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Key Considerations for Health Care Equipment Leasing in Today's Market

By Scott B. Davis and Phillip J. Robinson

The health care industry is going through a period of unprecedented change and uncertainty due to the slow-to-recover economy, tight credit markets, increasing costs and health care reform. These challenges are substantial and are expected to continue well into the future as health care reform unfolds. We know that major health care policy changes create winners and losers, as the Balanced Budget Act of 1997 demonstrated. The impact of recent health care reform legislation will be much broader.

In the midst of this turbulence, health care continues to be a very capital-intensive industry. Health care providers, including hospitals, physician practices, skilled nursing facilities, long-term care, home health care, labs, imaging centers, etc., must not only maintain their existing facilities, but also keep up with continuous advances in medical equipment and information technology (“IT”) if they hope to stay competitive. However, providers' access to capital for equipment purchases is being restricted, making leasing an attractive option for capital-starved and cash-strapped health care organizations. For leasing companies, this is clearly good news. While there are a number of complexities to operating in the health care leasing arena, there also are more than ample opportunities. Those leasing companies that are proactive in mitigating certain industry risks have an opportunity to be very successful in this space.

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