Making sense of extended warranties for medical equipment

The art of purchasing a piece of medical equipment requires the perfect combination of medical, financial, business and legal expertise. It also requires attention to a very important piece of paper that usually gets overlooked -- the extended warranty.

In general, there are three types of warranties for medical equipment: manufacturer's warranty, retail seller's warranty and extended warranty.

Manufacturer's warranties and retail seller's warranties are provided at no additional cost to the purchaser. Typically, these warranties are non-negotiable and are for a very limited time.

An extended warranty (also known as a service contract, protection plan or maintenance agreement) is a contract that the consumer purchases at an additional cost for the maintenance and/or repair of the equipment. It is intended to enhance the manufacturer's and retail seller's warranties by providing additional coverage and protection for a longer time.

This article describes key provisions that can make or break an extended warranty for medical equipment. First, there is the length of the warranty and when the clock starts ticking on it. Second, there are coverage provisions, specifically what is covered and the conditions, limitations and exclusions from coverage.

A physician client of mine wanted to purchase an extended warranty for a piece of equipment in which the retailer's warranty was for 90 days and the manufacturer's warranty expired after one year.

When reviewing a warranty's term, it is important to determine when coverage begins and expires. Typically, coverage commences on the date the equipment is purchased, the date the extended warranty is purchased, or after the manufacturer's and/or seller's warranties expire. Coverage often terminates after an elapsed period of time or number of uses. Knowing what coverage begins when, and when it ends, is important in determining who you have to talk to if something goes wrong with the equipment.

In the extended warranty presented to my client, the warranty's clock started ticking after the manufacturer's one-year warranty expired. Thus, if the equipment required repair during the first year, the physician would need to seek coverage from the manufacturer, and not the seller of the extended warranty.

I was concerned that if a repair was needed during the first year, but for some reason was excluded from the manufacturer's warranty (e.g., repair due to improper use), my physician client would be out of luck, because the extended warranty would not be effective until the initial one-year ownership period lapsed.

In this case, what we did -- and what you can do -- is negotiate with the seller of the extended warranty to provide overlapping coverage. That way, you can use either the manufacturer's or extended warranty depending on the problem.

But before you can negotiate that, you need to understand what is and isn't covered under an extended warranty. In fact, you need to know this even before purchasing the extended warranty to make sure it is worth the added expense.

Some important questions when reviewing a warranty include: Who determines whether the equipment requires repair? What factors determine whether the equipment requires repair? And are routine maintenance, manufacturing defects, and normal wear and tear covered?

Additionally, you should determine what the extended warranty provides that the manufacturer's and retail seller's warranties do not. It would be a waste of money to purchase coverage already included in the cost of the medical equipment through the manufacturer's warranty, for example.

In the extended warranty presented to my client, some of the covered items already were covered in the manufacturer's warranty. For example, a specific part was replaceable for the same period of time, regardless of whether replacement was from a manufacturer defect, overuse or improper use. When negotiating the terms with the seller of the warranty, you may be able to carve out certain coverage that duplicates the manufacturer's warranty, effectively reducing the purchase price of the extended warranty.

You also should be aware of all conditions, limitations and exclusions that could void your coverage altogether. You would not want the equipment to be unprotected by the warranty because of an act or omission to act that was otherwise avoidable.

Three years ago, another physician client of mine successfully repaired a sticking key on the keyboard of his ultrasound machine. Later, when the machine had an unrelated problem that was otherwise covered by the extended warranty, the coverage was denied, because the machine had been repaired previously by what was considered an unauthorized party.

In many cases, coverage is voided in the event equipment is not maintained or used as explicitly directed in the equipment's manual.

The benefits and protections you receive under an extended warranty depend entirely on the language in the document. If provisions of the warranty do not meet your needs and the needs of your practice, then those terms should be revised and negotiated.