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.  

Keeping Your Options Open: Part I

Every healthcare facility has a handful of medical devices that at some point need to get replaced. Some of those devices are “used and abused” and deserve a proper burial, but some still have a pulse.

The question is, will the ones with the pulse be handled just like their battered counter-parts? 

Will the Hospital Departments trade them for shiny-new next generation models without consulting Corporate Office? 

 

Will they be forever retired into an offsite barn used as a storage or, live in the hallway until Joint Commission arrives and then get quickly relocated into a nearby closet or worse, a bathroom (true story!)?

There are five alternatives to consider in addition to the antiquated trade-in or the "out-of-sight, out-of-mind" methods when replacing end-of-use medical devices. 

Each has its pros and cons but all are better alternatives than locking equipment in barns or using as foot stools under the nurse’s station.

The five most common alternatives are:

1. Internet Sales
2. Auctions
3. Hospital Site Sales
4. Direct Vendor Sales
5. International Container Load Sales

A 250 bed hospital has an average of 3,250 devices and since majority of devices are different, different selling strategies should be utilized. For the sake of keeping interest and time, let’s explore “Internet Sales” option in this post and reserve the rest for next time. 

 

Internet Sales Pros:

• Setting Asking Price: let’s face it, we all have access to the internet and if we can
  
  self-diagnose the root cause of that annoying cough, we can probably determine ballpark price of the equipment.

Quick Tip: Prices published on websites such as eBay and DOTmed should be discounted by at least 33%.  Prices listed on these platforms are almost always negotiable which is why it is imperative for facilities to maintain own database with prices received for sold devices. Also, please don’t assume that asset book value Finance Department has on record is the same as street value. It’s not!

• Unlimited Selling Cycle: you’re not bound by time limit and can continue selling until you receive a price that meets your expectations.
• Reaching Global Buyers: you expand your reach beyond vendors personally known to you or working for your facility to a wide range of prospective buyers located in US and abroad.
• 24 Hour Visibility: whereas online auctions and site sales provide limited visibility hours, the internet is always open.
• Reduced Commission/Service Fees: establishing an online store can cost as little as $0 or as much as $200/month, depending on the platform used, but that pales in comparison to 20-60% fees charged by providers offering online auctions and equipment consignment/storage services. 

Internet Sales Cons:

• Time Consuming: it can get time consuming (and irritating for anyone holding a full time job) to respond to prospective buyer’s inquiries, reply to emails, return phone calls, host inspections or verify if the screw holding the plastic case on the bottom of the unit is grey or silver.

• It takes approximately 2-4 hours to sell common general biomedical device.

• It takes approximately 40-60 hours to sell a fixed imaging system.

• It can take months to sell a unique, specialty-focused system or laser.

Of course, sale process can be decreased if you give away the system for the cost of de-install, but if you’ve read this far, I don’t think that is your goal.

• Choosing Selling Platform – there are plenty of online platform to choose from and it appears as if a new one pops up every day. From medWOW, DOTmed and eBay to SoluMed and MediBid just to name a few. Each platform has its own advertising criteria, fee structure and customer traffic that must be evaluated.
• Payment Processing: when selling online, buyers need to have payment options and at very minimum, facilities need to be able to process payments by credit card, PayPal, domestic and international wires.
• Logistics: managing logistics is a pain! And it will be even more painful if buyer is located abroad. It’s not a rocket science to figure out how to ship a 30lb box to Poland, however the process will take on a life of its own when the job calls for de-installation, crating and shipping via ocean-carrier to Australia or determining which consolidated clearing house to use for a shipment to Mexico.

There is definitely some effort involved when selling end-of-use medical devices on the internet, but the financial benefits almost always outweigh the labor involved. 

 

Don’t be afraid to incorporate Internet Sales into your equipment decommission program. Even if you determine it is more beneficial for your facility to trade-in that end-of-use asset, the vendor taking it on a trade just may be more generous with trade-in value if they know you have other options.

 

If you would like to learn more about the benefits of an in-hospital, centrally managed Medical Equipment Decommission Program, please visit www.ecomedhtm.com or send an email to med@ecomedhtm.com.