Tag Archives: Equipment Appraisals

Appraisal Methodology

M&E Appraisal Associates, Inc. (“M&EAA”) prepares all machinery & equipment appraisals, inventory appraisals, and medical equipment appraisals in conformance with Uniform Standards of Professional Appraisal Practice (“USPAP”) requirements. USPAP compliant valuation methodology entails the use of three approaches to value: sales comparison, cost, and income.

Inherent in the valuation process is the adherence to the principal of substitution. The principle of substitution is essentially a method for determining the relative value of an asset. The principle of substitution states that a knowledgeable and willing buyer will not pay more for an asset than the price to purchase a substitute asset that performs the same function or service.

The Sales Comparison Approach –

The sales comparison (or market) approach to value involves the use of market offerings and sales of comparable items in determining the value of a subject property.

The Cost Approach –

The cost approach involves the use of the current replacement cost new of an item, less all forms of depreciation to determine the value of a subject property. Depreciation in terms of the cost approach includes physical deterioration, functional obsolescence, and economic obsolescence.

Physical deterioration is a loss in value stemming from wear & tear, exposure to the elements, etc.

Functional obsolescence is a loss in value stemming from a flaw inherent in the subject property, in comparison to its current replacement. Examples of functional obsolescence include slower output or cycle time, inability to perform a specific function, excess capital or operating costs, and other such factors that may be inherent in a subject property.

Economic obsolescence is a loss in value stemming from external causes. Examples of economic obsolescence include a change in market conditions, government intervention or regulation, changes in reimbursement, and other such factors that are external to a subject property.

The Income Approach –

The income approach is based on the premise that value is a function of the future monetary benefit to be received from the ownership of a property. This monetary benefit, or income, is quantified via capitalization or present value discounting of cash flows to arrive at a value. The income approach is difficult to apply and is not regularly used in the valuation of machinery & equipment or personal property.

Concluding Value –

All value approaches are considered as part of the machinery & equipment appraisal process. The sales comparison and cost approaches are typically utilized in determining the value of machinery & equipment. Market information relied upon as part of the sales comparison approach generally includes recent sales or current sales offerings for comparable items. Original equipment manufacturers (“OEM’s”) are typically contacted to determine replacement cost new as part of the cost approach analysis. The appraiser’s knowledge resulting from the valuation of similar machinery & equipment is also typically applied. After the consideration of three approaches to determining value and all relevant data and information, values are then concluded by the appraiser.

The Medical Equipment Appraisal Process

M&E Appraisal Associates, Inc. (“M&EAA”) has extensive experience providing medical equipment appraisals.

In doing so, M&EAA recognizes the importance of being as inconspicuous as possible in order to never disturb patients during the medical equipment inspection process.

As part of the medical equipment appraisal process, M&EAA will typically provide the medical practice/facility with a checklist of information/items required by the appraiser. The information/items include, but may not be limited to:

  • A Depreciation Schedule
  • A List of Leased or Otherwise Not Owned Items
  • Photocopies of the Facilities Floor Plan
  • A List of Vendor Supplied Medical Equipment (Not Owned by the Practice)
  • A List or Identification of Personally Owned Items
  • A List or Identification of Medical Equipment at an Off-Site Location

The appraiser will contact the person designated at the facility to set up the site inspection appointment and talk about the type and amount of equipment that is to be appraised. At this time, if there are any questions about the checklist, they can be addressed.

Every effort will be made to arrange an appointment to allow the appraiser to go in rooms at the facility without disturbing the flow of patients. Oftentimes, the site inspection can be performed when the practice is closed for lunch or during a slow period. However, in the case of a larger facility, this is not always possible. The appraiser will never enter an exam room or similar area if the door is closed without first confirming it is empty.

The appraiser will arrive at the facility and meet with the contact person who will accompany the appraiser for a brief tour of the facility. The contact person will also identify all items that are NOT to be included in the appraisal (leased or rented, vendor-provided, personally owned, or otherwise excluded). After the walk-through, the appraiser will proceed throughout the facility, inspecting and gathering information for all items to be included in the appraisal. The appraiser will also typically photograph a sampling of representative medical equipment, exam or procedure rooms, etc. It is not necessary for the contact person to stay with the appraiser during the inspection; however, the contact person (or another person with authority and knowledge of the facility) should be available if the appraiser has questions or problems gaining entry to areas within the facility. Confidentiality will be exercised by the appraiser at all times, both with patients and staff. Photographs of patients or chart contents will not be taken.

Furthermore, in order to minimize the appraiser’s time at the facility, care should be taken to pull out any items that are typically kept in a drawer or cabinet and that should be included in the appraisal. Consideration should also be given to make sure any off-site items are accounted for.

After the site inspection, the appraiser will conduct market research and employ standard valuation methodologies to arrive at a value conclusion. The resulting report will include an itemized list of all items at the practice with corresponding values. In some cases, lower value or miscellaneous items will be grouped together at the discretion of the appraiser. The appraisal list will be formatted by room or area to allow for subsequent review by the client, physician(s) or practice staff, as necessary.

The president of M&EAA, Greg Feinsinger, CMEA has over 25 years experience providing medical equipment appraisals. A representative list of medical practices appraised includes:

Allergy & Immunology • Bariatric • Cardiology • Dentistry • Dermatology • Endocrinology • Endoscopy Centers • Family Medicine • Gastroenterology • Geriatric Medicine • Internal Medicine • Nephrology • Neurology • Nuclear Medicine • Obstetrics & Gynecology (OB/GYN) • Oncology • Ophthalmology • Optometry • Orthopedics • Otolaryngology (Ear, Nose & Throat) • Outpatient Surgical Centers • Pediatrics • Podiatry • Radiology • Urology • Weight Loss Centers

For more information about a specific medical equipment appraisal assignment, please call us at (844) VALUEME (825-8363).

Medical Equipment Appraisal