Let’s say your old SPECT camera is on its last leg, you’ve found a perfect new one for your practice, and you’re ready to purchase the camera. Great – now what?
We’re all familiar with how other big-ticket items like cars or homes are sold, but what about a SPECT MPI nuclear camera?
There are several different ways to pay for new medical imaging equipment, and in this post, we’ll dive into how the process works and what you can expect.
How Nuclear Cameras are Purchase and Financed
Nuclear Medicine imaging equipment is sold and financed like any other major equipment purchase. Practices can pay cash for the equipment, take out a loan, or leverage leasing options.
The most common way to pay for nuclear imaging equipment is through leasing. However, these leases are different from what you would see at a car dealership. They have their own unique facets, and there are options for how the lease is structured.
One of the most common decisions to make about the lease is whether to go with a $1.00 Buyout or a Fair Market Value (FMV) lease. There are proponents for both sides, and each option has its own pros and cons.
$1 Buyout Versus a Fair Market Value Lease
The main difference between a $1 Buyout lease and an FMV lease comes down to who “owns” the camera during the lease term. A $1 Buyout option acts as a capital lease where your practice would own the camera during the contract term. A Fair Market Value lease is structured more like a rental agreement.
Nuclear cameras purchased using a $1.00 Buyout are very similar to a conventional loan. Practices will typically provide a small downpayment and finance the rest of the cost. At the end of the lease term, you have the option to purchase your camera outright for – you guessed it – $1.00.
Dollar buyout leases are ideal for practices that want to purchase a nuclear cardiac camera and keep it for years. The nature of the ownership can affect the type and amount of deduction you can take on the purchase.
Fair market value leases can also be financed with a small down payment and have more options as opposed to the dollar buyout. More like an auto lease, at the end of your term you can simply turn the camera back in, continue to lease it for a set price or purchase the camera straight-out for its fair market value – hence the name. An FMV lease will typically have a term of one to five years, depending on the type of camera you purchase.
So which is better? The answer depends on your practice, but the lifespan of SPECT Cameras is such that most cardiology practices choose the $1.00 buyout option. The long-term benefits of ownership and depreciation make it a better fit as compared to an FMV lease.
Section 179 and Nuclear Medicine Equipment Depreciation Considerations
In a previous post on the topic, we looked at how Section 179 works and the impact it can have on your purchase and financing decision.
Section 179 was structured to encourage businesses to invest in equipment by allowing a deduction of up to the total purchase price for qualifying equipment.
Your practice has the choice of deducting all or part of the cost of the equipment from their gross income in the first tax year it was purchased. Among many categories (including company vehicles), the deduction applies to medical equipment or software, including nuclear medicine equipment. You can take the deduction whether you lease or purchase the equipment outright.
Changes to Section 179 since the Tax Cuts and Jobs Act made a significant difference for smaller businesses. While previously, qualifying equipment was typically written off a little at a time through depreciation over five years, these new rules mean you can write it off all at once. This could make a tremendous impact if you happen to have a big year in revenue for the business.
Of course, you need to be aware of the deduction limits, especially if your practice might need other new equipment or even vehicles. It would be best if you also were mindful that there is a tradeoff. Anything you deduct this year reduces your deduction for the next five years. Suppose for whatever reason, you dispose of the equipment before five years is up, after taking the total deduction upfront. In that case, the depreciation you deducted but never used will be added back to your income for that year. This is called “recovery” in the tax world and can be lengthy and complicated.
For most practices, though, we would point out that nuclear imaging equipment is good for at least ten years. The best place to start is by paying a visit to your tax accountant to run through some numbers and determine what makes sense for your practice.
Warranty and Support Services
Most new cardiac cameras come with a comprehensive warranty period, but the warranty will typically be a year and not extend for the entire life of the lease.
While choosing the type and amount of financing, a practice can also extend the term of their camera support contract and bundle that cost into the duration of the lease.
Depending on your situation, it may make more sense to bundle the cost of an extended contract and have the camera completely covered for the life of the lease. Structuring the contract that way spreads the service payments over the lease term and gives you a more accurate total cost of ownership.
Plus, it is possible to gain added deprecation due to the higher overall total. You can access that deduction for the term of the lease versus purchasing a plan a year or two after the initial camera purchase.
The Bottom Line on Purchasing Options
When it comes to purchasing a new Nuclear Gamma Camera, you have options. Work with your selected manufacturer and local lender partners to run the numbers and see what makes the most sense for your practice and budget.
Purchasing a new camera is an investment in your practice that will pay dividends for years, and it’s worth taking the time to get the best option for your practice.
The team at Digirad has strong relationships with finance partners in the industry and can run the numbers, prepare a Pro-forma, or provide a quote. If you are interested in learning more about financing options for a new Digirad camera, please contact us.