Transcript

The margin structure of LINAC service contracts and its impact on negotiations. · Medsolve Dynamics

Yoel Bakas: 47 to 70%. That is the margin on many LINAC service contracts. Hardware margins on the machine itself run closer to 42%. That spread is not accidental. It is why your vendor is so highly incentivized to lock you into a service contract at the same time as your capital purchase. It is also why they are highly incentivized to keep you from shopping around at renewal. The machine sale is where the relationship starts. The service contract is where it gets really profitable. I'm not saying this to make vendors look bad. I spent 20 years on the vendor side of those numbers. I lived inside that margin structure. and I completely understand why it exists. I'm saying it because programs that understand that margin structure sit very differently in negotiations than programs that don't. Before your next renewal, make sure you know what you're actually negotiating.