Buying Devices: Look Before You Leap: Part 2: Dollars and Good Sense

In the last issue, I discussed how to assess whether to purchase a new device from clinical and practical perspectives. Now to the nitty gritty—once you’ve determined it’s a good fit, what should you do before pulling the trigger?

THE DOLLARS

How often have you met with a rep at a meeting or received an email offering special pricing if you purchase their device immediately? What about the onslaught of December emails stressing the advantage of the end of calendar year tax deduction with purchase? Each company tantalizes you with calculations of the profits you’ll make within months. You may even have the ‘opportunity’ to be the first practice in your area to offer it. Where do you sign?

Hold on a minute! I know the deal sounds great and you have patients who would be perfect candidates. But as my late mother, an attorney, always stressed: do your due diligence before committing to anything.

Dissect the offer. How much is the device? That means the list, regular, and ‘special’ price. Don’t get stressed by the ‘limited time’ offer at a meeting. Tell them you are serious about the purchase but need a few weeks for your business consultant or lawyer to weigh in. What about the ‘We have a limited number. If you don’t get on the list now, it could be a year’ pitch? If the technology is that new, maybe waiting for the kinks to get worked out isn’t a bad idea. How long is the wait? If it’s several months, a new technology could come out in the interim which will give you negotiating power.

I dislike negotiation whether it is haggling at a market, purchasing a car, or buying devices. I start my discussion with device companies telling them I want the best offer first. That’s my starting point. If I’m not happy with it, that’s the end of the discussion. I expect luminary pricing because I know they will use my name to sell the device to others. Another reason for them to give you a better deal: if you have a big practice with lots of physicians and extenders, you will become an important account for consumables.

Speaking of consumables, how much are they? How many will the company provide with purchase for training purposes and over time for staff treatments? Are associated contact gels, grounding pads, or cryogen included in the price of the technical consumables?

Technology changes regularly. To avoid your device turning into a doorstop, make sure standard upgrades are included. If new handpieces, applicators, or even a completely new version are upcoming, what’s the anticipated pricing? You could be better off waiting for the next launch. If any upgrade requires a change in consumables, will they exchange your current stock?

Don’t assume the section 179 tax deduction will be a savings on your purchase cost. Speak with your accountant. It may or may not apply. If the company suggests you don’t need to pay tax because they aren’t registered in your state, validate it with your accountant. You’re expected to pay it directly to your state department of taxation. If you don’t, and are caught, you’ll have to pay the tax plus significant fines.

What if they offer a monthly fee plus per patient cost in place of purchase? Avoiding a large investment is attractive, but the actual profit may not be.

Devices require care, which generally means paying for a service contract. Check the number of years included with purchase and the cost after that. Sometimes, paying for additional years upfront can provide significant discount.

Finally, check out the financial status of the device company. Ask you financial advisor. Is it financially stable? Is it on the verge of being bought by another entity? (This could be good or bad for you.) You want to be sure the company will be around to provide support and consumables for the life of your device.

GOOD SENSE

You’ve negotiated pricing, included extra consumables, and extra years of service. The rep has emailed you the one-page purchasing agreement with itemized pricing. Don’t pull out the credit card yet! Somewhere on that page is reference to the Terms & Conditions.

You, your lawyer, or both must carefully read these Terms & Conditions. Don’t fall prey to the ‘Doctor, these are just reasonable and customary business practices. You wouldn’t ask to change your BMW contract,’ or ‘All of your colleagues signed it.’ Your car purchase agreement was written by international attorneys, and, as your mom always said, ‘if everyone jumped off a bridge, would you?’

Start with the common legal red flags.

• Indemnification: You should not indemnify the company for ordinary use of the equipment. If you are indemnifying them, they should indemnify you.
• Location for arbitration: Request your location. If they refuse, it should at least be someplace you can reach easily.
• Assignment of trademarks: You can agree to honor their trademarks. In turn, they must obtain prior written approval for use of your practice name, comments, and images.
• Limited use and ability to assign: Once the device is yours, the company cannot define how and by whom it is used in your office.
• Rented equipment: Watch out for a minimum use clause when paying monthly. That means the company can remove the device if you see fewer than a set number of patients.
• Network access: Technical support and software updates are often done remotely. That does not give the company a right to your patient data. If you feel there is a benefit to their extracting your information, specify it is only shared with you and not used for other purposes.
• Warranty: Confirm that the warranty includes everything discussed. If you’ve been promised a loaner during service, it must be listed. Understand what isn’t included.

And don’t forget the crazy clauses! Recently, I refused to sign an agreement until the company removed paragraphs stating I would be in breach if I said anything bad about the company or the device and that they had the right to decide to whom I could sell the device and what training they would need.

We have a lot of options. The only device available today won’t be the only one available tomorrow. From experience, I can tell you that the patients you want in your practice care more about who is treating them than about the device being used.