Radiology is a booming business, with procedure volumes growing in most facilities and locales. And imaging centers need to invest in new equipment to remain competitive and grow. Even a modest plan consisting of a new PET scanner and improvements to the physical plant can easily reach into the seven-figures. What's more, sites that don't do their homework and shop around for the best package may wind up in the undesirable position of paying for equipment long before (and long after) its useful life. That 'just right' package isn't all about the lowest interest rate, other factors like recourse are important.
Healthcare specialty financing companies like CIT Healthcare Finance (Tempe, Ariz.), MarCap (Chicago) and LFC Capital (Chicago) as well as the financing arms of major imaging vendors such as GE Healthcare, Siemens Medical Solutions and Philips Medical Systems understand the specific healthcare market and are often able to structure financing plans to meet some of the unique challenges encountered in the healthcare market. Options include capital and operational leases, non-and limited recourse financing and fee-for-scan arrangements.
THE INDIVIDUALIZED PLAN
Take for example Jersey Shore Radiology Associates, an 11-radiologist practice in Neptune, N.J., that decided to ramp up its practice with new MRI and CT equipment and leasehold improvements.
Practice Manager Laura Turek says radiologists realized the growth potential with the new equipment, but were concerned about making payments during a long build-out phase. Turek compiled information about the practice; including its financial records, practice history, current offerings, goals and information about relationships with local providers; and began shopping around for financing packages.
Jersey Shore opted for a $1.8 million loan through CIT Healthcare Finance because the company created a flexible package at a low interest rate. The deal provided the practice ample time to increase revenue with the new equipment; it called for interest-only payments during the year-long build-out and delivery period, half payments for several months and finally graduated to full payments. CIT also offered non-recourse financing, holding the practice solely responsible for the loan and relieving physicians of personal responsibility if the practice was unable to repay the loan.
KNOW THY TECHNOLOGY
Financing isn't all about dollars. It's also about getting your hands on the latest and greatest technology to maintain or boost your practice. But what happens to the practice that finds itself with a hefty loan balance on obsolescent equipment?
Take the pioneering radiation oncology practice that became the first on the block to launch a PET center 18 months ago with a five-year lease on a state-of-the-art PET scanner. Business grew, but as PET-CT scanners hit the market and physicians became aware of the clinical benefits, the center worried that it could not stay competitive with a PET scanner and faced a tough decision-get by with the PET scanner and potentially be overrun with competition or search for a financing company that could help them out of the situation.
The center completed some market research and presented the data to MarCap Corp. MarCap rolled the first financing package into a new lease and created a capital lease with limited guarantees on a new PET-CT scanner.
With the rapid rate of technology change, this scenario is becoming increasingly common. There are more than a few imaging centers with significant loan balances on four-slice CT scanners that would love to jump into 16-slice technology. One way to limit this situation is to keep up with technology by attending tradeshows like RSNA.
Although few centers take advantage of fee-for-scan arrangements, sometimes it's a perfect fit. Mike Nelson, MD, president and CEO of Breast-Med Inc. (Minneapolis) has tapped into iCAD's (Nashua, N.H.) ClickCad option for some clinics, private practices and small hospitals. The program puts breast CAD technology into the hands of the low volume sites doing 10 to 15 mammograms a day. Each site pays $5,000 to lease the CAD unit and pays $8 per case. Reimbursement in the $18 range allows the site to break even or turn a profit. Nelson points out that ClickCad also makes sense for sites that plan to upgrade to digital mammography in the near future, but want to offer CAD immediately.
MEAT & POTATOES FINANCING
Not every practice needs a creative financial package with an escalating