Capital purchases, which represent approximately 25% of a hospital’s annual budget, are some of the most complex and challenging procurement issues for health care organizations today. Appropriately allocating capital in anticipation of growth, a growing demand for state-of-the-art infrastructure, increasing safety regulations and shifting reimbursement models are only some of the issues for facilities to consider as they plan for these critical investments.
Vizient’s national Group Buy program, which always includes an extensive offering of capital equipment, strives to respond to market changes that can impact capital decisions.
For example, federal legislation signed into law in April 2014 required health care providers to comply with the National Electrical Manufacturers Association (NEMA) XR-29 standard attributes on CT equipment or risk a reduction in reimbursements beginning Jan.1, 2016. Approximately one-third of all CT scanners in the market have been affected by these guidelines. Through Vizient’s Group Buy program, hospitals were able to replace their CT equipment to remain XR-29 compliant while taking advantage of discounts and incentives that saved significant capital dollars.
A capital equipment savings opportunity available through the end of 2016 is part of the Protecting Americans from Tax Hikes (PATH) Act of 2015 and the permanent extension of the $500,000 limit in Section 179 of the IRS tax code. The Section 179 deduction on qualifying purchases of capital equipment can offer hospitals the ability to take advantage of a deduction for capital purchases this year. This deduction, combined with the savings offered through group buys, should be factored into your 2016 capital equipment investment strategy.
Looking ahead, we expect capital budgets will continue to be impacted by the pressures of health care reform and we are committed to bringing members unique savings opportunities via our group buy program.
Since 2005, Vizient has worked with contracted capital equipment suppliers to offer members quarterly savings opportunities via our national group buy program. In 2015, the average savings opportunity offered by participating capital equipment manufacturers was 40% off list price on specified products purchased within the quarter. Over the 10 years the program has been in place, these “group buys” have delivered $1 billion in savings to members on a wide range of capital equipment including angio/cardiovascular equipment, CT equipment, MRI systems, patient monitors and ultrasound equipment.
In addition to better pricing, these limited-time offers often provide value in the form of additional discounts on service agreements, training and software; extended warranties; flexible delivery dates; discounted parts and accessories; and additional trade-in value.