Buying and selling used medical equipment can significantly improve hospitals’ capital planning budgets. To do it well requires understanding fair market value for assets. But what exactly does that mean and why is it important?
What is Fair Market Value (FMV)?
Fair market value (FMV) represents how much an item is worth on the market and to a buyer. The value assumes both buyer and seller know enough to assess it fairly. This means neither party is withholding important information like flaws or maintenance records. From bicycles to catering equipment to heavy machinery, fair market value applies to almost any used purchase.
Current FMV reflects an asset’s condition, age, and market demand. A great example of fair market values in action is the Kelley Blue Book — the biggest resource for used car valuation. This widely-used website calculates market values based on a wide variety of data.
Why does fair market value matter?
FMV reports empower healthcare facilities to make better decisions about capital equipment strategies. When it’s time to retire or replace equipment, hospitals often rely on trade-in offers from the original equipment manufacturer. But trades often don’t reflect true fair market values. This leaves money on the table and hurts your hospital’s bottom line.
Knowing FMV for your inventory helps:
- determine assets’ true value for insurance purposes
- track value depreciation and market trends to forecast the best time to replace equipment
- appraise an asset’s true value to determine ideal disposition methods
Other sources, like tax documents or online searches for pricing, may sound simpler. But these can’t compare your assets to a depreciation table or estimate new replacement costs. They also won’t take an item’s condition or market trends into account.
How Fair Market Values Affect Capital Planning
Understanding market fluctuations, as well as FMV depreciation patterns for specific equipment, has a huge impact on value returned on dispositions. Experts like BidMed help determine ideal times to both buy and sell on the secondary market.
Choosing the Best Disposition Methods
Leveraging and understanding fair market values also helps return more to your budget with a variety of disposition methods. Hospitals armed with accurate FMV data know when an OEM trade-in offer is fair or not. Many successfully negotiate higher trades, or choose alternative methods with better returns.
Direct Sales on the Secondary Market Are a Win-Win
When OEMs can’t match fair market values, hospitals enter the secondary market prepared to find the right buyer. The highest returns come from selling to another end-user.
Ambulatory centers and alternative medical practices, such as veterinarians, often use capital equipment for longer lifecycles than specialty hospitals. Both parties win when connected on the secondary market — hospitals return more value to their budget, and smaller centers save money on “new” equipment.
Retain Value with Internal Transfers
Another great way for health systems and networks to retain value is using internal transfers. This is actually the first option hospitals should look at if they have network connections.
When health systems transfer book value between facilities, rather than buy or sell using FMVs, operating budgets retain more value overall. This provides significantly more flexibility for both facilities in their capital budgets.
Plan Ahead for Dispositions and Acquisitions
Understanding market trends and cycles also enables hospitals to time the market, to some extent. A partner like BidMed helps make decisions about the best time to purchases, or when the market will be hot to sell soon-to-retire equipment.
When a 6 month timing difference can drastically change secondary market values, smart hospitals plan around these trends.
Fair Market Values with BidMed’s Expertise
Our own version of the Kelley Blue Book offers real-world pricing for used medical equipment. BidMed specialists analyze actual recent sale prices, keeping our FMV database regularly updated. We then summarize findings in easy-to-read reports for our customers.
BidMed’s FMV reports help hospitals and health systems negotiate better trade-in offers, or determine alternate disposition strategies. If assets haven’t retained significant value, these reports also help build a case for tax deductions and donations.
FMV reports are available directly within Helix Workflow+. Subscribers can easily request reports on current inventory and connect directly to our disposition platforms.