Ownership or usage: How to make the best decisions when financing medical technologies
- By Philips
- March 03 2025
- 2 min read
In an increasingly high-tech world, healthcare providers need to procure the most advanced medical technologies to stay competitive and provide quality patient care. As providers invest in innovative technologies, medical equipment and infrastructures, they must carefully consider their financing options. In an environment of constrained budgets for capital investments, choosing how to finance new technology can be as important as choosing the technology itself.
At-a-glance:
- What to look for when choosing a healthcare financing partner
- The pros and cons of financing through ownership and usage
- Financial models that maximize equipment lifecycle value
- What Philips Capital offers as a financing provider
Whether a provider is looking to finance to own or use its next MR, ultrasound fleet or telehealth solution, finding the right financing partner is crucial, in order to attain a longer-term strategic partnership to improve investment value and return.
Today, financing mechanisms have evolved towards consumption, capacity, usage-based and risk-sharing models. However, the finance decision to own or use medical equipment usually depends on the financing structure, capital position and business strategy of the healthcare provider. There are pros and cons for both options.
How to weigh up ownership versus usage financing options
Usage-based: Financing through vendor leasing or healthcare-as-a-service models New financing structures and healthcare-as-a-service models offer flexibility, cost efficiencies and improve sustainability in today’s dynamic healthcare environment
Pros include:
- Make things simpler: Rely on the equipment supplier to ensure high operational uptimes.
- Maximizing cash flows: Structure financing contracts to optimize operational cash flow and budget requirements.
- Maintaining capital reserves: Minimize capital outlay on investment and down-payment needed to acquire complex technologies and lab/room preparation. Managing and reducing equipment maintenance costs: Bundle maintenance fees and repairs in the usage contract making costs and downtime predictable and plannable.
- Integrating multi-vendor systems: Include third-party products and solutions in the overall financing structures to simplify payment plans and optimize efficiencies.
- Staying competitive: Replace medical equipment after five to eight years with next-generation systems on a new contract or upgrade the original equipment within existing agreements.
- Having right-to-own equipment: Take ownership of equipment at end of financing contract through flexible end-of-term options.
- Making healthcare more sustainable: Maximize the lifetime value of technology through management and maintenance programs and leave recycling and disposal activities to the financing partner.
- Leverage flexibility: Structure financing contracts to provide more lifecycle options and opt to include services.
Cons include:
- Usage costs may exceed direct cash purchase cost: Continued lease or usage-based payments may exceed the cost of a direct cash purchase since usage costs are split over the long-term, although this can be addressed by leveraging end-of-term options
New financing structures and healthcare-as-a-service models offer flexibility, cost efficiencies and improve sustainability in today’s dynamic healthcare environment.
Ownership-based: Financing with a loan or extended payment terms from vendor, bank or other credit institution
Pros include:
- Reduce costs for technologies with a long lifecycle: Keep using equipment that has exceptionally long-life expectancy once the loan is fully repaid.
- Full latitude to adapt or adjust equipment: Modify equipment without seeking external approval from financing institutions or banks.
- Ownership = equity: Add another high-value asset to business equity once the loan is fully paid off.
Cons include:
- Pay higher upfront costs: Lenders may require a down-payment for high-tech equipment, depleting capital reserves.
- Risk of high repair costs: There is potential for increased maintenance costs and revenue disruption on equipment without a warranty guarantee.
- Risk of equipment obsolescence: Equipment may be outdated by the time the loan is fully repaid or have a very low resale value.
Which financing structures maximize equipment lifetime value?
There are many innovative financing structures that solve a broad range of healthcare procurement issues, from hospitals requiring frequent equipment upgrades to practitioners setting up or expanding their facilities, and for all care providers facing capital constraints.
Strategic partnerships enable equipment suppliers and healthcare providers to share responsibility for planning and managing the complexity of medical technologies based on current and future needs. Similar to leasing models, they combine equipment, devices, maintenance and services into a flexible offering with transparent financing terms and conditions.
Leverage the strategic partnership and benefits of tailored financing solutions with Philips Capital
New financing structures and healthcare-as-a-service models offer flexibility, cost efficiencies, and improved sustainability in today’s dynamic healthcare environment. Financing contracts can be tailored to provide more lifecycle options, such as equipment upgrades, capacity management, preventative maintenance, and additional services, ensuring that care providers can meet their specific needs and ultimately deliver better patient care.
With these models, the equipment supplier owns the equipment, and payments are linked to usage or service-level performance indicators, ensuring high operational uptimes for healthcare facilities. The lifetime value of financed technology is maximized through sustainable management and maintenance programs integrated into financing solutions, including cost-effective upgrades, replacements, and end-of-contract trade-ins, which extend the lifecycle of the equipment.
By partnering with Philips Capital, healthcare providers can leverage these tailored financing solutions to maximize equipment value while maintaining financial flexibility. Philips Capital’s deep expertise in both medical technologies and financing strategies ensures that healthcare organizations have the right support to achieve their strategic goals and deliver enhanced patient care.
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Footnotes
- Deferral Payment Program: Moratorium of up to 6 months possible, subject to credit approval on a case-by-case basis; offer valid for a limited time and subject to changes without notice.
Disclaimer
Results are specific to the institution where they were obtained and may not reflect the results achievable at other institutions. Results in other cases may vary.