Leasing and rental boost frees up NHS 'frozen capital'

The annual growth rate for medical equipment leasing and rental has now outstripped growth in the MedTech market as a whole, freeing up a large proportion of the ‘frozen capital’ crippling the UK’s healthcare system, a new report is expected to reveal.

Siemens Financial Services will soon publish its research paper Melting the Iceberg , which will show the global medical leasing market is currently expanding at a rate of 6.5% a year, outpacing the 4.98% growth rate of the global medical device market.

In light of stretched public capital and healthcare budget pressure, healthcare financial managers can no longer afford to tie up or freeze precious and scarce public sector capital through outright equipment purchase

The revelation comes as a lack of capital forces health trusts to adopt new procurement techniques, particularly to fund high-value equipment such as MRI and CT scanners, many of which are due to reach the end of the lifecycle within the next two years.

Through leasing and rental agreements, the organisations can instead put the costs through as revenue spread over a number of years. The contracts are also becoming increasingly popular as they are often worded to ensure equipment is automatically upgraded or replaced as technology improves over the life of the contract.

The report comes on the back of an earlier Siemens publication which calculated that the amount of capital effectively ‘frozen’ in the UK healthcare system due to outright equipment purchase was close to £2billion - £618m in diagnostic imaging equipment and a further £1.3billion in other medical systems such as endoscopy, anaesthesia, dialysis and surgical instruments.

David Martin, general manager for Siemens Financial Services in the UK, said the direction of travel revealed in the latest report showed trusts were adapting to the new procurement landscape and that suppliers were providing better flexibility and value for money.

Growth in the global medical leasing market is outperforming that of the medical device market, slowly chipping away the mountains of frozen capital. In a climate of fiscal austerity, asset finance will prove to be a particularly attractive financing tool

He added: “The magnitude of frozen capital in the NHS is still very high. In light of stretched public capital and healthcare budget pressure, healthcare financial managers can no longer afford to tie up or freeze precious and scarce public sector capital through outright equipment purchase. They are now prompted to look for efficient financing techniques such as leasing and rental for capital asset acquisition, where the cost of equipment can be spread in regular monthly payments over its useful lifetime, aligned with actual efficiency gains enabled by up-to-date medical technology.

“As illustrated in our report, growth in the global medical leasing market is outperforming that of the medical device market, slowly chipping away the mountains of frozen capital. In a climate of fiscal austerity, asset finance will prove to be a particularly attractive financing tool.”

Research for the report, which will shortly become available online took place between February and April this year across the UK and eight other countries including France, Spain, China, Turkey and India.