Transcript

Capital Is A 7-10 Year Commitment: The Math Most Proformas Skip · Medsolve Dynamics

Yoel Bakas: Capital decisions are multi-year commitments that compound over time. Most of us know that, but oftentimes these decisions are treated as point in time decisions. The proforma is built. The deal gets signed. The equipment is installed. That's year zero. Year one is just fine. Year 2, the warranty has expired and you're now paying for service. Year three is when those escalators could kick in at three or four percent. And that software renewal is now two CMS adjustments away from where the original proforma was built. By year four, throughput expectations have really crept up. And by year five, you're renegotiating a contract with a team that wasn't at the table when the deal was originally signed. Capital is not a point in time decision. It's a seven to 10 year operational commitment. The math that wins the capital approval is not the math that defends the operating margin in year five. The programs that protect margin through full capital cycle do one thing that others don't. They walked through the math at year 0, year 3, year 7, not just at signature. If your program is approving capital this year, year three and year seven math has to be in the room. And given what just happened with reimbursement, any proforma that was signed with math done before April is not the math that you need to defend now.