With hard times depressing everyone from Wall Street to Main Street, the once routine act of buying and financing diagnostic imaging equipment suddenly looks like an extraordinary feat.
Most planned purchases are still going through, but specific experiences drawn from facilities across the country indicate that successfully implementing new programs requires a motivated buyer, a willing financer, and more cash and creativity than were needed before last year's financial meltdown.
Recent trends also show that if you want to buy a $2 million MR or other high-tech scanner, the odds of completing the deal are higher if you are associated with an acute care hospital.
Interviews with officials of the captive financial companies representing GE, Philips, Siemens, and Toshiba reveal remarkable consensus about the events that led to the current credit crunch. Imaging equipment sales began to fall as soon as providers understood how the Deficit Reduction Act of 2005 would influence outpatient imaging. Medicare spending for outpatient imaging fell 13% in 2007, the first year the DRA was in effect.
Many plans to establish services or to replace aging scanners were canceled, as independent outpatient imaging providers felt the full force of Congress's decision to pay the lower of the two rates set by the Hospital Outpatient Prospective Payment System and the Medicare Physician Fee Schedule for imaging procedures. Anxiety about more tinkering with Medicare payment formulas and the possibility of comprehensive healthcare reform also engendered caution, the vendors said.
The historic balance of demand for equipment by freestanding clinics and hospitals then tipped toward the hospital sector, as outpatient facility operators decided against buying new equipment. Before 2008, diagnostic imaging centers accounted for 25% to 35% of equipment sales registered by Toshiba America Medical Systems. In 2008, they generated only 10%.
Meanwhile, hospitals and healthcare systems had their own problems. Many nonprofit facilities were cut off from inexpensive sources of borrowed capital when the market for nonprofit tax-exempt bonds dried up in 2008. Hospital administrators, who were accustomed to bonds with interest rates as low as 1.5%, were forced to look for alternative funding sources, said Timothy Evenson, vice president of sales and marketing at Philips Medical Capital.
Long troubled by low operating margins, hospitals were shaken even more by the long stock market decline through much of last year. The value of nonprofit institutions' charity endowments typically fell about 20%. Charitable giving decreased, and the value of securities held by both nonprofit and for-profit hospitals declined, meaning less cash was available for capital projects.
