To lease or buy? Four Tips for Practices on Property, Equipment

November 28, 2016  FierceHealthcare

For physician practices, the decision about whether to own or lease big-ticket items, from office space to medical equipment, can be more complicated than it first appears.

The rapid evolution of medical technology has meant rising capital costs for practices. Given that technology can be a key to a practice’s success, finding ways to finance that equipment can make a lot more sense than going without. The current market’s relatively cheap money makes leasing equipment an attractive prospect, but be careful, warned an article in Medical Economics.

The publication offered tips for making ownership decisions on medical equipment or office space. Here are four of them:

  1. Don’t underestimate location: When it comes to real estate, the old adage about location holds for offices in the same way it does for residences. If you plan to stay in one place long enough for the value of a property to increase, owning makes a lot of sense, but physicians need to understand the risk of a fall in property value, said Gary Ware, principal of Practice Consultants.
  2. Keep tabs on all capital needs: Other capital needs play a role in the decision as well. A growing practice might be better off keeping its assets liquid in order to hire more physicians, pointed out Thomas Ferkovic, managing director for Medic Management Group LLC.
  3. Consider consulting a tax adviser: When calculating the total cost of ownership, Cari Weston, director of taxation for the American Institute of Certified Public Accountants, urged practices to consult a tax adviser to ensure they fully consider price in any potential tax consequences.
  4. Maintain a firewall between asset types: It may make sense to use a mixed strategy, buying property outright and leasing equipment or vice versa. In any event, however, it’s a good idea to purchase real estate and equipment through separate legal entities, according to Weston. “You never want the assets of the practice at the mercy of the building, and vice versa,” she says.