Rise of multivendor service troubles scanner refurbishers

June 21, 1995

Could OEMs try to corner used market?Increasing interest on the part of OEMs in providing multivendorservice and asset management programs has some equipment refurbishersnervous. They worry that OEMs may try to corner the market onused

Could OEMs try to corner used market?

Increasing interest on the part of OEMs in providing multivendorservice and asset management programs has some equipment refurbishersnervous. They worry that OEMs may try to corner the market onused equipment, choosing to junk old systems taken in on tradeor to sell the equipment to brokers at inflated prices.

Either action could create a shortage of cost-effective usedsystems. Such a shortage might help buoy the prices of new equipmentwhile hurting companies that supply refurbished equipment to cost-consciousbuyers, according to Thomas Norman, president of the InternationalAssociation of Medical Equipment Remarketers.

"The growth of OEM involvement in servicing, buying andmanaging equipment represents a threat to every broker, refurbisherand leasing company," said Norman, who is also vice presidentof asset management for Ziegler Leasing of West Bend, WI.

The contract won by GE HealthCare Services to sell, serviceand manage imaging equipment for the Columbia/HCA hospital chainset off alarm bells in the refurb community, according to Norman.

"In such a position, a company can control a big chunkof the industry," he said. "If they want to, they couldmake sure that used equipment doesn't see the light of day again."

Refurbishers have a lot to lose. Growing cost consciousness,the availability of quality refurbished systems, and the increasedcredibility of refurbishers and resellers have led many prospectivebuyers to look seriously at used equipment.

A conservative estimate of the annual growth in sales of refurbishedsystems is 15% to 20%, according to Kenneth Halverson, presidentof Comdisco Medical Equipment Group of Rosemont, IL, a major lessorand refurbisher of imaging equipment.

Halverson is skeptical that OEMs could shut down this growthby stemming the flow of used equipment into the market.

"There are several billion dollars' worth of currentlyinstalled equipment that customers own, so I don't think you couldput enough fingers in that dike," Halverson said. "Idon't see any issue with the supply of equipment out there forthe refurbishers."

Robert McGee, president of x-ray refurbishing pioneer Serviscopeof Wallingford, CT, is similarly skeptical.

"You would have to control a majority of the market andthere are thousands of hospitals," McGee said. "I think(the concern about availability of used equipment) is a bit ofa panic reaction to GE's move with Columbia/HCA."

But Norman disputes whether OEMs would have to control sucha large number of hospitals. Despite the growing popularity ofused equipment, the refurb industry is ready for a shakeout, hebelieves.

"There are too many refurb centers; there are too manybrokers," Norman said.

Given that overcapacity, controlling the flow of used equipmentfrom even a significant chunk of the market -- such as the 300hospitals in the Columbia/HCA chain -- could have a major impact,according to Norman.