Staying Innovative with Leasing
A Flexible Financing Model Enabled a German Hospital to Enjoy Medical and Technical Innovation with Calculable Costs
Apr 15, 2015
Service providers in the German healthcare system are finding it increasingly difficult to deal with financing issues. Alternative financing models can help hospitals continue to maintain and even raise their quality standards by offering customized solutions.
Hospitals in the German healthcare system are finding it increasingly difficult to deal with financing issues, since the public subsidies for investments have significantly declined. At the same time, hospitals need to maintain the latest medical, quality, and technological standards. The number of investments for the replacement of medical equipment in Germany is increasing.
Siemens Financial Services offers solutions for financing replacement investments and infrastructure projects with medprolease.
The lessee gains financial flexibility with regard to payments, duration, and the term of the contract. The installment payments can be made according to the revenue situation and can include the costs of use, depreciation, and maintenance. This means that the lessee stays up-to-date technologically – with budget security and financial leeway for additional investments.
Since the introduction of a case payment system (diagnosis-related groups, DRG), hospitals in Germany have been in competition both with each other and in attracting patients. At the same time, subsidies from the German federal states have decreased significantly over the past few years. “Under these conditions, if a hospital wants to be successful in the long term, it needs to generate profit to afford the necessary investments in equipment and infrastructure,” explains Dr. Andreas Brakmann, Managing Director of Zentralklinikum Suhl in the federal state of Thuringia.
Reinvestments at the Local Level
The acute-care hospital is part of the German SRH Group – a private foundation with companies involved in healthcare and education. With 22 departments, more than 600 beds, and approximately 1,000 employees, Zentralklinikum Suhl is an important economic factor in the region. It also acts as an academic teaching hospital for the University of Jena and supports cultural, sports, and social projects. “We are a private company, but we are also non-profit,” says Brakmann.
The hospital’s profits are completely reinvested at the local level, but those investments don’t lead to more patient referrals and higher profits. “We invest up to 5.5 million euros annually,” reports Markus Bunzel, the hospital’s Head of Administration. “Around 70 percent of that is from our own resources.” The remainder comes from state subsidies.
Total Expenditure on Health in 2012
Spending 11.3 percent of its gross domestic product on healthcare puts Germany two percentage points above the OECD average.1
The Question of Financing
A few years ago, when the hospital needed to buy an angiography system and a new gamma camera, and to replace an eight-year-old computed tomography unit, it decided against buying the equipment with conventional financing – and chose to procure the three systems from Siemens Healthcare through customized medprolease agreements with Siemens Financial Services. “This financing model includes both investment and maintenance components,” says Bunzel. The leasing payments can be made from current revenue according to the principle of “pay as you earn”.
Paving the Way for Innovations
“The contract allows for variations with lower or higher installment payments depending on the revenue situation – and the term of the contract can also be extended,” explains Bunzel. The interest rate risk of conventional financing can be avoided while claiming the tax advantages for investments. This gives the customer room for continuous technological innovation – while minimizing the financial risk.
About the Author
Thomas Meissner, MD, is a medical journalist in Germany with an office in Erfurt, Thuringia. He worked as a doctor in the UK and Germany before completing his training as a journalist with the German periodical Ärzte Zeitung, where he also was an editor. He has been working for well-known trade and public media outlets for more than 15 years.