Specialized Leases from Elekta Facilitate Sharing of Financial Risk and Return
ATLANTA, March 26 /PRNewswire/ -- Hospitals and health systems are facing a "perfect storm" as traditional financing options close, revenue is squeezed by layoffs and federal cuts, and investment income dwindles. Complicating the situation are competitive pressures, not only from other medical facilities, but from new entrants into the market such as standalone treatment centers.
Elekta Inc., an international leader in oncology and neuroscience solutions, is seeing new demand for its alternative financing solutions in this difficult economic environment. GK Financing L.L.C., a joint venture between Elekta and American Shared Hospital Services, provides alternative financing for projects involving Leksell Gamma Knife(R) and Elekta Axesse(TM) radiosurgery systems, including revenue-sharing and fee-for-service leases.
With GK Financing, a hospital does not own the equipment, but rather enters into a Services Agreement (the "Lease") and starts benefiting immediately from using Elekta's radiosurgery solutions. The Lease defines how revenue is shared, the obligations of the parties, and the options available to the hospital at the end of the Lease.
Tufts Medical Center in Boston partnered with GK Financing to install its Gamma Knife from Elekta. "At the time of our Gamma Knife installation, we were facing capital constraints and wanted a partner who could share the risk and help us upgrade the equipment when needed," says Denise Schepici, Senior Vice President of Clinical Services at Tufts Medical Center. "In light of the current financial crisis, we're glad we were able to spend less upfront and still offer the technology we needed to stay competitive."
"We began seeing an increase in interest in alternative financing over the past year, but it has accelerated since the credit markets tightened," says Craig Tagawa, who is Senior Vice President of American Shared Hospital Services and has served as CEO of GK Financing since its inception in 1995. "Using a service like GK Financing allows a hospital to obtain the equipment they need to provide the best possible care for their patients and remain competitive, without waiting - perhaps years - for the available capital."
Mr. Tagawa goes on to cite a number of forces creating financial difficulties for hospitals. "Hospitals have seen their investment portfolios decline, potentially creating debt covenant issues, which could impact their access to capital. We're also seeing hospital margins coming under pressure due to an increase in uninsured patients, in part due to rising unemployment."
Hospitals have traditionally had a number of sources for capital, but bank loans and credit lines have become increasingly difficult to obtain. And a study by the Financial Leadership Council of The Advisory Board Group showed that the yield on A-Rated, tax-exempt hospital bonds has jumped from 5.25% in December 2007 to 8.50% (as of December 19, 2008). Little wonder, then, that financial challenges continue to rank Number 1 on the list of hospital CEOs' top concerns in 2008, according to the American College of Healthcare Executives' (ACHE) annual survey of top issues confronting hospital CEOs.
Turning to alternative financing can offer benefits for everyone involved, says Mark Symons, Senior Vice President of Elekta's Neuroscience business unit. "This approach to financing new services can add a useful component for managing a hospital's total investment risk. If they are risk averse and/or access to capital is limited, alternative financing lets hospitals implement a service when they - and their patients - need it."
Note: This is the second in a three-part series on how hospitals are exploring financing alternatives and/or leveraging current assets to maintain a competitive edge. For the complete series, visit Elekta.com
About Elekta Elekta is a human care company pioneering significant innovations and clinical solutions for treating cancer and brain disorders. The company develops sophisticated state of the art tools and treatment planning systems for radiation therapy and radiosurgery, as well as workflow enhancing software systems across the spectrum of cancer care. Stretching the boundaries of science and technology, providing intelligent and resource-efficient solutions that offer confidence to both healthcare providers and patients, Elekta aims to improve, prolong and even save patient lives, making the future possible today. Today, Elekta solutions in oncology and neurosurgery are used in over 5,000 hospitals globally, and every day more than 100,000 patients receive diagnosis, treatment or follow-up with the help of a solution from the Elekta Group. Elekta employs around 2,500 employees globally. The corporate headquarter is located in Stockholm, Sweden, and the company is listed on the Nordic Exchange under the ticker EKTAb. For more information about Elekta, please visit www.elekta.com.
|SOURCE Elekta Inc.|
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