Picker launches financing arm, targets hospitals

Health Industry Today, June, 1992

Picker International Inc., Cleveland, and LDI Corp., which leases and sells information processing and other equipment, have formed the Picker Financial Group, which will provide various financing packages to hospitals and imaging centers.

PFG will offer three programs: a full-service lease; a true lease; and a lease purchase. The programs will cover Picker's full line of diagnostic imaging equipment, which includes magnetic resonance imaging, computed tomography, nuclear medicine and X-ray equipment.

Under the full-service lease, customers make monthly payments for use of the equipment and service by Picker technicians. At the end of the lease, customers have the option of purchasing the equipment at the fair-market value, returning the equipment or renewing the lease.

The true lease works the same way but service is excluded. The lease purchase is similar to a loan agreement and is designed for customers who want to make balloon payments. The customer does not have the flexibility to make equipment upgrades.

Service contracts can be purchased separately from Picker with the true lease or lease purchase, but the full-service program is the most cost-effective on a monthly basis, said Ira Miller, vice president, marketing and sales at PFG.

PFG will structure fee-per-scan agreements at a customer's request, but does not recommend them. "There are very few |fee-per-scans~ out there that are not disguised leases because they have minimums |minimum payments~" he said. "We can structure those but don't plan to make them a cornerstone product because the customer will pay more. If the volume is there, the customer will pay less by signing a four- or five-year commitment."

Humana Inc., the Louisville, Ky. hospital chain, has been asking companies to provide fee-per-scan arrangements with a guarantee that the monthly fee will not be higher than that of a lease. "We won't do that and others won't do that," Miller said.

What differentiates PFG from third-party financing operations is that PFG guarantees customers the option of continual equipment upgrades throughout the life of the lease, according to PFG.

"We will hold equity in the contracts and guarantee financial access to upgrades," Miller said. "Third-party lessors have the tendency to sell off their equity and therefore can't guarantee an upgrade. Picker customers have experienced this and it's a big problem in the industry."

Third parties, he said, also hit customers with additional costs that can be significant.

"There are no costs added on to the monthly cost with PFG. At the end of the lease term, we'll pay for repackaging and shipping costs (except for MRI equipment). With third-party leases, these costs are borne by the lessee. Some third parties also charge restocking costs. PFG also waives progress payments."

A major reason Picker decided to form the financing arm is to move its equipment back into the hospital from the private clinic, which Picker sees as an industry trend, according to Miller. Currently, sales to hospitals represent 65% of Picker's domestic business and imaging facilities make up the remainder. In the private clinic equipment market, Picker has been working with U.S. Concord Inc., Norwalk, Conn., which structures installment contracts.

"The leasing products will help Picker move into the hospital more, but it will take some time," Miller said. "I think hospital market penetration is a natural move; imaging services are moving back into the hospital because of the new rules on the capitalization of ownership in imaging centers."

PFG will be competing not only against third-party financing organizations, such as Chicago-based LINC Scientific and Rosemont, Ill.-based Comdisco Inc., but also leading imaging manufacturers with their own financing operations, such as GE Financial Services, Waukesha, Wis., and Toshiba America Medical Credit, Tustin, Calif.

"GE has brought financing to a fine science," Miller said. "We will level the playing field. We will be able to offer monthly payments every bit as good as GE's."

GE Financial Services would not go on record with the financing programs it offers, but did say that many of its customers are expressing an interest in financing alternatives.

PFG was rolled out in late April at Picker's national sales meeting. Intensive educational sessions were held for account executives and sales management, Miller said.

Miller and others from PFG will soon meet with Picker's national media agency to develop an advertising campaign. A two-page spread on PFG appeared in the May issue of Healthcare Financial Management.

Financing of diagnostic imaging equipment in the United States exceeded $1 billion in 1991 and is projected to grow 15% annually, according to Picker.