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 www.ecomedhtm.com, send us an email or call Toll-Free 855.234.5600. 

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.