🔒As hospitals look to control costs, Soma Tech’s refurbished medical equipment business booms

As hospitals, doctor’s offices and other healthcare providers continue to face pressure to control or even reduce costs, many are increasingly turning to the refurbished medical equipment market to save on some of their most costly purchases.

That’s been a boon for Bloomfield-based Soma Tech International, which sells refurbished medical equipment to healthcare facilities worldwide, including the largest health systems in Connecticut like Yale New Haven Health, Hartford HealthCare and Trinity Health of New England.

Demand has been so intense in recent years — amid the pandemic and cries in Connecticut and nationally for the healthcare system to better control costs, including via medical equipment purchases that can carry multimillion-dollar price tags — that Soma Tech’s revenues have increased nearly 2,000% over the last three years, placing the company No. 283 on Inc. magazine’s recently-published list of the 5,000 fastest-growing U.S. private companies.

The $50-million plus business with about 100 employees spread across four locations (Bloomfield, New Britain, East Hartford and Cheshire) has also grown its workforce and is constructing a new 60,000-square-foot building next to its headquarters that will debut next year and be used for engineering, sales, operations and warehouse storage.

Peter Leonidas, who founded the company in 1992 and still leads it as president and CEO, said he’s seen an increase in business because of recent partnerships with top hospital chains and growth in the international market.

By purchasing refurbished medical equipment (that meets strict safety and quality standards), individual hospitals can save millions of dollars annually on items ranging from defibrillators to anesthesia machines, incubators and even surgical tables, Leonidas said.

And he’s tapped into a market that’s expected to grow at an annual rate of 12% to reach $18 billion by 2026, according to Medi-Tech Insights, a business research firm.

“The demand for this equipment is at a very high level,” Leonidas said. “We have and continue to grow beyond physician’s offices and ambulatory surgical centers and expand into hospital chains because we offer something of value at an affordable price that is in high demand.”

Pandemic boost

Leonidas, who grew up in Greece and lives in West Hartford, earned an electrical engineering degree from UConn and an MBA from Rensselaer Polytechnic Institute.

He started Soma in the early 1990s and his first client was the New York City Emergency Medical Services (EMS). He sold the agency for $4,900 apiece refurbished defibrillators that he bought in bulk on the open market for $2,000 each.

Today, Soma Tech’s business model involves purchasing (from hospitals, leasing companies, banks, equipment manufacturers and through its own purchasing trade desk), refurbishing and then reselling medical equipment to a variety of care providers.

“We also offer long-term service contracts and guarantee five-year parts support for everything we sell,” Leonidas said.

The equipment Soma receives comes in various conditions — from worn and very used to nearly new.

Every item is thoroughly tested before they can be certified as patient-ready, he said, including by Soma’s in-house biomedical engineering team. Hospitals and other care providers have their own testing protocols before equipment is used on patients, he said.

The global health pandemic was a tailwind for Soma.

During the pandemic’s peak, there was demand for ventilators, infusion pumps, patient monitors, and oxygen therapy devices, Leonidas said, as the American healthcare system faced major supply shortages.

“The pandemic accelerated acceptance of refurbished equipment to large healthcare systems,” he said. “It opened new doors for our company.”

Key to Soma’s recent growth has been forging partnerships beyond physicians’ offices to working with some of the top hospital chains in the state, country and internationally. The firm’s thousands of clients include the renowned Cleveland Clinic and John Hopkins University in Baltimore.

“We became partners with the bluest of the blue chip companies,” Leonidas said, noting that the sheer volume of transactions with those outfits has grown each year thus increasing the company’s revenues.

Leonidas said his long-term goals include opening regional offices in the southwestern part of the country.

Soma also has a sister company in Seattle called STSurg that specializes in sterile processing units.

Budget savings

One of Soma’s key value propositions for customers is cost savings, Leonidas said.

As an example, Soma Tech offers refurbished surgical microscopes – which can sell brand new for $280,000 – for $150,000. A new C-Arm medical imaging device can run $180,000; Soma sells a used one for $75,000, he said.

Medical supplies account for about 20% of hospital expenses, according to the American Hospital Association. And, according to a 2018 study published in the National Center for Biotechnology Information, the U.S. spends roughly $200 billion annually on medical devices.

As hospitals look to better control those costs, they are being forced to look more closely at their supply chains and medical equipment budgets, experts said.

Among Soma Tech’s longtime customers is Hartford HealthCare.

Amato DeRosa has been HHC’s point person in dealing with Soma for more than two decades. DeRosa, system director of IT and biomedical engineering, said HHC purchases anywhere between 10 to 100 devices annually from the Bloomfield company, ranging from vital signs monitors to electrosurgical units.

The equipment goes through HHC’s rigorous training and inspection process for safety concerns, DeRosa said.

“They continue to be one of our ‘go-to’ suppliers when looking for refurbished medical equipment,” said DeRosa, who declined to say how much the health system has saved through its refurbished medical equipment purchases.

Paul Monckton, a Yale New Haven Health clinical engineering technician, said Yale will often buy products from Soma at savings of at least 50%. He said the hospital chain easily saves “hundreds of thousands of dollars a year, if not more” working with Soma.

Leonidas said he expects demand for his company’s products to continue to grow as he expands his customer base, and more care providers look for ways to control costs.

“We formed the business to make health care more affordable,” he said.