Let’s talk about used medical equipment fair market value, or FMV. At some point, every health care organization attempts to establish FMV of used medical devices prior to reselling or upgrading them.
If you engage an appraiser to establish FMV, you will likely receive a value suitable only for accounting purposes and completely unrelated to real price at which your device will resell on secondary market.
Its trade-in value, dealer assessed FMV and liquidator projected FMV can vary by as much as 100%.
So, if the appraiser provided FMV cannot be used as a benchmark and other values are inconsistent, what is the appropriate resale price of your medical device?
In used medical device marketplace, FMV is highly correlated to basic economic principles of supply and demand. Its value also depends on prospective buyer’s profile, their professional affiliations and location. And, it is impacted by cyclical price fluctuations, FDA recalls and public health ailments.
For example, supply shortages of IV pumps during an influenza season will result in a significant price increases of pumps regardless of the appraiser provided FMV or asking prices published online.
Also, the same prospective buyer offering to buy a device from a hospital, or an auction will assess its FMV lower if they are purchasing for inventory. Now, if they have an end-user to whom they will immediately resell this device, they may offer to pay a considerably higher price.
This exact situation recently took place in our office.
We were selling a bone densitometer for a client. A buyer submitted an offer that was below the system’s assessed resale value. Buyer justified their offer by stating that bone densitometer lacked a key feature, was expensive to de-install, crate and transport across the country to their facility.
We presented the offer to our client but advised them to accept only if the system had to be removed immediately. Per our suggestion, our client rejected the offer.
Few weeks later, the same buyer inquired if the system was still available. After learning that it was, they increased their offer by 210%. The reason for increase was because this time they were working with an international end-user who despite the absence of a key feature still wanted this system.
So, with FMV being arbitrary, original purchase price carrying absolutely no weight on the secondary market, how can health care organizations establish resale value for their medical devices?
Here are 5 basic suggestions to consider:
- Resale value depends on supply and demand of “like” or similar devices. Study the market and determine if there’s a surplus or deficit of equipment you’d like to sell.
- Work with buyers who need equipment instead of buyers who purchase it for stock.
- Avoid remarketers, resellers, companies that “remove equipment for free” and liquidators.
- Refrain from selling to service companies that fix equipment.
- Independently establish a resale price range. Don’t rely on OEMs and dealers to tell you how much your equipment is worth. Establishing an unbiased resale price range value will help you assess market offers.
While used medical equipment FMV is an arbitrary number, these basic proven suggestions will help you resell your medical devices on the secondary market at equitable prices.
EcoMed works exclusively with multi-hospital health care systems, independent hospitals, GPOs, ASCs, ACOs, imaging centers and healthcare providers by managing resale and transportation of medical devices removed from clinical use. Contact us for FREE resources that will help you make the right decision on how to resell medical devices that were removed from clinical use.