you heard these statements while selling medical devices after they were removed from use by your organization? 

 

Are these statements accurate, or is the buyer trying to corner you into lowering the price under pretense they know the market better? 

In some instances, yes, these statements are correct and your buyer is right.

 

However, that's not always the case. 

 

If your buyers are purchasing devices for inventory than it is unlikely you will receive fair market price.   These buyers have overhead expenses such as warehousing, transportation, refurbishing processes, etc. and there's never 100% guarantee that device will sell and their investment will be fully recovered. 

 

However, there are situations when devices sell at fair market prices or premium. This usually occurs when

• Buyer has an immediate need for device  
• Device is being purchased by an end-user

So how do you decide whether to sell the device, or keep it until the right buyer pops up on the radar?

 

Here 3 biggest factors that should influence your decision

1. Equipment type
2. Future use potential 
3. Timeline

Let's explore the Big 3 in more detail.

 

Device Type: 
There are many types of equipment - general, surgical, lab, diagnostic, the list goes on. 

Within this mix, there are individual unique devices such as O-Arms, Portable Heart-Lug Machines and Mobile Hyperthermia Treatment Systems to name a few. 

Provided such devices are in working condition and supported by their manufacturers, it is possible to sell them 25%-60% above fair market price.  

 

The keys to getting a good sale price are

• Correct Sales Strategy
• Global Market Use and Demand Knowledge
• Communications
• Targeting the Right Buyers
• Patience

Posting an Internet listing and sending few emails to vendors that fix medical equipment and soliciting an offer will unlikely yield any stellar results.

 

Future Use Potential:

Yes, your organization may have paid a lot of money when they purchased this device. Yes, it may be in pristine condition and well maintained, but offers you are receiving don't come close to what you feel the device is worth or asking prices you see on the Internet for same device so you decide to keep it.

 

It's a tough predicament but if you're not going to use this device, you should entertain a lower offer as it sits there, it will loose all remaining residual value and in the end, you will pay to have it removed and scrapped. 

 

Please don't assume you will get 40-50% of what you paid in 1995 especially if the device is no longer supported by the manufacturer. 

 

Also, keep in mind MD Buyline and asking prices on DOTmed do not reflect fair market price for end-of-use medical devices.  You will need to determine fair price by doing your own analysis, monitoring the market, following auctions and constantly communicating with multiple buyers.   

 

Timeline:

Occasionally, even with a good strategy, you will have no choice but to cave in to your timeline. Most unique devices eventually sell. It’s just a matter of time it takes to find the right buyer willing to pay the right price.

 

However, if space is an issue or an asbestos abatement project is underway, time may not be on your side. Therefore, timeline will impact duration of the selling cycle.

 

If you pull the plug on selling cycle because you don't have time to chase buyers, answer their questions or just want device out, then you should probably delegate or outsource this job. 

 

Premature sale of medical devices only limits revenue that can be generated from capital investments made by your organization.    

 

At the end of the day, everyone wants a good deal. Everyone negotiates. Everyone hustles.  Ultimately, it is up to you or your trusted partner who works on behalf of your organization to sell end-of-use medical device equitably and smart.

 

 

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, looking for suggestions, ideas or resources, please contact us and we will be glad to be a resource. 

 

To learn more about benefits of a managed Medical Equipment Decommission Program, please visit www.ecomedhtm.com or send an email to med@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.