Medical Imaging Equipment Trends
COVID-19 INDUSTRY BRIEF
EFFECTS OF THE CORONAVIRUS ON THE Medical Imaging Equipment INDUSTRY Updated July 1, 2020
- COVID-19 Impact: The COVID-19 crisis has caused volatility within the healthcare space because patients have delayed elective procedures. Magnetic resonance imaging (MRI) is expected to see reduced demand, as a significant proportion of scans are for non-life-saving procedures. According to recent estimates, the number of MRI outpatient imagining procedures has decreased by as much as 70 percent, according to the Radiological Society of North America. In the short term, this will impact equipment values. However, many of these treatments are necessary for patient healthcare, so a return to normal volumes in the long run is expected.
- Global Growth Rate Forecast: The global MRI systems market is expected to experience a 6.2 percent compound annual growth rate through 2027, driven primarily by an aging population and technological advancements that make MRI an efficient diagnostic tool.
- Market Dynamics: Demand for all types of medical equipment is linked to basic demographics, which will be unchanged in the medium and longer term. Long-term pricing pressure concerns about the cost of medical care will continue to pressure this industry.
- Value in Refurbished Machines: Gordon Brothers has seen rising acceptance of refurbished machines in major medical centers and hospitals in the U.S., in addition to those in Mexico and South America, among others, as medical service providers seek to reduce costs. Some global markets have seen decent demand, offsetting U.S. consolidation. For example, Saudi Arabia, which is in the midst of privatizing its healthcare system.
- Secondary Market Condition: Over the last 12 months, Gordon Brothers has seen a weakening of the export market for certain types of used medical equipment due to weaker economic conditions in the rest of the world as well as technological obsolescence trends.
- Valuation Outlook: In terms of appraised values for both machinery and equipment and inventory, we do not expect there to be any negative impact due to COVID-19, other than short-term operating issues due to social distancing or logistics issues.
Date June 2020
- The COVID-19 crisis has caused volatility within the healthcare space because patients have delayed elective procedures. Magnetic resonance imaging (MRI) is expected to see reduced demand, as a significant proportion of scans are for non-life-saving procedures.
- According to recent estimates, the number of MRI outpatient imagining procedures has decreased by as much as 70%, according to the Radiological Society of North America. In the short term, this will impact equipment values.
- As technology is updated, older machinery may become obsolete and lose value in the secondary domestic market, as the average lifespan of medical devices is only five to eight years.
By the numbers
Industry faces Challenges from COVID-19: The global MRI systems market will grow at an average rate of 6.2 percent from 2019 through 2027, according to projections from a May 2020 Fortune Business Insights report. However, the industry has been negatively impacted by the coronavirus pandemic. To mitigate the spread of the coronavirus and to shift resources to essential services, many doctors and healthcare facilities postponed non-essential procedures. The American College of Radiology issued a statement on May 19, 2020 asserting that “If the risk of illness or death to a health care worker or patient from health care-acquired COVID-19 is greater than the risk of illness or death from delaying radiology care, the care should be delayed; however, if the opposite is true, the radiology care should proceed in a timely fashion.” As noted in the Fortune Business Insights report, while some health care areas are expected to see surges in demand during the pandemic, MRI equipment is one area that is anticipated to have noticeably slower growth for 2020 due to reduced demand.
Major U.S. players, such as Siemens, are anticipating major imaging modalities—including MRI equipment—to experience sales declines due to delays in installations and the refocusing of investment decisions during the pandemic period. In terms of outlook, outpatient imaging has seen a decline of over 70 percent in volumes, as compared to 50 percent among inpatient and emergent scanning, according to an article published on April 15 by the Radiological Society of North America. We anticipate that outpatient imaging may suffer a huge revenue loss in the coming years. Due to the continued rise in COVID-19 cases in the U.S. as of June, it is uncertain as to when outpatient scan volumes may normalize, especially if another shutdown occurs later in the year.
Age of machine important to value: The year of manufacture is a good indicator of how much imaging equipment is worth on the secondary market. After five years, machines are typically worth no more than 25 to 40 cents on the cost dollar, with the main driver being that every five to seven years a new generation of machines is typically released. It is important to note that through the approximate five- to seven-year window of a generational lifetime, a machine is still generally considered to be “current” technology. As machines approach years five and six, end users may contemplate purchasing new machinery (cost permitting), knowing that the service life will be longer and from a business and marketing standpoint, they may benefit from maintaining the most recently-updated machinery.
Machines in excess of eight or nine years of age will likely end up in emerging markets like Mexico or South America. While these second- or third-generation machines may be fully functional, they are no longer the state-of-the-art technology desired by most medical facilitates in the United States.
Magnet strength, gradient, and slew rate determine best use: Magnets are the fundamental, most important components of MRI machines and magnetic strength correlates with the level of detail in images produced. Magnetic strength is commonly measured in Tesla (T). Today’s machines use magnets ranging from 0.35T to 3.0T in power; however, most machines sold in the world today are powered by 1.5T magnets (mid-field strength). Within each strength category, machines are further refined by their gradient specifications, which define the machine’s spatial resolution and imaging speed. Gradients are created when electrical currents pulse on and off during imaging. They reach different heights over different durations. A machine’s slew rate is calculated by dividing the gradient strength by the rise time (the time to reach that strength) and is measured in Tesla per meter per second (T/m/s). High-field superconducting machines achieve slew rates of approximately 150 to 200 T/m/s; superconducting open scanners typically range from 100 to 120 T/m/s; and lower-field permanent scanners feature 50 T/m/s. The combination of strong gradients and high slew rates means thinner slices, which are important for cardiac and brain imaging. However, other specialties, such as orthopedics, do not necessitate such strict performance requirements. Appraisers must consider these technical specifications when determining the marketability of machines.
Coils add value: Coils act as an antenna for MRI systems that broadcast the radio frequency (RF) signal to the patient and/or receive the return signal. There are two classes of RF coils: volume coils and surface coils. Volume coils transmit and receive signals over large volumes, while surface coils are designed to scan smaller regions. Examples include specialized extremity coils, which produce high-resolution images for wrists, shoulders, feet, and fingers; and head coils, which enable faster brain scans with parallel imaging. A broad array of coils can add to the value of MRI systems. Lenders should be aware of the types of coils that are included in their collateral. Coils are more valuable when sold with a full MRI system.
latest software desired: While the physical characteristics of an MRI machine are crucial, they mean little without the sophisticated software that operates the equipment. Some companies refuse to service machines unless the software is up to date. Upgrades can be very expensive, so MRIs operating current technology will fetch the highest prices. Even an older machine running the latest software can be quite valuable. Lenders should inquire with borrowers about their maintenance practices for upgrades.
logistics can add up: Prospective buyers on the secondary market must factor significant rigging and transportation costs into the purchase of used machines. De-installation is complicated and must be done by a trained professional who may charge from $15,000 to $20,000 per machine—not including the cost of removal from the building. Rigging of machines that can weigh up to 45 tons will add thousands more in fees, and the costs could increase further if the machine is not located on the first floor of the building or near an exterior wall. Installation involves a variety of highly technical tasks that require specialized expertise and sensitive and costly tools. Removal, rigging, transportation and installation costs can total more than $75,000 to $100,000 per machine.
Note: This publication is provided for informational marketing purposes only. The material contained herein should not be regarded as advice, nor relied upon to make financial, operational or other decisions; nor should it be used as a substitute for an asset appraisal. Actual recovery values may vary from transaction to transaction and the recovery values referenced herein are for representative transactions without regard to specific key factors. This material may be redistributed only in its entirety, including notice of copyright. All rights reserved. ©2020 Gordon Brothers, LLC.
Reference sources: Journal of the American College of Radiology, fortune business insights, grandview research, ibisworld