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Weighing Risks and Rewards in Health Care Financing

By Joe M. Nachbin
January 03, 2005

The United States spends $1.4 trillion on health care annually, translating to the potential for $300 billion in health care financing. Those are numbers that deserve more than a passing glance. However, according to a recent survey of U.S. health care leasing published by R. S. Carmichael & Co. and the Equipment Leasing Association (“ELA”), Healthcare Equipment Leasing, 2003 U.S. Market Dynamics and Outlook, only 10 companies controlled 85% of this sector.

There is a good reason for this concentration of financing players within the industry: Health care leasing is a highly specialized niche requiring not only asset-specific expertise but also knowledge about changing federal regulations, third-party insurance policies and physician reimbursement practices, medical malpractice coverage, as well as medical practices and treatment applications themselves. Health care is a complex sector of the leasing market that is really composed of multiple submarkets. Entrants therefore must be able to handle the submarket niche they have chosen and have unique equipment knowledge to set realistic residuals and manage the end-of-term phase of the often highly specialized equipment associated with health care.

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