Financing the future: how leasing is changing healthcare

Chris Wilkinson of Siemens on how the emergence of leasing agreements is enabling the NHS to procure innovative new equipment despite budget restraints

BY Chris Wilkinson, head of sales for healthcare and public sector at Siemens Financial Services in the UK

It is no secret that public healthcare in the UK is experiencing serious pressure to reduce spending in line with government-enforced cuts.

It was announced last year that public health budgets would be reduced a further £200m under measures to ‘bring down public debt’. Such cuts challenge NHS hospitals to provide the quality of care needed to cater for a growing and increasingly-aged society.

Deferring investment in technology can directly impact productivity and quality of care

Indeed, the latest figures from medical services regulators show hospitals have overspent by nearly £1billion. Regulators have described the situation as the, ‘worst financial crisis in a generation’, with the NHS annual deficit heading towards an annual deficit of at least £2billion.

With hospital finance managers under increasing pressure to cut costs; investment in new or upgraded technology is difficult to prioritise.

According to the European Co-ordination Committee of the Radiological, Electromedical and Healthcare IT Industry (COCIR), austerity measures have resulted in the ongoing use of ageing diagnostic imaging equipment across the continent.

Deferring investment in technology, however, can directly impact productivity and quality of care. Lack of investment could mean that the machinery currently in use is outdated and impeding diagnostic efficiency.

Innovations in medical technology offer healthcare organisations the potential to expand the breadth and scale of their capabilities. Advanced medical technology enables faster and more-accurate results, ultimately contributing to improved patient throughput. For instance, integrated technology makes it possible to combine measurement data from computed tomography (CT) and magnetic resonance (MR) scans to be automatically translated into personalised prosthetic devices for knees, hips, shoulders, or other joints, thus opening the door to automated production of custom-made prosthetics.

The new technology promises to sharply reduce surgical planning time for the replacement of diseased joint, while improving the accuracy of associated manufacturing processes. Additionally, independent clinical evaluation has shown that new diagnostic imaging software, which can identify, unfold and label all 24 ribs in the human body while also automatically labelling all 24 vertebrae, shortens radiologists’ reading time by 50% and increases the sensitivity of rib fracture detection by 10%, thus leading to faster, more-accurate analysis and resulting in estimated savings of approximately $12 per use in reduced radiologist reading time.

With budget cuts increasing, hospitals can benefit from flexible asset financing techniques instead of tying up precious capital in equipment acquisition

Although harnessing technological innovations can help realise cost savings through improved patient throughput, keeping pace with such advancements requires considerable capital expenditure. In this context, it is essential for hospital chief finance officers to seek new and sustainable ways of investing without hampering cash flow. Asset finance techniques such as leasing are gaining popularity as a cost-effective investment-enabler. Such financing solutions spread the cost of the equipment over an agreed financing period, with monthly finance payments arranged to align with the expected benefit of its use, such as improved operational efficiency. This removes the need for a large initial outlay, thereby improving cash flow and working capital. Asset finance thus allows public healthcare institutions access to the latest technologies, while assisting with long-term financial planning. Additionally, financing arrangements can incorporate other costs such as installation as well as introduce the possibility of technology upgrade in line with technology developments.

Tailored, all-encompassing financing packages tend to be offered by specialist healthcare financiers who have an indepth understanding of production technology and its applications. They are, therefore, more capable of creating customised financing packages that fit the specific requirements of a healthcare establishment – for instance, flexing the financing period to suit the organisation’s cash flow. This contrasts with the standard financing terms usually available from generalist financiers.

An example of how NHS hospitals can make use leasing to facilitate equipment acquisition is one hospital in the Anglia region. The hospital needed to focus on delivering a challenging cost savings programme while maintaining and improving the quality of care delivered. Recognising that its old analogue mammography machines were outdated, the hospital decided to acquire three static and one mobile MAMMOMAT Inspiration Full Field Digital Mammography systems from Siemens Healthcare after a competitive tendering exercise. To finance the significant investment, the hospital opted for a lease provided by Siemens Financial Services (SFS) in a separate competitive tender.

As part of the project the hospital was also able to transform its old processing room, which was no longer needed, into a third mammography room. This helped it cater for more women as Government extended the screening age from within three years of a woman’s 50th birthday to within three years of her 47th. With lease financing from SFS, the hospital has been able to master the challenge of driving cost savings while maintaining its superior healthcare standard through the transition to digital radiography.

The NHS is attempting to deliver the best quality of care possible in the face of deficit. Smart financing can help to address this challenge

The NHS is attempting to deliver the best quality of care possible in the face of deficit. Smart financing can help to address this challenge.

If hospitals want to prioritise patient care and comfort, efficiency improvements are needed. By investing in equipment upgrades and advanced technologies hospitals can enhance capabilities and provide better, more-efficient and more-accurate treatment. With budget cuts increasing, however, hospitals can benefit from flexible asset financing techniques instead of tying up precious capital in equipment acquisition.

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