Two New Healthcare Equipment Leasing Studies Provide Comprehensive Overview and Details of Healthcare Financing Marketplace

Friday, October 28, 2005

ARLINGTON, Va.--(BUSINESS WIRE)--Oct. 28, 2005--

$15 Billion In New Business Projected Over Next Two Years As Healthcare Equipment Sales in IT Systems, Outpatient Care Grow

Two new studies were released today which provide complementary macroeconomic overview and market-specific details for use by the equipment leasing industry. The Equipment Leasing Association (ELA), the non-profit association representing companies involved in the forecasted $248 billion equipment leasing and finance industry, and R.S. Carmichael & Co., Inc., a marketing research and management consulting firm, White Plains, New York, have released a new report, Healthcare Equipment Leasing: U.S. Market Dynamics and Outlook 2005-2006. The Equipment Leasing and Finance Foundation, a non-profit organization dedicated to enhancing recognition and understanding of equipment lease financing, released its study researched by the University of Virginia Darden School, Long-Term Trends In Healthcare: Implications for the Leasing Industry. Together, The Healthcare Financing Compendium provides the most comprehensive information currently available on the dynamic healthcare market and its implications for the equipment leasing and finance industry.

'These two studies provide thorough insights into the drivers of healthcare equipment leasing,' said Ralph Petta, Vice President of Industry Services for the Equipment Leasing Association. 'This is a tremendous resource for organizations in healthcare and equipment leasing to understand how the healthcare marketplace is financed and why.'

The ELA/Carmichael market study focuses on the leasing practices of healthcare providers, including hospitals, outpatient centers and physicians' offices. It also examines the market from the standpoint of healthcare equipment vendors and lease financing competitors.

Highlights from the report include:

-- The estimated size of the U.S. healthcare equipment leasing market in 2005 is at least $7.0 billion in terms of new volume.

-- The healthcare equipment leasing market is projected to exceed $8 billion in volume by 2007, attributable mainly to forecasted equipment sales growth (as opposed to significant gains in lease penetration).

-- Over the past five years the average annual rate of lease financing market growth in healthcare has been seven percent.

-- Healthcare equipment leasing is primarily a 'middle-market' business, with most transactions in the $250,000 to $5 million range.

-- The hospital market represents a growth market for IT systems (e.g., digital radiology systems that store, retrieve, distribute and display medical images in digital format).

-- The outpatient care market, especially the ambulatory surgery center segment, also continues to grow as a market for lease financing.

-- When investment in all healthcare equipment is considered, lease financing penetration is relatively low and appears to be stabilizing due, in part, to reimbursement reductions, regulations affecting physician referrals, and a lack of awareness of leasing as a tool for equipment acquisitions. However, the upside potential remains substantial although leasing companies will continue to see challenges in realizing the potential opportunities.

'Equipment leasing continues to represent a fundamental source of capital financing for healthcare providers,' said Richard S. Carmichael, Managing Director of R.S. Carmichael & Co., Inc., which conducted the study. 'Healthcare industry conditions such as steady growth, capital budget constraints and rapid technological changes create opportunities for equipment leasing to make greater inroads.'

The Equipment Leasing and Finance Foundation report features an overview of healthcare industry trends, a statistical analysis of leasing transactions and implications for leasing and finance organizations.

Among the study findings:

-- The healthcare industry in 2004 represented a $1.8 trillion annual market that accounted for 15.4 percent of total gross domestic product (GDP).

-- Healthcare's share of GDP is expected to continue to increase every year to 2014 as healthcare expenditures growth are expected to outpace GDP growth.

-- Small, professional firms are the most significant business form in the healthcare sector, followed by not-for profit organizations.

-- The critical element in improving the productivity of the healthcare industry and reducing its cost growth is capital investment in productivity improving technology that will substitute capital for labor.

'Knowledge of both historical and future trends in the healthcare industry is key to participating in this marketplace,' said Lisa Levine, Executive Director of the Foundation. 'The Foundation study on long-term healthcare trends provides those and other critical perspectives on the healthcare industry.'"