Connect with this month's featured Advertisers:

How to buy smart someone else’s former property

Evaluating or purchasing capital equipment in the remarketed – also known as used – market elicits certain reactions.

To the ill-informed and indifferent crowd used equipment carries with it some negative stigmas, some of which are earned and deserved. To the savvy purchaser who knows how to navigate and negotiate the secondary marketplace, however, used equipment can deliver top line revenue projections and fulfill bottom line savings expectations.

Making five- and six-figure purchases in the secondary market isn’t necessarily easier than buying capital new. In fact, it tends to be more challenging. As a result, Healthcare Purchasing News Senior Editor Rick Dana Barlow tapped four experts in the used equipment arena for insights on how to approach it as a sourcing option. John Marquez is president and CEO of Long Beach, CA-based Therapy Remarketing Group LLC, which specializes in remarketed oncology equipment. Knut Fenner is vice president, Proven Excellence Refurbished Systems Division, Siemens Medical Solutions USA Inc., Hoffman Estates, IL. Bob Mighell is co-founder and president, Marysville, WA-based World Medical Equipment, which specializes in surgery-related secondary equipment. Martin Zimmerman is president and CEO, Chicago-based LFC Equipment, which specializes in used imaging equipment, primarily computed tomography scanners.

Marquez, Fenner, Mighell and Zimmerman all weighed in on the benefits of the used equipment market, provided healthcare facility materials managers do their homework.

FENNER: Only the OEM knows the service history of the equipment; has access to original spare parts, test procedures and test equipment; has access to latest software updates; has the knowledge and expertise to know how exactly the equipment works; and guarantees an in-depth refurbishing process, which includes the exchange of worn parts with original spare parts, testing with original test equipment and procedures and a complete system check.

MIGHELL: Don’t confuse ISOs with refurbishing companies. ISO stands for independent service organizations and they primarily just service equipment. They do not, in general, sell equipment. OEMs, like STERIS, can have their own service department, which would not be considered an ISO since they are not ‘independent’ from the OEM, as well as have their own refurbishing organization.

ZIMMERMAN: Look at all of them. There’s no one answer. The OEMs are almost always going to be the highest price because they are closest to new. You can go to a third party, which gets equipment from the same places, but have the OEM check it out. If ISO provides warranty, then you have to ask all of the same questions. Who does the service? Their experience? Normally, money can be saved if there’s no difference at all.

MIGHELL: Reading magazines is a good start but trade-shows are also a great place to find out about different refurbishing organizations. Networking among colleagues who work at other facilities is also a good source for quality companies.

FENNER: Recommendations from colleagues and other facilities, IAMERs and the Internet.

ZIMMERMAN: You can usually tell. Look at how professional they are in the way they advertise and market themselves. How many systems have they sold? Call end users and check them out. Who’s going to cover the warranty? OEM bought? Service history, customer list. It may be someone who worked at an OEM and went out on their own. Is the system in use or stored in a warehouse? ‘Trust me’ is a different game. Assess the risk. Reputable outfits will have plenty of referrals. What’s with the aftermarket service lines? Who handles warranty? Certainly, if anybody’s good it’s going to be transparent. When did they get the equipment, who serviced it, etc. This should be readily determinable. If they hesitate, then drop it.

MARQUEZ: After the first year of manufacturer’s warranty, a service contract on a five-year-old system will be the same as a service contract on a one-year-old system. Generally, once you’re on an annual or month-to-month you’re kind of getting the same level of service outside of the warranty – [time and materials]. What’s covered is the same – parts, etc. Terms may be across the board. Any actuarial risk on the component side is absorbed, and there is little or no cost of operation difference until you get past the seven-to-eight-year mark, and have to replace high-cost items like a klystron in a linear accelerator. That’s why it is almost better to buy a 10-year old used system with a two-year-old klystron, than a six-year-old system with original components. The life expectancy for both klystrons is eight years or so, with the 10-year-old on the right side of the curve, and the six-year-old approaching the end of life for many of its major components. So TRG advises its clients to consider the totality of what they are buying, not just the age or hours. A system is a collective of inter-related components, and one must consider all the variables to arrive at a prudent decision.

MIGHELL: This comes back to the issue of how much you pay for a piece of equipment can affect how much maintenance is going to cost you in the future. We sometimes have facilities tell us that they have a quote for the same pieces of equipment that is much less than ours. I have seen situations where a facility is being offered a piece of equipment for less than the cost of parts I have in my refurbishing process. You have to know that something is not right. We have gained a few loyal customers by following up a few months later and getting them the equipment they needed in the first place once they returned the lowest cost first option.

FENNER: The difference between low price of acquisition versus low cost of ownership mainly lies in the point of costs incurred and the allocation of risk throughout the ownership.

MARQUEZ: I’m not sure it does if you do your homework and only deal with established players with good reputations. My understanding is that a ‘remanufactured’ system may include components or parts that differ from the original OEM configuration. This change is considered significant enough to call it remanufactured and require the registration. Buying a system with some parts that may be unproven or not recommended, you could potentially open up a whole new can of worms. A ‘refurbished’ system is cleaned and re-assembled per the manufacturer’s original guidelines. No re-inventing the wheel here. The registration process in general is not a suitable safeguard, nor is the ‘clearance’ meaningful enough to matter. It is a false comfort.

MIGHELL: Remanufacturers are defined by the FDA as ‘Any person who processes, conditions, renovates, repackages, restores, or does any other act to a finished device that significantly changes the finished device’s performance or safety specifications, or intended use.’ If someone is changing a finished device and altering its performance then I think it is a great idea that they are registered with the FDA. If someone is advertising themselves as a remanufacturer then it would be wise to ask if they are registered and what changes are they making. When we refurbish a piece of equipment, we are very careful to bring that piece of equipment back to the OEM specifications without any changes.

MARQUEZ: In many cases it doesn’t matter. For instance, in TRG’s modality, radiation oncology, if an accelerator is under a full service contract with the OEM, then it is by definition operating at new system spec, or it would have been repaired and any fading component replaced, Think of it as binary. Either it is at spec, or it isn’t. By going through the service records, one can get a pretty good feel for what has been a problem and if the problem has been fixed. If so, why replace a component with another five years of life on it, and pay the cost thereof? What’s the logic? I think many of the arguments of the ‘disassemble, replace everything, return to OEM spec’ arguments are designed to provide comfort for uninformed buyers.

MIGHELL: It is always best to ask a lot of questions. Ask to see photo and written documentation of their refurbishing process. We also photograph the entire process for each piece of equipment we do. This is easily sent to the customer at their request. OEMs do sometimes make it difficult to obtain parts but the OEMs often buy their parts from other companies which will sell the parts directly to us for significantly less than the OEM would charge. We have started own parts department and now sell parts directly to facilities and independent service organizations.

FENNER: The truth is that it is very hard for third-party vendors to refurbish a unit according to OEM specifications since they do not have access to things like original test procedures, equipment or original spare parts. Only the purchase of an OEM-refurbished unit guarantees outpatient care facilities that this equipment has been refurbished and tested according to original test specifications from the trusted OEM, with original test equipment and that original spare parts have been used.

For more information, visit the following Web sites: www.lfcequipment.com, www.siemens.com/refurbished, www.therapyrg.com and www.worldmedicalequip.com.