Cramer Decker offers a PERK: 0% financing

Thursday, November 30, 2006

SANTA ANA, Calif. - In an effort to improve access to credit and boosts its sales, Cramer Decker Medical has begun offering something you don't see every day: 36-month leasing at 0% interest.
The new leasing program, administered by VGM Financial Services, applies only to Cramer Decker's Patient Equipment Respiratory Kits or PERKS. The kits contain everything a provider needs to set up a new respiratory patient--a concentrator, portable cylinders, a conserving device, etc. They cost $1,200 to $1,500. Cramer Decker created the new leasing program to help counter Medicare's new 36-month cap on oxygen reimbursement. The company also recognizes that many providers are strapped financially, and 0% interest should help ease the pain, said John Peterson, director of sales.
(In a November HME News Poll, 64% of providers who responded said that Medicare reimbursement cuts had decreased their cash flow to the point that they are taking longer to pay creditors.)
"Cash flow is one of the biggest issues for providers at this time," added Leanne Kelly, vendor account manager for VGM Financial. "I think the cuts have providers looking at their business differently, and they need to make sure they have cash flow with the changing times."
When you consider that industry interest rates range, on average, from 8% to 15%, depending on a provider's credit risk, Cramer Decker's 0% offer appears all the more unusual. It is not, however, unprecedented.
"We offer various promotions from time to time to our customer base and some times those interest rates are below market as an additional incentive to provide a slam-bam, no-brainer deal to the customer, similar to what the car companies will do with 0% financing," said Bill Corcoran, vice president of financial services for Invacare, the industry's largest creditor.
Some industry leaders estimate that about one third of all providers have so much debt that borrowing more money has become very difficult.
"We know there are people like that," Peterson said. "That's why we set up the program. If we get people who are such bad credit (risks) that they may skip town tomorrow, they are probably not going to be approved, but we definitely give (many) the benefit of the doubt."
Industry consultant Wallace Weeks said that most of the companies he works with have manageable levels of debt. But as Medicare ratchets down reimbursement even further, look for that to change, especially for companies that don't retool to make themselves more efficient, he said.
"As margins contract, a balance sheet that may have seemed manageable, may become unmanageable, or at least difficult, with a margin that has thinner profit margins," Weeks said.
In short, crunch time "is on the way," he added.