Health Service Focus

17.07.17

Financing options explained: How to control capital expenditure on healthcare equipment

It is no secret that budgetary constraints in healthcare are, to put it mildly, tight. Despite best efforts to centralise, rationalise and undersize NHS spending, the enormous and perennial top-down financial pressures inevitably filter down to the individual clinic and hospital department where the most difficult spending decisions have to be made. 

Capital expenditure on equipment is an absolute necessity on the frontline of healthcare. Not only does the latest technology save lives, it can also go a long way to making care delivery more efficient and, in the long term, affordable. 

But cutting-edge medical equipment comes with a cost – and that doesn’t account for all capital costs in GP surgeries, clinics and hospitals, either. Healthcare services also need IT systems, beds for patients and much more besides. 

All of this adds up to a lot of difficult decision-making, as budget-holders at trusts and CCGs try to balance financial pressure from above with the demands of providing world-class service. The aim of the game is to make a little go as far as possible, by making smart purchasing decisions to gain the maximum long-term impact on service.

Making money do the hard work 

Without endless capital reserves and little room for manoeuvre, finance becomes all-important. Finance is how you can make the money do the hard work and create flexibility where you don’t have any. If you understand how to use the right options in the right situations, finance allows you to procure the equipment you need while keeping costs under control. 

Here are the main asset finance options available to healthcare buyers, and when they are most useful:

Hire purchase 

Hire purchase allows you to spread the costs of capital expenditure over a fixed period of time. Once the payment term is completed, you get the benefits of outright ownership, just without the upfront costs. 

Arrangements will normally include a nominal deposit and then regular repayments, which include interest. Payment options are often flexible, allowing you to stay in control of your budgets.

Finance lease 

A finance lease is one of the most flexible finance options available. As with hire purchase, you spread the capital costs of a new piece of equipment over an extended period and use it in the meantime on a rental basis. The difference is, you don’t have to commit to full purchase upfront, and repayment rates are usually lower. 

At the end of the agreed term, you have three choices: you can pay off the remaining balance in a ‘balloon payment’ to buy the equipment outright, extend the lease arrangement, or cancel it altogether and return the equipment. This is a great option if you are not certain how long a piece of equipment will be operationally useful to you, or if you want to keep expenditure down in the short term. 

Operational lease 

An operational lease is a full rental arrangement – your finance provider purchases the equipment, and you lease it from them at a fixed rate over a fixed term. Unlike with a finance lease, there is no option to purchase at the end and the asset is simply returned. This is a useful option for getting access to high-value or specialist equipment you need for only a limited time, or for protecting yourself if its resale value deteriorates quickly. 

Unsecured loan 

A loan allows you to complete a capital purchase upfront, using the lump sum loaned to you. There is no period of third-party ownership as with a hire purchase, and for bookkeeping purposes, interest repayments are a finance cost rather than part of the capital costs of purchase. 

Find out more

Peregrine Leasing is one of the UK’s leading providers of asset finance, with more than 25 years’ experience in the healthcare industry. Visit www.peregrineleasing.co.uk to find out more.

Comments

There are no comments. Why not be the first?

Add your comment

 

national health executive tv

more videos >

latest healthcare news

RCGP: Comprehensive plan for handling winter pressures ‘vital’

14/07/2020RCGP: Comprehensive plan for handling winter pressures ‘vital’

With annual winter pressures and a potential second wave of the coronavirus risking coinciding, the Royal College of GPs (RCGP) has called f... more >
Manchester University NHS FT health innovation campus takes forward steps

14/07/2020Manchester University NHS FT health innovation campus takes forward steps

A world-leading health innovation and precision medicine campus being established in Manchester, as part of a joint venture between Manchester Un... more >
NHS Confederation partner in new report to level up health in Yorkshire

14/07/2020NHS Confederation partner in new report to level up health in Yorkshire

NHS Confederation, Yorkshire & Humber Academic Health Sciences Network (AHSN) and Yorkshire Universities have combined their expertise to pub... more >

editor's comment

26/06/2020Adapting and Innovating

Matt Roberts, National Health Executive Editorial Lead. NHE May/June 2020 Edition We’ve been through so much as a health sector and a society in recent months with coronavirus and nothing can take away from the loss and difficulties that we’ve faced but it vital we also don’t disregard the amazing efforts we’v... read more >

last word

Haseeb Ahmad: ‘We all have a role to play in getting innovations quicker’

Haseeb Ahmad: ‘We all have a role to play in getting innovations quicker’

Haseeb Ahmad, president of the Association of the British Pharmaceutical Industry (ABPI), sits down with National Health Executive as part of our Last Word Q&A series. Would you talk us th... more > more last word articles >

the scalpel's daily blog

NHS at 72: Managing mental health services going forward

03/07/2020NHS at 72: Managing mental health services going forward

Sean Duggan, Chief Executive of the Mental Health Network Let’s take this opportunity to reflect on the amazing achievements of our health system over the past few months. But as we recognise the best of the NHS and its response to the Covid-19 crisis we must not forget that for mental health the peak has yet to come. Covid-19 has placed enormous pressure on the entire health and care system. Despite the very real hardships f... more >
read more blog posts from 'the scalpel' >

comment

NHS England dementia director prescribes rugby for mental health and dementia patients

23/09/2019NHS England dementia director prescribes rugby for mental health and dementia patients

Reason to celebrate as NHS says watching rugby can be good for your mental health and wellbeing. As the best rugby players in the world repr... more >
Peter Kyle MP: It’s time to say thank you this Public Service Day

21/06/2019Peter Kyle MP: It’s time to say thank you this Public Service Day

Taking time to say thank you is one of the hidden pillars of a society. Being on the receiving end of some “thanks” can make communit... more >
Nurses named as least-appreciated public sector workers

13/06/2019Nurses named as least-appreciated public sector workers

Nurses have been named as the most under-appreciated public sector professionals as new research reveals how shockingly under-vauled our NHS, edu... more >
Creating the Cardigan integrated care centre

10/06/2019Creating the Cardigan integrated care centre

Peter Skitt, county director and commissioner for Ceredigion Hywel Dda University Health Board, looks ahead to the new integrated care centre bei... more >
Helpforce to launch training programmes for NHS volunteers

10/06/2019Helpforce to launch training programmes for NHS volunteers

Kay Fawcett OBE, clinical advisor and education lead at Helpforce, and Lynn Twinn, talent development consultant, outline the new national traini... more >

interviews

Matt Hancock says GP recruitment is on the rise to support ‘bedrock of the NHS’

24/10/2019Matt Hancock says GP recruitment is on the rise to support ‘bedrock of the NHS’

Today, speaking at the Royal College of General Practitioners (RCGP) annual conference, Matt Hancock highlighted what he believes to be the three... more >
NHS dreams come true for Teesside domestic

17/09/2019NHS dreams come true for Teesside domestic

Over 20 years ago, a Teesside hospital cleaner put down her mop and took steps towards her midwifery dreams. Lisa Payne has been delivering ... more >
How can winter pressures be dealt with? Introduce a National Social Care Service, RCP president suggests

24/10/2018How can winter pressures be dealt with? Introduce a National Social Care Service, RCP president suggests

A dedicated national social care service could be a potential solution to surging demand burdening acute health providers over the winter months,... more >
RCP president on new Liverpool college building: ‘This will be a hub for clinicians in the north’

24/10/2018RCP president on new Liverpool college building: ‘This will be a hub for clinicians in the north’

The president of the Royal College of Physicians (RCP) has told NHE that the college’s new headquarters based in Liverpool will become a hu... more >
Duncan Selbie: A step on the journey to population health

24/01/2018Duncan Selbie: A step on the journey to population health

The NHS plays a part in the country’s wellness – but it’s far from being all that matters. Duncan Selbie, chief executive of Pu... more >