PRWire

Munich - In Europe’s leading economies, the inefficiently bound capital in the healthcare system is estimated to have grown from EUR 11.1 bn to EUR 13.1 bn between 2005 and 2006. This represents an increase of about 19%.

Recent figures of an analysis by Siemens Financial Services (SFS) underscore the substantial potential for efficient employment of capital in European healthcare systems: SFS calculations show that more than EUR 13 bn was “bound” in 2006. With nearly EUR 4 bn, Germany ranked first among the countries that were studied. “Bound” capital is capital that is more or less “frozen” as a result of the acquisition of investment goods. In today’s environment of shorter technological cycles, ownership of technical equipment is associated with a number of serious drawbacks. This applies to the healthcare segment as well. In an era of escalating healthcare spending, the analysis clearly shows that the sector is inadequately using available financing solutions like leasing and, as a result, is letting efficiency potential go to waste.

The main reason for the 19% rise in the European average to EUR 13.1 bn in 2006 may be that spending for medical equipment rose 20% within a year while growth in leasing totaled only 6.4% during the same period in the countries that were studied1 . With a total of about EUR 4 bn, Germany was indeed the top country. But its growth rate of only 9% was by far the lowest – possibly the result of the latest cost-cutting efforts in the German healthcare system.

Kai-Otto Landwehr, Managing Director of the SFS subsidiary Siemens Finance & Leasing GmbH, said: “The result of shorter technological cycles should not be that a growing share of available capital in the healthcare system is bound in equipment investments that may fall victim to the next technological advances in 12 to 18 months. Our study shows that in Germany alone the substantial sum of EUR 4 bn is ‘frozen’ in the healthcare sector because suitable financing solutions for investment goods are being inadequately used. Of course, the entire amount cannot be released at once for use in other areas. But when purchasing no longer is the standard option and the focus shifts to usage, considerable efficiency potential arises.”

In the process, additional transparency is created. “Tailored financing contained in a comprehensive finance plan can provide healthcare managers with a very accurate picture of the real costs of investment goods over time,” Landwehr said. And he added that this picture was necessary in order to precisely calculate the prices of individual treatment units.

Calculating Frozen Capital

The formula for calculating ‘frozen capital’ is as follows:
• Annual spending on healthcare equipment is reduced to the proportion deemed ‘leasable’ (conservatively, 50%)

• This remaining sum is then reduced by the all-sectors leasing penetration rate for the country in question (also highly conservative, as the health sector leases/rents less than the commercial world)

• The remaining sum is regarded as largely ‘frozen’ in that it has been locked-in to outright purchases where payments could have been spread – as monthly payments – across the lifetime of the asset

For more information see:
www.siemens.com/answers-for-finance

[1] Average figures from a variety of sources, including Mediastat, Espicom, Frost and Sullivan

About Siemens Financial Services
Siemens Financial Services (SFS) is an international provider of financial solutions in the business-to-business area. With about 1,900 employees and an international network of financial companies coordinated by Siemens Financial Services GmbH, Munich, we support Siemens as well as non-affiliated companies, focusing on the three sectors of energy, industry and healthcare. We finance infrastructure, equipment and working capital and act as a competent manager of financial risks within Siemens. By leveraging our financing expertise and our industrial know-how we create value for our customers and help them strengthen their competitiveness. For more information see: www.siemens.com/finance.

This document contains forward-looking statements and information – that is, statements related to future, not past, events. These statements may be identified by words as “expects,” ”looks forward to,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “will” or words of similar meaning. Such statements are based on our current expectations and certain assumptions, and are, therefore, subject to certain risks and uncertainties. A variety of factors, many of which are beyond Siemens’ control, affect its operations, performance, business strategy and results and could cause the actual results, performance or achievements of Siemens worldwide to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements. For us, particular uncertainties arise, among others, from: changes in general economic and business conditions (including margin developments in major business areas); the challenges of integrating major acquisitions and im-plementing joint ventures and other significant portfolio measures; changes in currency exchange rates and interest rates; introduction of competing products or technologies by other companies; lack of acceptance of new products or services by customers targeted by Siemens worldwide; changes in business strategy; the outcome of pending investigations and legal proceedings; our analysis of the potential impact of such matters on our financial statements; as well as various other factors. More detailed information about our risk factors is contained in Siemens’ filings with the SEC, which are available on the Siemens website, www.siemens.com, and on the SEC’s website, www.sec.gov. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in the relevant forward-looking statement as expected, anticipated, intended, planned, believed, sought, estimated or projected. Siemens does not intend or assume any obligation to update or revise these forward-looking statements in light of developments which differ from those anticipated.