CMS announced in July a likely Radiation Oncology bundled payment model starting in 2020 for a duration of 5 years for 17 cancer types. They want incentives to focus more on quality rather than volume (i.e., less fractions). Is seems that reimbursement cuts could be substantial (i.e., approaching double digits).
Sites with lower patient volumes are more concerned about the cost of their operation since they have less revenue being collected. Sites that purchase pre-owned equipment tend to spend less on both equipment and maintenance contracts since they often choose to pay for time and material on an as-need basis, or they negotiate lower service contract pricing.
Apart from the MR-Linacs that have been developed in recent years, there have been few major enhancements to conventional linacs over the past decade, making it more difficult for treatment facilities to differentiate themselves based on technology alone. Some sites are choosing pre-owned equipment and using some of the funds saved to market their facility more generally. In some markets, promoting IMRT and /or IGRT (e.g., with portal imaging) can be sufficient as a technology equalizer or differentiator.
In general, more economical solutions lower the financial risk of the business as it minimizes exposure to events such as reduced patient referrals, changes to reimbursement, competitive actions etc.
In general, linear accelerator relocations are expensive and the process can incur additional costs to replace disrupted parts. It could be advantageous to purchase a pre-owned unit, perform general marketing to increase referrals, and after a few years when it is time to relocate, make equipment decision based on:
the patient volume at that time
new equipment technology introduced to the market its demand
any recent change to competitive activity
An empty vault can be an ideal revenue opportunity for pre-owned equipment and provide an advantage against a competitive site that has invested in new equipment and a bunker due to their corresponding high cost of operation.
A backup machine can have several advantages. Firstly, the need for quick service response is reduced, allowing a more economical service solution to be implemented (i.e. like a “time and materials” option). In addition, as the patient referrals increase due to marketing initiatives, the backup machine can be put to work without requiring additional work shifts.
The reimbursement amount is independent of the price paid for equipment. A more economical equipment solution could help those considering purchasing a linac and concerned about the market dynamics, and the time to ramp-up their referrals.
Any purchase should be considered in terms of the immediate, mid and long-term objectives of the organization.
It is important to understand the dynamics of the local market and demographics, and how they may change over time. Different markets value and respond differently to technology. Sites with older equipment often purchase newer units so as not to lose referrals to the sites with newer equipment.