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Introduction
Nowadays, newer technologies are emerging day by day. Among these, isokinetic exercises are gaining pace. Isokinetic exercises are a part of strength training. In this limb muscles are made to exercise. Not only does it provide a strength workout, but it is also useful for people who experience general injuries in the day to day life.
Our hospital’ orthopedic ward is already equipped with a variety of instruments and impediments related to isometric and isotonic exercises. Recently, I have realized that there is a requirement of isokinetic exercise setup. Daily about 40 admissions are there in our hospital related to general injuries of muscle such as a sprain, wrench, minor and major foot injuries, back pain etc. This instrument is required to provide final rehabilitation and relief to such patients.
I have already studied the market cost of this complete fixture (quotations can be attached to the document on requirement). The final cost including handling, dispatch, and transport sums up to $25,000. As according to my understanding, this is a huge amount, because this costing was not discussed in the annual hospital budget. Above all, the average lifespan of this instrument is 5 years, after which the instrument will not be of any use to us. Newer technology will come in the market, and we will have to replace our entire rig.
Therefore, in my opinion, leasing would be the best option. Regarding the same, I have spoken to certain banks with which our hospital deals normally. Other options are also there. We can choose any of them, once a final decision is made. Reasons for the same and its probable outcomes are discussed in the forthcoming sections. I am forwarding this report to Assistant Administrator, Good Luck Hospital, New York.
Different leasing options
Various options are available with equipment providers:
First one is “Gross or full-service lease”. In this, the rent is all-inclusive. The service provider will bear the entire cost of the contraptions including its maintenance. If we chose this option, then we will be free from annual maintenance charges of the attachments as well. This method is extremely user-friendly. Although this option will land up in overall high installments per month, still I would recommend this option because of its user-friendly nature.
The second option is “Net lease”. This type of sublet is a bit more advantageous to the owner of the outfit. In this, the hospital authorities will have to take up the maintenance charges of the fixtures. The overall cost of the product is borne by the lessor in installments. The service tax and installments will be comparatively less in this case. We will have to hire an appurtenances manager/engineer for performing all related repair work.
One more option is “modified gross lease.” This method is a blend of option 1 and 2. In this method, the annual rent of the belongings is paid all at one stretch; instead of the monthly rent/installment of option1 and 2. Some part of the gadget maintenance would be borne by the lessor and rest of it by the lessee. The installment plan is intermediate between options 1 and 2.
According to my opinion, we should choose either option 1 or 3; although, the final decision is in your hand and overall hospital management authorities. A detailed report of why this process is necessary is explained further:
Advantages of leasing equipment versus purchase:
There are various advantages of taking facilities on rent in comparison to redemption. Pointwise their details are given below:
Capital availability: if the hospital is short of funds or wants to save funds, and spend these on other requirements of the hospital, then the loan is utilized; so that the machinery becomes available in the hospital, even with a low budget. Budgetary flexibility is best available by usage of this method.
There are big taxes on ownership of many habiliments. If the hospital charters the device, then it could easily refrain itself from the overall cost of government taxes. Most of the times, subleasing is 100% tax deductible.
This method can safeguard the hospital from the maintenance and related cost of the equipment. Via rent, the hospital authorities are saved from the tiresome activity of maintaining papers related to AMC (annual maintenance contract).
Medical technologies are upgrading day by day, so are the gadgets related to these medical technologies. If a hospital procures any apparatus, it would be atrophied in a few months if medical technology related to that product advances. In such a case, the hiring of equipage is a good option. These contracts are short. On up gradation of technology, newer and better paraphernalia can be hired the next time.
The best advantage of this plan is a flexible payment plan. The hospital can make payment in accordance with annual capital budget.
Disadvantages of leasing versus purchase:
While some options have pros, they have their cons also. It depends on our requirement and costing policy, which decides whether we should, choose rent or buy. Although in our case, hire is the best option, still I would like to bring forward certain disadvantages of lease agreements to your kind perusal.
Over the due course of time, a health care organization would pay more for this kid and kaboodle than buying it. This is because of the interest levied by the baggage provider. Sometimes, this may result in a waste of funds.
There will be no money back/resale guarantee to the health care organization. This is so because ownership of the stuff was never held by the hospital authorities.
Since maintenance is the job of lessor, sometimes, problems related to timely maintenance and repair of product arise. Since the machines are costly and sophisticated, sometimes their parts are imported. In such a case, it takes a time to repair the machine on time. The reasons may be genuine or partial.
The decision of Director of Rehabilitation Services:
Looking at the above pros and cons of loan and asset, it is always best to take the equipment on rent rather than purchasing it.
I have made this decision based on the following central factors:
The high price of this machinery suggests charter rather than investment. This would save expenses, which can be used by the hospital in other health related services.
The life of these accessories is 5 years only. After that, it would be of no use to the hospital. Also, the hospital administration would not be able to make much out of this product via resale, because the life span of this machine has now ended. So, a much monetary benefit would not be attained.
The hospital staff does not have enough information about resale of this new contrivance because this instrument is new in the market.
This instrument is required for isokinetic exercises. An isokinetic exercise is a special type of exercise used to train muscles. Awareness related to these exercises is increasing in general public day by day. So, fitness experts are recommending newer types of instruments. So, it is for sure, that the instrument may become totally outdated within a few months. In such a case, if the hospital acquires this facility on a sublease, then it will always be free to replace it with newer technology.
I am sending this report to Assistant Administrator, Hospital Management Cell for further analysis and decision making.
References:
Coudeyre et. al (2016) “Isokinetic muscle strengthening for knee osteoarthritis: A systematic review of randomized controlled trials with meta-analysis” Annals of Physical and Rehabilitation Medicine, 59(3):pages207-216
Uyar and Kuzey (2016) “Does management accounting mediate the relationship between cost system design and performance”, Advances in Accounting, In press.
Pflueger (2016) “Knowing patients: The customer survey and the changing margins of accounting in healthcare” Accounting, Organizations and Society, Volume 53, Pages 17-33.
Steven A. Finkler and David M. Ward (1999) “Cost Accounting for Health Care Organizations” Second Ed. Aspen Publications pages 140-145.