Asset finance \'the secret\' to funding £300m worth of new medical equipment
Leasing, frameworks and rental solutions vital to enable UK hospitals to replace out-of-date equipment, report states
Hospitals in the UK will need to find nearly £300m over the next two years to fund the replacement of out-of-date diagnostic imaging equipment, research has revealed.
According to figures released this week by Siemens Financial Services (SFS), health organisations will have to invest £294m between 2013 and 2015 to upgrade equipment that is now more than 10 years old.
The cost of these essential replacements is even higher elsewhere in Europe, with Spain facing a £368m bill, and France needing to find around £373m.
Key to meeting this challenge, says the report, will be creating innovative funding systems that address the lack of capital currently available.
At a time of acute budgetary pressure, equipment replacement can often be made affordable through the use of asset finance techniques such as leasing and renting
“Due to legislative reform, demographic change and rising prosperity, demand for healthcare services is rising across the world, fueling the requirement for up-to-date medical equipment that plays an indispensable role in the provision of high-quality healthcare,” says the document.
“This is, however, exerting considerable financial strain on the European healthcare systems where a proportion of medical equipment is currently out-of-date and needs to be urgently replaced.”
Suppliers and manufacturers will now have to come up with new funding mechanisms including offering asset finance, which previous research by SFS has found to be a growing route for the acquisition of high-value medical equipment.
David Martin, general manager for SFS in the UK, told BBH: “Up-to-date medical equipment plays a crucial role in the provision of quality healthcare services and improvement of health outcomes. In particular, diagnostic imaging technologies facilitate accurate, early diagnosis and reduce invasive procedures, making a vital contribution to efficient and effective healthcare provision. It is therefore imperative that healthcare providers urgently replace the backlog of outdated medical imaging equipment. At a time of acute budgetary pressure, equipment replacement can often be made affordable through the use of asset finance techniques such as leasing and renting.
“Asset finance allows healthcare organisations to spread the cost of equipment over its useful lifetime. Such financing arrangements often cover not only the equipment acquisition cost, but also maintenance, service and sometimes consumables. Their growing popularity with healthcare providers around the world indicates the usefulness of being able to align payments with benefits gained.”
Currently, close to £2billion of capital is ‘frozen’ in the UK healthcare sector. Using asset finance, managers can harness private sector capital and spread the cost of equipment in regular monthly payments over the financing period
Leasing is being increasingly popular for funding high-value equipment. While it is most commonly used for purchasing imaging equipment, the past 12 months have seen its use in other areas grow, including to purchase incubators, pressure-relieving mattresses, haemodialysis machines and washer disinfectors.
Chris Wilkinson, head of sales for public sector leasing at SFS, said: “Finance managers in healthcare need to master the challenges of maintaining high service quality standards in the face of budget constraints and efficiency targets.
“Currently, close to £2billion of capital is ‘frozen’ in the UK healthcare sector. Using asset finance, managers can harness private sector capital and spread the cost of equipment in regular monthly payments over the financing period. In addition, such financing arrangements can often incorporate service, maintenance and technology upgrade during the leasing term.”
Framework agreements are also being drawn up, providing another avenue through which trusts can purchase equipment and services.
For example, London 2015 is a £250m and £400m framework agreement to help London trusts looking to replace electronic patient record systems previously delivered under the NHS National Programme for IT.
It was set up after seven trusts in the capital realised that if they were each to go out to the market individually and assess what was available, not only would they be duplicating each other’s efforts but it would be a time-consuming, resource-intensive, lengthy and expensive process. Several also felt that their internal expertise in procuring a solution could be challenged. Instead, the trusts teamed up with Nautilus Consulting, a specialist organisation made up of experienced clinicians and technologists, to manage the procurement and spread the cost.
Helen Parslow, director of business development EMEA at solutions provider, Harris Healthcare, said: “At a time when resources are limited for the NHS and numerous suppliers are wanting and willing to show trusts what they can help them achieve, the rise of the framework should be something that NHS trusts can embrace across the country to get the best possible outcome for all.”
