The day you purchased that first piece of equipment was the day you started building asset value in the practice and this continues through the years as long as the practice or ASC exists.
How much value? It is important to remember that price does not equal value. Maximize the value of your practice assets by going after the best value and not the least expensive you can find. It is important to remember that price does not equal value. You maximize the value of your business by obtaining equipment that is the best value, not necessarily the equipment at the best price, and you maintain that value by caring for that equipment with continued preventive maintenance and cleaning to keep it in excellent condition.
Did you purchase the best available piece of equipment or the best-priced? Is it cleaned and adjusted on a regular basis or only when it needs repair? Is it kept covered when not in use? Was it purchased new or used?
Any physician who wants to know the bottom-line values of his or her practice assets must ask questions. Every item purchased – from the slit lamps in the exam lanes to the chairs in the waiting room to the copy machine paper – is an asset that adds dollars to the bottom line of your practice.
When you are considering purchasing a piece of equipment, think about long-term value, not short-term economy. In the long term, the better the equipment, the more value it will hold for you down the road when you sell or bring in a partner into the practice.
Take a slit lamp as an example. There are a range of choices available, from the expensive models that are considered the standard of care to the more economical basic units. Buying a good name-brand piece of equipment will save a lot of money in the long term and provide the quality you want. If you are buying a used piece of equipment, make sure it has been well cared for and by all means, get some type of warranty.
When buying equipment from another physician, you are on your own after the purchase, so inspect it carefully. If you are not able to inspect it, get a written money-back guarantee that everything works properly. Stipulate that if it does not work properly as stated, the seller will agree to pay for a technician to come and fix it at no cost to you. Get this agreement in writing to avoid confusion later. If you are buying from a used equipment dealer, get a six-month warranty with everything spelled out and agreed to. Once again, get it in writing.
Equipment needs preventive maintenance on a regular basis, just like the car you drive. Even the slightest bump can create a misalignment of optics, or a jam can occur due to dust collection on a part. Regular cleaning will extend the life of your equipment and keep it operating at peak efficiency when the patient is in the exam lane.
The techs should wipe down all diagnostic equipment and make sure it is covered at the end of the day. Once a month, have the techs go through each piece of equipment and thoroughly clean each piece of equipment, even using cotton swabs to clean corners and hard-to-reach areas. Annually, have a repair technician come in and clean the insides and make sure all optics are properly aligned.
Retail, Wholesale, Fair Market Value
Retail value is the price that would be paid for a piece of equipment through a distributor. This includes the cost of the equipment, plus profit for the distributor, plus commission for the salesperson and sales tax for your state.
Wholesale is the value of the item excluding profits, commissions and sales tax. If you are selling an item for a used equipment company be prepared to be offered the lowest dollar amount possible so the company can maximize its profits. Keep in mind that this figure is negotiable.
Fair market value is the dollar amount at which the item would be transferred or valued between two practices in a merger situation or if you are selling to another physician. Fair market value is determined by four criteria:
- Age of the item
- Operational condition
- Cosmetic condition
- Market availability
Using these four criteria to value the item, plus eliminating commissions and profits will give you the value of an item exchanged between one practice to another practice with no middle-man involved.
When buying, selling, or merging practices, partnerships or retirements, this is the value that should be used to present a fair value range to everyone involved. When involved in any of the above, count everything in the office, including computers, copy paper, pens, paper clips, etc. Everything in the practice or ambulatory surgery center (ASC) has a value so make sure you receive full benefit of what has been invested.
About the Author
Jim Hamlett recently retired as the owner of Asset Appraisal Service. Until his retirement, he had been involved in the medical equipment and supply field in sales and management since 1981, conducting asset appraisals of practices and ASCs for 28 years.