News | September 20, 2012

MDET: A New Acronym to Learn

Medical Device Excise Tax expected to drive medical device stockpiling

MDET Medical Device Excise Tax CT Systems Cath Lab

September 20, 2012 — Each autumn, with an eye on the winter months ahead, squirrels gather nuts to prepare for the inevitable change. Hospitals, medical facilities, doctors and long-term care facilities may be doing the same this fall, stocking shelves and purchasing items from their wish list and budgets before a new tax on most medical products goes into effect. 

The Medical Device Excise Tax (MDET), a component of the Patient Protection and Affordable Care Act (PPACA), goes into effect after Dec. 31, 2012. The excise tax, 2.3 percent of the sale price, will be placed on the sale of most surgical instruments and medical devices by the manufacturer, producer or importer. Most medical devices intended for human use will be taxed, based on definitions used by the U.S. Food and Drug Administration (FDA).  The tax does not apply to eyeglasses, contact lenses, hearing aids or any other medical device that the public generally buys at retail for individual use.

Most experts agree that the impact of the tax will be felt beyond 2.3 percent. The final sale price of applicable medical devices will also be affected by costs associated with administering, tracking, collecting and paying the tax. Companies will be responsible for making payments on medical products sold after Jan. 1, 2013, with the first tax payments due in April. It is estimated that half or more of the costs associated with MDET will be passed along in the form of higher priced products.

Robert Edelstein, president of Millennium Surgical Corp., a national supplier of specialty surgical instruments, is actively working with vendors, importers and suppliers to determine the effects of the MDET on the cost of their products.

"We are working to determine what effect the tax will have for our buyers. It will be interesting to see if the contracts that hospitals use will allow their vendors to increase cost," said Edelstein. "From my understanding the manufacturer selling through a group purchasing organization (GPO) will be paying the tax on the selling price." This means the fees the GPO collects, often 3 percent, and the rebates the hospitals collect will be taxable.

"Some contracted suppliers have healthy gross profits," noted Edelstein. "Others have a very small profit and the 2.3 percent could erase most of it."

Among the devices on the list of taxable items are medical equipment, surgical instruments, surgical supplies, custom packs, procedural kits and patient care products. Demo equipment, loaned and/or leased equipment, some devices used in veterinary medicine, those used in medical or clinical research, and dental instruments and products are also included. Sales contracts for medical software and IT systems will also be taxable. And future taxes may also be imposed on medical applications for smart phone and other mobile devices.

So what of the squirrels? Just like the squirrel who harvests in preparation for the tough season ahead, medical facilities that work with their finance departments and make smart purchases before Dec. 31 can reap the benefits. By purchasing before Jan. 1, 2013, not only will they avoid inevitably higher costs due to the tax, but they will also avoid the sudden and yet undetermined impact on their contracts and GPOs. Medical facilities that fail to plan ahead may find themselves left out in the cold.

For more information: www.irs.gov/pub/newsroom/reg-113770-10.pdf

Related Content

CT Shows Enlarged Aortas in Former Pro Football Players

3-D rendering from a cardiac CT dataset demonstrating mild dilation of the ascending aorta. Image courtesy of Christopher Maroules, M.D.

News | Computed Tomography (CT) | January 12, 2018
Former National Football League (NFL) players are more likely to have enlarged aortas, a condition that may put them at...
Siemens Healthineers Strengthens CT Portfolio With Four New Systems at RSNA 2017

The Somatom Force with the new FAST 3D Camera

Technology | Computed Tomography (CT) | December 14, 2017
December 14, 2017 — Siemens Healthineers introduced four new...
Toshiba Medical Introduces Aquilion Prime SP CT System at RSNA 2017
Technology | Computed Tomography (CT) | December 13, 2017
December 13, 2017 — Toshiba Medical, a Canon Group company, introduced its new Aquilion Prime SP...
Philips Debuts IQon Elite Spectral CT Scanner at RSNA 2017
Technology | Computed Tomography (CT) | December 11, 2017
At the 2017 Radiological Society of North America (RSNA) Annual Meeting, Philips unveiled the IQon Elite Spectral CT,...
Toshiba Highlights Ultra-High Resolution CT at RSNA 2017
News | Computed Tomography (CT) | December 06, 2017
Toshiba Medical, a Canon Group company, showcased the Aquilion Precision, what it calls the world’s first ultra-high...
Samsung Unveils Mobile CT OmniTom at RSNA 2017
Technology | Computed Tomography (CT) | November 26, 2017
Samsung Electronics debuted its OmniTom mobile 16-slice computed tomography (CT) scanner at the Radiological Society of...
Siemens Healthineers Announces First U.S. Installs of Somatom go.Up CT System
News | Computed Tomography (CT) | November 15, 2017
November 15, 2017 — Center for Diagnostic Imaging (CDI), one of the nation’s largest providers of diagnostic imaging
Medis Releases QAngio CT v3.1
Technology | Computed Tomography (CT) | October 09, 2017
Medis has released a new version of its QAngio CT (computed tomography), which can now be launched from the Medis Suite...
Hitachi Supria True64 CT Receives FDA Clearance
Technology | Computed Tomography (CT) | September 15, 2017
Hitachi Healthcare Americas Inc. announced it has attained U.S. Food and Drug Administration (FDA) 510(k) clearance to...
Orange County, Calif. Hospital Adopts Siemens Somatom Force CT for Cardiac Imaging
News | Computed Tomography (CT) | September 12, 2017
Hoag Memorial Hospital Presbyterian recently became the first hospital in Orange County, Calif., to install the Siemens...
Overlay Init