Medical Equipment Lease Agreements
Leasing medical equipment has several advantages for a medical practice: quick access to the newest technology, rapid improvements to patient care, and a new, high-tech revenue generation vehicle that you might otherwise have not been able to afford for a long while. Having the most technologically-advanced equipment will let your patients know you’re offering the best, most timely care available and leasing this equipment means your budget won’t be depleted before the technology can even begin paying for itself.
Other Reasons to Lease Medical Equipment
- You won’t be stuck with maintenance and repair costs. A lease will cover those.
- Leasing requires little upfront cash.
- Payments can be written off as a tax expense. If equipment is purchased, depreciation must be calculated over the life of its use.
Payments can usually be structured to match your cash and revenue flows.
Beware These Leading Pitfalls
While leasing has many advantages, it is important that you use caution when entering into a medical equipment lease agreement. Watch out for the following stumbling blocks during the equipment leasing process.
Make sure that any upfront deposits will get returned if you do not get approved for financing. A leasing company that utilizes this arrangement will justify it by claiming your unreturned deposit is needed to cover their administrative costs.
Make sure there are no clauses that state the medical equipment lease agreement auto-renews if you don’t let them know about your intent to terminate the contract. Evergreen clauses will state that if you fail to provide notice within a certain amount of time of your intent to terminate the agreement, you’ll be stuck for another term. Not catching an evergreen clause prior to signing a leasing contract could make leasing medical equipment much less affordable. Also be aware that most leases are multi-year and generally do not have a termination without cause provision. If there are performance issues that might permit termination for cause documentation should be kept that provides evidence of notice to the vendor and any failure to make needed repairs.
Interest Rates Seem Too Good?
If a leasing company advertises outrageously low rates, they are probably too good to be true. They might offer very low rates to some clients, but don’t assume you will be eligible for this rate.
Beware the On-Line Calculator
Leasing companies that offer customers an on-line calculator to determine payments usually provide you an interest rate that is, again, not actually attainable. This is another example of bait and switch. Once you begin the application process, you may be faced with a far more expensive monthly payment.
Aside from the nuts and bolts of leases, if there is any thought to share or sublease the equipment to another provider, consideration should be given to both Stark and Anti-Kickback law and regulation for which there are exceptions and safe harbors to meet for compliance purposes.
If you’re considering leasing equipment for your practice, it’s best to have a board-certified healthcare attorney from our Dallas health law firm review the lease agreement prior to making a commitment. We can assist you with this service and help with medical equipment lease agreement negotiations.