Medical Equipment Rental: Trends, Opportunities, and What It Means for Business Owners
Welcome to The Founders Report, where we explore key trends in various industries and what they mean for business owners considering a sale or investment. In this article, we’re diving into the US Medical Equipment Rental industry, a mature and fragmented market that’s experiencing steady, moderate growth. With revenue hitting $5.0 billion in 2024, this industry is benefiting from several macro trends, including cost-cutting measures in healthcare, an aging population, and rapid advancements in medical technology. But what does this mean for business owners in this space? Let’s break it down.
Industry Outlook: Moderate Growth with Strong Tailwinds
The Medical Equipment Rental industry has been growing at a CAGR of 1.1% over the past five years and is expected to increase slightly to 1.7% over the next five years, reaching $5.4 billion by 2028. Several factors are driving this growth:
Cost-Cutting Measures: Healthcare providers are under pressure to reduce expenses, and renting equipment has become a preferred option, especially for technology that changes rapidly.
Aging Population: The medical needs of the growing elderly population are a key driver of demand for rental equipment in hospitals, long-term care facilities, and home healthcare settings.
Value-Based Care: The shift from volume-based to value-based care is pushing providers to improve patient outcomes, which often requires access to the latest medical technologies—making rentals an attractive option.
For business owners, these trends suggest ongoing demand for rental services, positioning the market for continued expansion. However, the moderate pace of growth means that strategic positioning will be essential for standing out.
Products and Market Segmentation
The largest segment in the industry is medical equipment rentals (excluding surgical equipment), followed by surgical equipment rentals and support services. Acute and extended care organizations—such as hospitals and long-term care facilities—are the primary customers, representing the bulk of industry revenue.
For business owners, this means focusing on the needs of acute and extended care providers is critical. As healthcare facilities increasingly shift to renting equipment rather than buying, companies that can offer flexible rental options and specialized products will have a competitive edge.
Competitive Landscape and Challenges
The Medical Equipment Rental industry is highly fragmented, with low market concentration. In 2024, the top three players—Agiliti Health, 3M Company, and Hill-Rom Holdings—accounted for just over 40% of industry revenue, leaving plenty of room for smaller operators to carve out market share. However, several challenges need to be navigated:
Buyer Power: Hospitals and healthcare providers, especially larger ones, hold significant bargaining power, often driving down prices.
Supplier Power: Companies that offer unique or specialized equipment wield strong pricing power, which can cut into rental margins.
Rising Costs: Depreciation is a major expense in this capital-intensive industry, and rising wages for a specialized workforce are squeezing profitability. In addition, the increasing use of Group Purchasing Organizations (GPOs) by healthcare providers is putting downward pressure on pricing.
For owners, this underscores the importance of managing costs efficiently while offering differentiated services that can command higher rental rates. Partnering with healthcare providers to understand their evolving needs and offering innovative solutions will help navigate these pressures.
Key Financial Benchmarks and the Role of GPOs
The financial profile of the industry highlights some important considerations:
High Depreciation Costs: Depreciation accounted for an estimated 13.2% of industry revenue in 2023, reflecting the capital-intensive nature of the business.
Group Purchasing Organizations (GPOs): The rising use of GPOs is another trend that is reducing profitability by negotiating lower rates for medical equipment rentals. Business owners need to be prepared for tighter margins and should consider ways to provide added value that goes beyond price.
If you’re considering selling or securing investment in your medical equipment rental business, these financial benchmarks are essential to understand. Buyers and investors will closely scrutinize how efficiently your company manages its assets and maintains profitability in the face of downward pricing pressure.
What This Means for Business Owners Considering a Sale or Investment
If you own a company in the Medical Equipment Rental industry, several factors will influence the valuation and attractiveness of your business to potential buyers or investors:
Operational Efficiency: Given the moderate growth in the market and the pressure on margins, buyers will look for businesses that are well-run, with strong cost control and efficient use of capital.
Specialization and Differentiation: Companies that offer specialized or cutting-edge equipment, or that serve niche markets within healthcare, will be in a better position to command higher valuations.
Strategic Partnerships: Partnering with acute and extended care providers, as well as GPOs, to create value beyond pricing will enhance your competitive position. Buyers will appreciate strong relationships and customer loyalty.
Scalability: Businesses that have demonstrated an ability to scale—whether through expanding product offerings, geographic reach, or partnerships—will be more attractive to both strategic buyers and private equity investors.
Fragmented Market: The highly fragmented nature of the industry presents opportunities for consolidation. If your business is well-positioned and operationally strong, it could be an appealing acquisition target for larger players looking to expand their footprint through mergers and acquisitions.
Conclusion: Preparing for the Future
The US Medical Equipment Rental industry is positioned for steady growth, supported by favorable demographic trends and an evolving healthcare landscape. However, to thrive in this environment, business owners need to focus on efficiency, innovation, and strategic partnerships. Whether you’re considering selling your business or bringing in a growth partner, understanding these industry dynamics will help you position your company for success.
At V&R Advisory & Capital, we specialize in helping business owners navigate the complexities of selling or recapitalizing their businesses. If you’re in the medical equipment rental industry and want to explore your options, let’s have a conversation about how to maximize the value of your business and plan for a successful transition.
SOURCE: IBISWorld. (2024). Medical equipment rental in the US: Industry report (OD4804).
