An interview with Peter Myhre, SVP of Wells Fargo’s Healthcare Financing Division
Four months ago, Wells Fargo Equipment Finance, Minneapolis, a wholly owned subsidiary of Wells Fargo Bank, named equipment financer Peter Myhre senior vice president of its newly formed Healthcare Financing Division. The new division offers equipment-financing solutions tailored specifically to health care providers, such as hospitals and labs. Myhre recently spoke with CLP about the new venture, the stimulus package, and the unique perspective health care specialists can bring to equipment financing.
|Peter Myhre, senior vice president of Healthcare Financing Division|
Q: How did the new health care equipment finance division get started?
Myhre: Wells Fargo already had an established team in its commercial bank division dedicated to serving health care providers, but prior to the development of the health care equipment finance division, hospitals were serviced by specialists in equipment financing, not specialists in health care.
There is additional value that having an industry specialists provides. For one, we better understand the issues that health care providers are facing, particularly in reimbursement. Also, a lot of the operations in health care that require financing are start-up, new operations, and often include physician ownership and partnerships with hospitals. We know that medical equipment is unique and high-tech, and that it changes. It’s important, and we understand that.
Q: Tell us about your background in health care and financing.
Myhre: I started as a CPA auditing financial companies that did lending to the health care market. Following that, I was in direct health care equipment and project financing for 20 years, principally working with health care providers such as hospitals, physicians, development companies, and labs—labs to a lesser degree, simply because they buy less capital equipment.
However, I think the situation is changing with development for new technology for the lab market. Blood services, for example, are becoming increasingly complex and require new technology, which I think is becoming the case with a lot of other lab-related endeavors.
Q: Tell us about Wells Fargo’s history and commitment to health care.
Myhre: Wells Fargo is very selective about what segments and targets they pursue, and health care is one that they have been looking at for the last 3 years in particular. While all or most of our competitors are getting out the market, Wells Fargo is investing in this new segment. Given that they’re moving into this market while many people are leaving, I think that’s an indication of how strong their commitment is.
Q: Does the equipment you are willing to finance depend on what customers are looking for?
Myhre: Yes, and we also work with the manufacturers selling lab equipment. Then we will work across all different types of health care providers and any type of lab service. As lab equipment is getting more expensive, manufacturers are seeing a greater demand for financing.
Q: What has the response to the equipment financing division been like so far?
Myhre: It’s been a perfect storm of contraction among our competitors, and of health care organizations needing to rebalance their financial statements and cash flows. By modifying their equipment financing strategies to products like fair market value leases, they can preserve bank lines and cash for other operating expenses, like salaries. Wells Fargo continues to be one of the best-capitalized banks in its class, so we’re in a good position to maintain and extend our commitments.
Q: What are some of the unique benefits or solutions that this division can offer?
Myhre: Fortunately and first, we’ve got plenty of money to lend. We’ve entered a new market, and we’ve hired a team of experts who are going to aggressively pursue that business and try to accommodate whatever the customers’ needs are.
As I mentioned, Wells Fargo only enters a market to become a dominant player, and I think that our breadth and ability to customize solutions, like fixed or floating rates or end-of-lease terms, is one of the biggest value add-ons for health care and service providers right now.
Q: How much flexibility does the division offer in customizing financing packages?
Myhre: I think that with the accelerations and changes in lab technology, varying terms, unit term upgrades, which allow a customer to upgrade before the end of the term, and end-of-term options are becoming much more important.
Q: Do laboratories that are connected to hospital or hospital systems usually require the hospital to get involved in the financing process?
Myhre: Most acute care hospitals have in-house labs that are wholly owned, so it’s critical for them to be able to run stats and be directly involved.
On the other hand, if we’re financing reference labs, they provide testing services to the hospitals, so we rely on the financial performance of the lab company itself and not necessarily its customer base.
Q: The recent stimulus package promises $20 billion for health care and health IT spending. How does the Equipment Financing division see itself fitting in with the opportunities created?
Myhre: I think that I mentioned how important it is to understand the technology and have professionals in health care that understand that space. The push to implement EMR is an area that we are aggressively pursuing. It is one that includes hardware, software, and data-management systems. They are all items, even though much of it is software that we will finance.
Many labs today are utilizing laboratory information systems that, interestingly, are not compatible with current EMR systems. As we see it, this creates an opportunity for systems and software upgrades, middleware, and hardware to link the systems.
On exactly what the definition of EMR is and how far it extends into the lab market, I can’t speak to. Regardless, the new legislation is going to drive IT expenditures, and I think it’s going to overflow into the lab space.
Q: Can you speak about any additional stimulus package benefits that might prove useful to our clinical lab readers?
Myhre: Definitely. Organizations may be able to take advantage of two key provisions of the act. The first is the increase in the section 179 expense deduction, and the second is the extension of bonus depreciation.
Bonus depreciation is most likely where CLP readers will experience the most benefit. New equipment that is purchased and put into service this year will qualify for an additional 50% depreciation, as opposed to a regular MACRS schedule that spreads the depreciation over the life of the equipment, which could be 3, 5, or 7 years. Purchasers are now able to take literally half of that purchase price and depreciate it in the first year they acquire the equipment.
I am not an expert in tax and deductions, though, and I encourage readers to talk to their tax attorney about this.
Q: Any additional thoughts on health care?
Myhre: Regarding what President Obama is trying to accomplish in stimulating the economy, we’re seeing the things he’s done that will impact health care and we think we think it’s going to work. We think it will drive additional capital expenditures, and we’re gearing up for that.