Essay about Portland Cancer Center

1340 Words6 Pages
Case 18: Leasing Decisions | |

The Portland Cancer Center is a not-for-profit inpatient and outpatient facility dedicated to the prevention and treatment of cancer. Working to perfect noninvasive brain surgery techniques for the past ten years, the Center is considering options to replace its current model of the Gamma Knife. Radiosurgery is often referred to as the Gamma Knife. The Gamma Knife delivers 201 separate radiation sources to treat certain brain cancers without invasive surgery. For patients with deep lesions the Gamma Knife significantly reduces the risk associate with traditional surgical procedures. Other clinical benefits to the Gamma Knife include: treating Parkinson’s, trigeminal neuralgia,
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The per procedure lease has a benefit to both parties, however reduces risk for the Center. It would only be advantageous is the volume of procedures was low, specifically below 100 procedures. Maintaining a state of the art healthcare facility is important and the lease will allow the Center to do so. The lessor is compensated for taking risk with tax deductions, however they will assume the risk with the technology. The NAL of $130,554 affirms that leasing creates more value than buying in this situation. The lessee’s IRR of 6% is well below the 10%, which also indicates a positive aspect to leasing versus buying. The terms of the lease should be carefully considered, especially the cancellation clause in the contract. This is important to address because of concerns with the new facility being ready before four years time. Significant costs could be associated with unutilized equipment so GBF could consider adding a penalty to the cancellation clause.
The decision is also weighed based upon the move to the new facility. If the Center moves early keeping the equipment and moving it to the new facility is always an option. The Center should also negotiate a lower yearly lease payment. The lease answers the clinic’s requirement of a short-term commitment with the least risk associated due to a new facility that is on the way. There are also perks to a short- term lease
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