For practices that want to furnish their offices with state-of-the-art equipment without the risks of purchasing it outright, leasing presents a smart alternative, according to a recent Medical Economics article written by attorney Raymond W. Dusch, JD. In addition to protecting a practice from the "obsolescence factor," he writes, leasing arrangements offer physicians financing and payment flexibility that may be more attainable and attractive than borrowing money from a bank.
Leasing also looks good on a practice's balance sheet, Dusch explains, because lease payments show up as current operating expenses, allowing the lessee to show fewer debt amounts on the books. Most leasing companies also are willing to work with practices to roll associated costs, such as training, service contracts, and consumables, into payments. Even more, practices often can arrange to stagger their lease payments to correspond with seasonal cash flow. Some vendor contracts even allow clients to upgrade at any time without an early termination fee.
It is important, however, for practices to understand all of the details of leasing agreements. Even with provisions that are "not particularly sinister," practices should look out for onerous late fees, automatic renewals (or "evergreen provisions"), and "net leases" in which the lessee assumes responsibility for all expenses associated with the equipment.
Practices should also note that, similarly to used car loans, they will likely still have to make payments to finance companies even if the equipment performs poorly or not at all. In addition, a physician's blanket insurance policy does not necessarily cover newly leased equipment, in which case a rider should be added, naming the leasing company as the loss payee.
To learn more:
- read the article in Medical Economics