Medical Imaging Equipment Trends
Date June 2019
- Revenue for diagnostic imaging centers in the United States is forecasted to increase at an annualized rate of 1.2 percent over the next five years
- As a way to save on costs, 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. Some global markets, including Saudi Arabia, which is in the midst of privatizing its healthcare system, have seen decent demand, which is offsetting U.S. consolidation
- As technology is updated, older machinery may become obsolete, losing value in the secondary domestic market as the average lifespan of medical devices is only five to eight years
By the numbers
Industry facing growth and challenges: Per a recent report by Fortune Business Insights, the global MRI systems market will grow at an average rate of 6.4 percent from 2018 through 2025. Revenue for diagnostic imaging centers in the United States is also forecasted to increase at an annualized rate of 1.2 percent to $19.6 billion over the next five years. The key factors driving the growth include technological advancements leading to the increased adoption of high-field MRI systems, a growing geriatric population, and the discovery of a significant helium deposit in Tanzania’s East African Rift Valley in late 2016. Helium, a non-renewable resource, is a necessary element for the functioning of MRI machines. From 2011 to 2013, the helium industry faced shortfalls of 20 percent, leading to significant shortages, which negatively affected the industry. While the discovery of a new deposit is good news, the African field will most likely not be online until 2020 at the earliest; therefore, the industry is still experiencing a near-term helium shortage. However, the latest generation of MRI systems are more efficient with helium usage and require lower fill levels, which has helped offset demand somewhat.
There are several challenges facing industry providers including coping with the increasing costs relative to acquiring and maintaining advanced MRI systems, such as specialized neonatal and breast MRI systems, among others. Stringent regulatory approvals and intensifying competition from computed tomography (CT) scans may also hinder growth for companies in the space. Additionally, increased control over laboratory services by Medicare and other third-party programs is expected to partially offset the positive effects of industry growth drivers, as well as recent changes to the Patient Protection and Affordable Care Act that will limit insurance rolls.
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. 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 year five to six rolls around, end users may contemplate whether to purchase a new machine (cost permitting) knowing that the service life will be longer, and that they may benefit from both a business and marketing standpoint from maintaining the most recent generation machinery. Machines in excess of eight or nine years old 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 most important and fundamental components of MRI machines and correlate 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. Within that 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 taking the gradient strength and dividing it 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 around 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 of interest. 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 which coils are included in their collateral. Coils are more valuable when sold with a system.
Latest software desired: While the physical characteristics of the machine are crucial, they mean little without the sophisticated software that operates the equipment. Some companies refuse to service machines unless 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, which doesn’t include the cost of removal from the building. Rigging of machines that can weigh up to 45 tons will add thousands more in fees and will increase further if the machine is not located on the first floor or near an exterior wall. Installation involves a variety of highly technical tasks, which require specialized expertise along with sensitive and costly tools. Together, removal, rigging, transportation, and installation costs can top $75,000 to $100,000 per machine.