Factors to Consider When Purchasing Medical Equipment for Your Health Care Practice
Purchasing a piece of medical equipment is often the largest single-item expense for a health care practice and must be treated as any other critical business decision. The practice’s due diligence investigation must include independent research as to the quality and function of the equipment, a targeted cost-benefit analysis and a thorough review of the lines of business that the practice intends to offer with the new equipment. Unfortunately, practices tend to rely on the “pitch” and representations of the sales rep presenting the equipment and often lose track of the analysis that must be conducted.
Over the past few months I have been meeting with an increasing number of practitioners that, after entering a lease and/or finance for a very expensive piece of medical equipment, find that their practice (a) does not have a sufficient patient base to test/treat with the equipment, (b) has a sufficient patient base to test/treat with the equipment but the testing/treatments do not bring in enough revenue to support the cost of the equipment, (c) need additional equipment, software, and/or professionals to use the new equipment and/or (d) are not being reimbursed by insurance carriers for the testing/treatments. Many practitioners note that the sales reps who originally presented the equipment made certain misrepresentation and/or omitted certain information which later led to the practices inability to recover the expected revenue (i.e. “the rep did not tell me that I needed to buy the software for the equipment separately” or “I did not know that the manufacturer was distributing coupons which I would be obligated to honor.” Most of these practitioners find themselves before a court where the signed contract reigns supreme.
For these reasons, it is always important to approach any medical equipment purchase with the following questions in mind:
- Is the testing/treatment indicated by the machine a “covered” procedure by major insurance carriers? In particular, practices will need to determine whether carriers readily reimburse for the testing/treatment implicated by the machine and what the average rate of reimbursement is.
- Is the testing/treatment implicated by the machine considered “experimental” by major insurance carriers for the purposes intended by the practice and what is the “medical necessity” threshold for performing the testing and/or treatment? In most cases, procedures considered “experimental” by the insurance carrier are not payable without prior authorizations, if at all. Moreover, practices will need to determine how common the intended testing/treatment is and what population of patients are authorized to receive the testing/treatment in the ordinary course of business.
- What CPT codes and/or diagnosis codes are implicated for the equipment? In particular, practices will need to find out whether the intended CPT codes are considered exploratory "test" codes and what diagnosis codes support the intended CPT codes.
- What amount of tests/treatments must be performed per month to cover the monthly expense associates with the equipment and whether the practice's current patient base requires that amount of testing/treatment? This information is necessary to budget for the new medical equipment.
- Did the manufacturer/distributor of the equipment issue any rebates and/or coupons to end-users that the practice will be obligated to honor? If possible, the practice must try to narrow down the manufacturers/distributors prior and future incentives to end-users and incorporate the manufacturers/distributor representations into the written agreement.
- Is there any additional software, training and/or components that the practice will need to purchase prior to or after using the equipment? Will the manufacturer/distributor provide software/hardware updates when available? Again, the practice can negotiate these issues and memorialize them in the written agreement.
