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INTERVIEW Green cash flow


Manufacturer financing for immediate cash flow boost. By Francesco Pompei


mentmethodisamonthlycreditcardchargebythe manufacturer.Nocomplexityof leases,compliancy orcontracts.Thehospitalownstheinstrumentsand paysonaninstallment basis financed bythemanu- facturer. For TA thermometers, this charge is less than$15/monthperthermometerfor24monthsfor most GPO pricing. A typical cost for disposables alone for other types of thermometers is about $21/month, thus immediately improving cashflow by$6/monthper thermometer.Afurther cashflow improvementisfromelimination of probe replace- ment and repair charges, which typically are about $100/yr per thermometer. This brings the total im- mediatecashflowgaintoapproximately$14/month per thermometer. After the thermometers are paid for,thetotalcashflowimprovementisthen100per- cent of the previous cost, or $29/month per ther- mometer. For a hospital with 500 thermometers, over five years this adds up to nearly a million dol- lars of free cash flow.


Francesco Pompei is Founder and CEO of Exergen Corporation, and holds 60 US patents in non- invasive thermometry for medical and industrial applications. Earning BS andMS degrees from MIT, and an SMand a PhD from Harvard, Pompei also holds an appointment as Research Scholar in the Department of Physics at Harvard in cancer research.


Howdoesmanufacturer-financednewtechnol- ogyincreaseimmediatecashflowforcash-short hospitals? Francesco Pompei. First, a new technology must cost less and deliver improved patient care. In the current climate, unless both criteria are met, a new technologymaynot be a good deal for the hospital, or for the patient. Second, out-of-pocket cost of ac- quisition of thenewtechnologymustbe lower than what it replaces on day one. This means that effec- tive new technology must be financed in some way to allow the hospital to gain its benefits immediate-


62 www.executivehm.com Access clinical studies: Exergen Corporation - 400 Pleasant Street - Watertown, MA 02472


For more information, please call 617-923-9900 x6234, email: medical@exergen.com, or visit: www.exergen.com


ly, even if there is no readily available cash or fi- nancing.Thebestreadysourceof thisfinancingmay be the manufacturer, who even in the toughest of times always has the lowest financing costs of any- one in the supply chain. This is because its cost of producing any product is always the lowest in the supply chain. An example of this is temporal artery (TA)


thermometry,anewtechnology thatbothimproves patient care and substantially reduces costs. Patient care improvement results from the increased speed andaccuracyofmeasurement,withtheinherentpa- tient appeal of a gentle forehead scan. This replaces other methods, which are slower and less accurate, and require an unwelcome probe insertion into a bodycavity.Thescanof the forehead, like theuseof a stethoscope, lightly touches skin with no mucous membranes and requires no disposable – simple cleaningbetweenpatients is adequate. Since dispos- ables account for about 90 percent of thermometry costs, this saving is very substantial.


Howdoes themanufacturerfinancingwork? FP.The hospital conducts its evaluations, purchase andacquisition in thenormalmanner, but the pay-


Whatmakes thisgreen? FP. Elimination of waste – particularly non- biodegradable plastics used in thermometer probe covers. One medium-sized hospital estimated that it eliminated 2.2 tons of waste per year due to ther- mometerprobecoverswhenconvertingtoTAther- mometry. Other thermometers are easily broken due to their design requirement for a probe inser- tion into a body cavity. BecauseTAthermometers are entirely non-invasive instruments, they can be designed tobenearly indestructible. This allows the manufacturer tooffer a lifetime warranty, eliminat- ing the costandassociated waste for replacing ther- mometer probes as well as disposables.


Whywouldamanufacturer provide this typeof financing? FP. If the manufacturer has the financial strength to offer this service to its hospital customers, then it is an excellent use of resources to help improve thefi- nancial health of its customers,whichultimately re- sults in increased sales for the manufacturer. In addition, the manufacturer, together with its hospi- tal customers, makes a significant improvement in care for our patients and care for our planet.


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