Why GPs and small clinics need to consider equipment leasing
Investors in the healthcare sector can lease moving assets such as ambulances and motorbikes. PHOTO | FILE |
What you need to know:
For us in healthcare two kinds of equipment can be leased, moving assets (ambulances and motorbikes), and fixed equipment. The former two in particular are cash consuming headaches for most hospital administrators.
At the height of the Sh38 billion cancer screening medical equipment leasing deal, columnist Jaindi Kisero opined in two articles on the benefits of leasing and its cost savings to public coffers. That deal aside, the local private health sector has a few things to learn and gain from the leasing world.
As a relatively new concept in Kenya, particularly in healthcare, its uptake hasn’t been high. It is still treated with suspicion by many decision makers.
In a bid to demystify medical equipment leasing, we last week organised a gathering of players in the health sector to deliberate on healthcare cost reduction and how leasing can help get the missing diagnostic tools into the hands of doctors, especially those outside urban areas.
The Norms and Standards, a guideline document on the staffing and equipment needs for quality health delivery, shows that most private and public health facilities may not be equipped to desirable levels. One key obstacle is lack of financing for small facilities.
The current model of outright equipment purchase is not tenable for small entrepreneurs and many public health facilities.
On average, it takes a GP clinic three years to attain “basic equipment” status. During that time patients do not get optimum diagnostic services.
This contributes to referrals and is the reason for missed diagnosis cost escalation and poor interventional outcomes.
By the time a definitive diagnosis is arrived at, it is sometimes too late. From one of the presentations it emerged just how little we understand of this novel concept. What is leasing? When is it best to lease? and how can we make it better? are three questions that stuck.
According to Mr Paul Njeru, regional manager of Vaell (Vehicle and Equipment Leasing Ltd), several types of leases exist. Each has its advantages and weaknesses, but a lease can be tailored to a particular client, product or sector.
Raising funds
Two types of health businesses stand to benefit from leasing: startups and the government. For the former group, which accounts for over 70 per cent of GPs, leasing is advisable because they have limited cash flow. With so many things to buy raising funds to buy equipment is not easy.
The second group represents large organisations with unpredictable cash inflows and subsidised healthcare, such as county governments.
As I write this article counties are grappling with cash issues occasioned by a delay in remittance from the central government. They also have huge expenditure needs after inheriting a dilapidated health system. The health wage bill alone gobbles up about 65 per cent of some county health budgets.
As Mr Kisero opined in his article, depreciating assets and projects that need huge capital outlay are better off run on a leasing model.
For us in healthcare two kinds of equipment can be leased, moving assets (ambulances and motorbikes), and fixed equipment.
The former two in particular are cash consuming headaches for most hospital administrators. One needs to look at parking bays of public health facilities costs to see why leasing is an option.
Secondly is medical equipment; varying from precision tools to laundry equipment and furniture.
But is leasing cheap or are efficiency and convenience its main points? Next week we analyse two scenarios to find out.
