Generally speaking, two classes of medical devices exist- disposables and capital equipment.
Capital Equipment Explained:
These are high-dollar pieces of equipment that are purchased from a hospital’s capital budget. Physicians and departments will often have “wish lists” for capital equipment they want the hospital to buy. The frequency at which this budget becomes available varies. Still, the funds are often accessible a minimum of once a year.
Once the budget becomes available and the account prioritizes your product for purchase, they will issue payment. If your product is not prioritized, you will have to wait until the next time the capital budget becomes available.
While you are waiting for the funds to become available, you will want to continue conducting cases at the hospital. This appeases the physicians requesting your technology and ensures that your product is not forgotten.
Payment received in this interim period can take many forms, as every hospital has different protocols. The hospital may rent the capital equipment on a per-case basis. This could be a rent-to-own option or simply a sunk cost for the hospital.
Additionally, most pieces of capital equipment have disposable components that are used for each case. Medical device companies do this to have a constant revenue stream even after the high-dollar equipment is purchased. The disposables are usually charged to the hospital.
Capital sales reps are well compensated. They typically receive a flat commission percentage and other compensation for the disposables and rental fees.
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