P2S industry whitepaper series - MedTech & Medical Devices - 2026
The CEO's guide to recurring revenue
How MedTech OEMs move from capital sales to recurring revenue with subscription, managed-service and outcome-based contracts.
What Medicare paid US hospitals per dollar of cost in 2024
Source: AHA, Costs of Caring 2026
Total contract value over the term, compared with an equivalent capital sale
Source: P2S, more than 500 industrial As-a-Service cases
Share of Intuitive Surgical's FY2025 revenue that was recurring, $8.47bn
Source: Form 10-K, 3 Feb 2026
About this report
Cross-sector evidence from more than 500 industrial As-a-Service cases, not theory modelled from the outside.
P2S Management Consulting draws on more than 500 industrial As-a-Service cases across 12 industries: Energy Storage & Utilities, HVAC & Building Systems, Machine Tooling, Packaging & Printing, MedTech & Medical Devices, Fluid & Process Equipment, Electrical Appliances, Material Handling, Testing & Certification, Industrial Mobility, Construction Tools, and Industrial Automation.
This MedTech edition uses thematic analysis of publicly disclosed cases, market and regulatory research, and the pattern library P2S has built from structured stakeholder interviews in other industries. Market and policy data come from the AHA, HHS OIG, Deloitte, Frost & Sullivan, the WHO, and company filings, cited at point of use.
| Topic | Caution |
|---|---|
| Market figures | Estimates differ by analyst. Treat them as directional. |
| Vendor evidence | Case results are vendor-reported from specific sites. They show the model exists, not that you will see the same numbers. |
| Recurring revenue | Intuitive Surgical's figure covers instruments, service, and leases, not subscriptions alone. |
| Clinical outcomes | They depend on staffing and the care pathway as well as the device. Guarantee one only when population, baseline, and measurement are defined. |
| Regulation | Correct as of October 2026. Take legal advice for your device and market. |
About this report
| Term | Meaning |
|---|---|
| CMS | Centers for Medicare & Medicaid Services, the US federal payer. |
| DRG | Diagnosis-Related Group. A payment system where the hospital receives a fixed amount per type of case. |
| GPO | Group Purchasing Organisation. A US body that negotiates prices on behalf of many hospitals. |
| HTA | Health Technology Assessment. How public bodies judge whether a technology is worth paying for. |
| IDN | Integrated Delivery Network. A US group of hospitals and clinics under one owner, often buying centrally. |
| IFRS 16 | The accounting standard that decides whether a contract is a lease and must appear on the customer's balance sheet. |
| MDR / IVDR | The EU Medical Device Regulation and In Vitro Diagnostic Regulation. |
| PFI | Private Finance Initiative. A UK model where a private partner finances and runs public infrastructure over a long term. |
| Physician-preference item | A product chosen mainly by the doctor rather than by procurement, such as an implant. |
| SPV | Special Purpose Vehicle. A separate company that holds contracts and assets off the OEM's main balance sheet. |
| Telemetry | Data a device sends automatically about its use and condition. |
| VAC | Value Analysis Committee. A hospital team that reviews new products on evidence, cost and reimbursement before purchase. |
P2S - MedTech & Medical Devices
Hospitals no longer buy only devices. They are buying diagnostic capacity, operating economics, and guaranteed performance.
For OEMs, growth no longer comes only from selling hardware. It comes from turning device performance into a promise that a hospital, a tender panel, a CFO, and sometimes a payer will sign. The question for every MedTech executive: which outcomes are truly contractable, meaning outcomes you can write into a contract and enforce?
The model works only when the outcome can be measured continuously, the risk is priced against the right buyer, and the financing fits the device's real life. Connected devices and AI make that measurement possible, though nobody gets it for free.
01 - Which archetype fits your portfolio, your buyer, and the gates you can clear.
02 - Whether you can verify the outcome independently, before you price it.
03 - Whether your financing and sales incentives can carry a multi-year commitment without leaking margin.
The CEO checklist turns these into five checks. Most leadership teams cannot yet tick all five.
P2S - MedTech & Medical Devices
Risk, contract value, and governance demand all rise from left to right. The rest of the paper refers to them by name.
The customer pays per scan, per use, or a monthly fee for current, maintained equipment. No ownership. Value metric: per scan, per patient, per month.
A mostly fixed fee for a managed fleet or lab over several years, with part of the fee at risk against KPIs such as uptime. Value metric: fixed fee plus a performance share.
The price depends on a guaranteed result, either to the hospital (Route A) or to the payer (Route B). Value metric: result-linked price.
| Dimension | 01 Technology access | 02 Savings & infrastructure | 03 Performance guarantee |
|---|---|---|---|
| Who signs | Hospital (VAC, GPO, or tender) | Hospital, often board or tender | Route A: hospital. Route B: payer |
| Data needed | Usage and uptime | KPI data both sides trust | Agreed baseline; payer data for Route B |
| Where AI helps | Scheduling and utilisation | Predictive maintenance | Measuring the outcome |
| Governance | Low | Moderate | High |
P2S - MedTech & Medical Devices
The shift is not pricing creativity. It is the ability to measure, verify, and prove clinical and economic value over time.
Hospitals now buy proof: clinical evidence, operational impact, and lifecycle cost. US hospital expenses grew 7.5% in 2025, while Medicare paid 83 cents per dollar of hospital cost in 2024 (AHA, Costs of Caring 2026). AHRMM, the AHA's supply chain body, says hospital purchasing decisions must weigh clinical evidence, outcomes, quality, cost, and reimbursement. In Europe, national tariffs, HTA bodies, and public tenders scored on lifecycle cost create the same pressure. Signal to track: the share of tenders requesting lifecycle cost, utilisation, or risk-sharing commitments.
Differentiation now comes from the software, connectivity, AI, and service around the device, and these earn a premium only when they produce a measurable improvement. Deloitte found that 80% of leading medtech companies with a software offering sell it by subscription (2023). Intuitive Surgical shows the model at scale: $8.47bn of recurring revenue in FY2025, 84% of the total. Signal to track: the share of customer value, and willingness to pay, generated after installation.
The device used to be an event: a scan, a test, an implant. Increasingly it is an ongoing relationship. Medicare paid more than $500m for remote patient monitoring in 2024, yet an earlier HHS OIG review found that about 43% of enrollees did not receive all three components of the service. Collecting data, or running an algorithm, is not the same as delivering care. Signal to track: active utilisation, patient retention, and workflow integration, not device count.
Regulation no longer ends at approval. In the US, Section 524B requires makers of connected devices to submit a plan for post-market cybersecurity monitoring and a software bill of materials. In the EU, MDR Article 83 requires surveillance for the device's whole life; the Data Act has applied since September 2025, with data-access design duties for new connected products since September 2026; and the AI Act's high-risk rules for AI in medical devices apply from 2 August 2028. As-a-Service is one of the few structures that funds these lifelong obligations. Signal to track: the lifetime cost of surveillance, cybersecurity, AI conformity, and regulatory change per installed device.
80% monetise it by subscription - 20% other models
Source: Deloitte, review of 24 leading medtech companies, 2023
Sources: AHA "Costs of Caring 2026"; AHRMM 2026; Deloitte 2023; Intuitive Surgical Form 10-K (3 Feb 2026); HHS OIG 2024 and 2025; FDA Feb 2026; Regulation (EU) 2023/2854; Regulation (EU) 2026/1744.
P2S - MedTech & Medical Devices
Most executives treat outcome-based models as something to adopt once the technology is ready. The technology is largely ready. The real clock is contractual.
When a competitor signs a 10 to 25 year managed equipment contract or value partnership with a hospital group, covering several equipment refresh cycles, that estate is closed to other suppliers for the length of the term. Siemens Healthineers' contract with Queen's Hospital in the UK runs for 33 years (Archetype 02). As-a-Service contracts do not only win revenue. They take accounts out of the market.
The second mover also inherits the first mover's terms. Once one supplier has set the uptime level, the share of fee at risk and the exclusions, buyers use them as the benchmark. The follower then has to accept more risk for the same fee.
Delay has an internal cost too. Every system sold on capital terms is a system whose usage data you do not own, and a customer relationship that resets at the next tender.
Sources: Siemens Healthineers, Managed Equipment Service and Queen's Hospital Value Partnership (accessed 2026); P2S analysis.
P2S - MedTech & Medical Devices
The buyer is not always the payer, and that decides what you can sell.
Four gates decide whether a device gets used: regulatory approval, physician adoption, payer reimbursement, and hospital purchase. What differs between markets is who stands at the last two.
| United States | Europe | |
|---|---|---|
| Who buys | Hospital or IDN, via VAC and GPO | Hospital, often by public tender |
| Who pays for care | CMS and private insurers | National health service, sickness funds, or insurers |
| Who funds equipment | The hospital | Varies. Germany: the states. England: NHS capital limits |
| Route B possible with | Large insurers (UnitedHealthcare, Aetna) | Insurers that negotiate with hospitals, as in the Netherlands |
Archetypes 01 and 02, and Route A, need only the hospital to say yes. Route B saves the payer money, so the OEM must contract with the payer. In Europe, a service fee can move cost from one budget to another. In England, most NHS equipment leases now count against capital limits (IFRS 16, since 2022), while managed services may not. Check which budget pays before you price. A contract stays a service rather than a lease when the supplier can substitute the asset, the supplier decides how the asset is used, and the service is genuinely bundled with it. Design for these three before you price.
Home devices follow a shorter chain. VieMed rents home ventilators with monitoring; InfuSystem rents infusion pumps with servicing. What the customer buys is simplicity.
Sources: symplr; bpb; NHS England IFRS 16 guidance; P2S analysis.
P2S - MedTech & Medical Devices
Public and private hospitals buy the same device in very
different ways.
| Public hospitals | Private groups and IDNs | |
|---|---|---|
| How they buy | Formal tender (EU Directive 2014/24/EU) | Negotiated contract, often via a GPO |
| How offers are scored | Best value, which can include lifecycle cost | CFO business case and VAC review |
| Contract length | Framework agreements capped at four years; longer single contracts possible | Flexible |
| Speed | Slow to start, stable once awarded | Faster, but easier to renegotiate |
| Best entry archetype | 01 or 02, as a lifecycle-cost bid | 01 to 03 |
Public buyers can only score an outcome offer if the tender asks for one. Influence comes before the tender, through market consultation.
Public accounting matters: whether a contract counts as a lease or as a service changes how attractive it is to a public body.
Private groups care less about procedure and more about whether the contract beats ownership on the CFO's numbers.
Source: Directive 2014/24/EU (Articles 33, 40, 67, 68); P2S analysis.
P2S - MedTech & Medical Devices
An outcome offer is a five-layer system, and every layer has to be designed before the first contract. Providers that skip the verification and governance layers usually find the gap at the first renegotiation, around 18 months in.
AI plays two roles: it improves the device, and it can measure the outcome. The second is more valuable and riskier. If the customer does not trust the algorithm, the contract has no agreed truth.
AI makes the outcome measurable. It does not make it contractable. What to guarantee, what to exclude, what to charge, and who carries the risk when a tariff changes are commercial decisions, and they are made before the first contract is signed.
System design, not pricing
Margin in MedTech service models is rarely won or lost in the device. It is won or lost in verification quality, exclusions, and how warranty terms line up with service levels.
P2S - MedTech & Medical Devices
Recurring revenue instead of lumpy capital cycles. Consumables, software, and data attach to the contract, and predictive maintenance lowers the cost to serve. Competition moves from specification sheets to guaranteed performance.
Capital spend becomes an operating cost (check which budget pays, see Who buys, who pays). Spend follows actual use. One accountable provider instead of three vendors. Performance risk moves to the provider.
Fewer complications and less downtime; under Route B the payer keeps the saving. Scarce capital goes to staff and services. Rising demand met: about 1.4 billion people will be 60 or over by 2030 (WHO).
P2S - MedTech & Medical Devices
Imaging, monitoring, robotics, and diagnostic capacity.
Each archetype needs a different contract, financing logic, and operating depth. Choosing the wrong one for the buyer is a common and costly mistake.
The customer pays for readiness, not ownership. It is the simplest archetype to contract, which makes it the right first move for most OEMs.
| Dimension | Detail |
|---|---|
| Best for | Imaging, monitoring fleets, surgical systems, and sites without capital budgets. |
| Value metric | Per scan, per procedure, per patient, or a monthly fee. |
| Value proposition | The provider installs, maintains, and upgrades; the customer pays from the operating budget. |
| Data needed | Usage and uptime telemetry. |
| Where AI helps | Predicting demand and scheduling capacity. |
Nihon Kohden has offered monitoring by subscription since 2019, monthly, census-based, or per patient, with no upfront fees. Intuitive Surgical applies the same logic at scale: most of its revenue comes from instruments and service per procedure, not from the robot. Care is also moving out of the hospital: Frost & Sullivan (June 2026) names ambulatory surgery centres among the most attractive growth areas in medtech, helped by CMS widening the list of procedures they can perform.
Sources: Nihon Kohden America, Dec 2019; Intuitive Surgical Form 10-K, Feb 2026; Frost & Sullivan, 23 Jun 2026; Hospodková and Rogalewicz, Frontiers in Public Health, 3 Sep 2025.
P2S - MedTech & Medical Devices
Managed labs and hospital-wide fleets.
The customer pays a mostly fixed fee for a managed fleet or lab. Part of the fee depends on agreed KPIs, and that turns a service deal into an outcome contract.
| Dimension | Detail |
|---|---|
| Best for | Multi-asset labs and hospital-wide fleets. |
| Value metric | Fixed annual fee plus a KPI-linked share. |
| Value proposition | One accountable partner with money at stake. |
| Contract need | Multi-year term with an uptime guarantee; Siemens Healthineers offers up to 99% (vendor-stated). |
| Where AI helps | Predictive maintenance makes the uptime promise priceable. |
Equipment access
Maintenance, software, training
Usage charges and a performance share
Siemens Healthineers runs this as a performance-sharing model: a monthly flat fee plus KPI-linked payments. Its contract with Queen's Hospital in the UK, a managed equipment service under the hospital's PFI contract, covers all medical equipment for 33 years.
Sources: Siemens Healthineers, Value Partnerships and Queen's Hospital Value Partnership (accessed 2026).
P2S - MedTech & Medical Devices
How it shows up in hospital-facing guarantees and payer-linked outcome contracts.
The customer pays for a guaranteed result. This is the highest-value and most demanding archetype: the provider sells downside risk transfer, not service effort. Two routes decide whether you need a payer.
Route A, guaranteed to the hospital. The result is one the hospital captures and the OEM can control or underwrite: uptime, capacity, or the cost of a defined device-related complication. No payer contract is needed. Example: Medtronic's TYRX Risk-Share Program, which rebates the hospital if an infection occurs; nearly 1,000 agreements were signed by early 2018. Route B, guaranteed to the payer. The result is a clinical or economic outcome across a patient population, and the saving lands with the payer, so the OEM contracts with the insurer. Examples: Medtronic with Aetna, where part of the insulin-pump reimbursement depends on clinical thresholds, and with UnitedHealthcare, where part of Medtronic's payment is tied to outcomes.
| Dimension | Detail |
|---|---|
| Best for | Route A, mature fleets and devices with a defined, insurable complication. Route B, implantable and therapeutic devices with measurable endpoints. |
| Value metric | Price tied to a defined operational, clinical, or economic result. |
| Key data need | An agreed baseline, data owner, and measurement method before launch; for Route B, payer outcome data. |
| Where AI helps | As the measuring instrument, if both sides have validated the method in advance. |
UnitedHealthcare members analysed
Fewer preventable admissions for pump users than with daily injections
TYRX risk-share agreements with hospitals by early 2018
Source: Medtronic and UnitedHealthcare, 10 Jul 2018; CNBC, 28 Feb 2018. Vendor- and payer-reported.
Sources: Medtronic newsroom, 10 Jul 2018 and 28 Feb 2018; Medtronic FY2018 Form 10-K; Medtronic testimony to the US House Energy and Commerce Committee, 13 Sep 2018; CNBC, 28 Feb 2018.
P2S - MedTech & Medical Devices
Margin shifts to the player that can measure, contract, finance, and operate the outcome better than competitors.
The software, connectivity, AI, and data layer Consumables inside managed contracts Long-term fleet agreements, in some UK cases running over 30 years Hospital-facing and payer-linked outcome contracts Services broadly: across manufacturing, many OEMs earn 40-50% of their profits from services (Deloitte, 2022; cross-industry figure, not MedTech-specific)
GPO and IDN price compression in the US; public tender price pressure and purchasing consortia in Europe EU MDR recertification cost, and AI Act conformity for AI-enabled devices from August 2028 Physician-preference item pressure Long capital-equipment sales cycles, longer still for public tenders Commoditised disposables
Underpriced technical risk: performance assumptions modelled at best case rather than field conditions.
Weak contract boundaries: outcome language without strict scope, exclusions, and liability caps. Every unclear boundary becomes a billing dispute.
Poor telemetry or metering quality: billing disputes are almost always disputes about whose data is authoritative, including whose algorithm.
Manual billing processes: cannot handle a multi-site fleet at scale without significant headcount.
Financing mismatches: contract duration misaligned with real device life creates cash-flow gaps.
Misaligned sales incentives: reps paid on unit sales quietly undermine the model at the point of sale.
P2S - MedTech & Medical Devices
Six cases from public disclosures, two per archetype.
Several of the clearest public cases date from 2018 and 2019. That is not because the model has stalled. It is because few OEMs have solved the contracting, and those who have rarely publish their terms. That gap is where first movers still have room.
Subscription
Friction Hospitals needed monitoring equipment to keep pace with changing bed counts without a fresh capital request each time. Offer Monthly, census-based, and per-patient subscriptions launched in 2019, with no upfront fees and products added or refreshed during the term. Lesson One of the earliest live subscription launches in this paper. The commercial mechanic matters more than the device category.
Usage-based leases
Friction Surgical robots carry a very high upfront cost, tying revenue to the pace of new system sales. Offer Instruments consumed per procedure, ongoing service contracts, and usage-based operating leases alongside the capital sale. Lesson FY2025 recurring revenue reached $8.47bn, 84% of the total. The clearest large-scale, audited proof that paying per use of an installed platform works. It is access economics, not a performance guarantee.
Sources: Nihon Kohden America, 11 Dec 2019; Intuitive Surgical Form 10-K, 3 Feb 2026. Company logos are used for identification only. No endorsement of P2S is implied.
P2S - MedTech & Medical Devices
Managed service
Friction Labs work under tight budget and capacity limits, with little room for a step-change capital purchase. Offer Analysers, reagents, maintenance, and software delivered and run as one managed service, with Roche managing the third-party suppliers in the contract. Lesson One accountable partner runs the whole lab, so the customer buys a working service rather than a set of assets. The next step is to tie part of the fee to agreed KPIs.
Performance commitments
Friction Hospitals want guaranteed uptime and capacity, not just a maintenance contract. Offer A long-term partnership with agreed performance commitments. Siemens Healthineers also offers a performance-sharing model: a monthly flat fee plus payments linked to predefined KPIs. Lesson Siemens Healthineers reports 99.3% uptime, an 8% cost reduction, and 100 more MRI patients per month at VieCuri Medical Center (vendor-reported, site-specific). Siemens does not disclose whether VieCuri's fee is KPI-linked; that share is what would turn a service contract into an outcome contract.
Sources: Roche Diagnostics UK, Managed Laboratory Service (accessed 2026); Siemens Healthineers (accessed 2026). Company logos are used for identification only. No endorsement of P2S is implied.
P2S - MedTech & Medical Devices
Route A · hospital
Friction Infections after cardiac device implants are costly for hospitals, and a preventive product has to prove it pays for itself. Offer If an infection occurs when the TYRX antibacterial envelope is used, Medtronic gives the hospital a rebate. Nearly 1,000 such agreements were signed by early 2018, and Medtronic cited TYRX as a model when it announced a five-year value-based partnership with Lehigh Valley Health Network on 28 February 2018. Lesson A hospital-facing guarantee needs no payer, but the complication must be precisely defined and measured.
Route B · payer
Friction Payers need proof that device spend turns into measurable outcomes. Offer Value-based agreements with insurers. With Aetna, part of the insulin-pump reimbursement depends on clinical improvement thresholds; with UnitedHealthcare, a portion of Medtronic's payment is tied to outcomes. Lesson UnitedHealthcare's first-year analysis of more than 6,000 members showed a 27% lower rate of preventable admissions for pump users than for patients on multiple daily injections. The saving lands with the payer, so the contract has to be with the payer.
Sources: Medtronic newsroom, 28 Feb 2018 and 10 Jul 2018; Medtronic FY2018 Form 10-K; CNBC, 28 Feb 2018. Company logos are used for identification only. No endorsement of P2S is implied.
P2S - MedTech & Medical Devices
Most As-a-Service failures are operating-model failures
Moving to outcome-based models is a change in how the company works, not a pricing change. Six dimensions have to be designed together.
Define one customer value metric ($/scan, $/diagnosis, or a defined outcome) before anything else. Build pricing logic, bundling, and limits that protect margin around it, and set discount discipline and renewal mechanics before the first contract.
Build SLA structures, verification rules, and remedies specific to clinical and regulatory exposure. Define liability boundaries and exclusions with counsel. For public buyers, check tender rules and contract-length limits early.
Define the capital path: balance sheet, external debt, or SPV. Align cash-flow logic with contract duration and real device life. Self-fund the first three to five contracts before engaging external partners.
Shift the narrative from specifications to outcomes, aimed at the VAC, the tender panel, the CFO, and where relevant the payer. Pay on contract health, retention, and realised margin. Misaligned commissions are the main internal sabotage mechanism.
Verify CRM, ERP, billing, and contract-management readiness for per-scan or per-diagnosis invoicing. Manual billing cannot handle a multi-site fleet at scale.
Make the outcome measurable, auditable, and manageable: telemetry, KPI dashboards, EMR/EHR integration, and, where AI measures or predicts performance, a validated method the customer has accepted in writing. The digital backbone must be in place before the first invoice.
P2S - MedTech & Medical Devices
From first deal to full scale
Four phases. Six CEO-level decisions that cannot be delegated. The sequence matters as much as the decisions.
Choose the value metric, and whether the counterparty is the hospital or the payer.
Decision 4 - the truthApprove the source of truth, including any AI model that measures the outcome. It must be in the contract.
Set exclusions and liability caps before the first contract.
Decision 3 - the funding (pilot)Self-fund the pilot to build a track record.
Pay sales on retention and margin, not bookings.
Choose debt, SPV, or balance sheet once the track record exists.
Decision 5 - the infrastructureFund billing and integration before volume grows.
P2S - MedTech & Medical Devices
Four types of support, available at any stage. They are not sequential: you may need several at once.
Opportunity Scan, then a one-day Scoping Workshop - 2 to 4 weeks. What you hold at the end: an archetype fit assessment for your device portfolio, a readiness score against the five checks in the CEO checklist, and an executive briefing for your leadership team. When: your leadership team needs to understand what outcome-based MedTech models really require before committing.
Scoping phase - 4 to 8 weeks. What you hold at the end: an investment case for your CFO and board, a stakeholder map across commercial, technical and finance functions, and a decision paper. When: the idea exists but lacks executive buy-in.
Pilot design to first signed contract - 3 to 6 months. What you hold at the end: the contract architecture, the pricing and risk boundary, the verification model, the financing path, a first signed pilot, and a tender strategy for public buyers. When: you are ready to move from concept to reality.
Scale-up and transfer - 6 to 12 months. What you hold at the end: a margin model, a contract playbook, a sales incentive plan, billing and KPI set-up, and trained commercial and operations teams. When: the model works and your organisation needs to own it.
We are prepared to carry part of the commercial risk alongside our clients, on the same recurring revenue we help build.
AI is part of the system we build with you, not a substitute for designing it.
P2S - MedTech & Medical Devices
Bring your answers to a free short call with one of our partners. If there is a fit, we follow up with the P2S Opportunity Scan, which benchmarks your business against more than 500 As-a-Service cases in a short report for your leadership team.
florian@p2sconsulting.com +32 479 37 92 10
juan@p2sconsulting.com +32 471 97 67 09
gregory@p2sconsulting.com +32 491 52 02 52
In a world where resource scarcity is becoming a structural reality, P2S believes the shift from ownership to usership helps optimise resource use and supports more resilient industrial systems. Western industrial firms must accelerate their transition towards service-driven and more circular business models. P2S exists to support industrial firms in that transition.
Our mission To accompany industrial firms in the design and implementation of subscription and As-a-Service business models in order to boost recurring revenues and reduce carbon footprint.
Avenue Louise 209 A - 1050 Brussels - Belgium - www.p2sconsulting.com
Financing appendix
The shift from capital sales to outcome-based contracts changes the provider's cash-flow profile materially. This appendix sets out the cash-flow pattern (the Fish Model) and the three financing paths that have proven viable in moving from pilot to scale.
A capital transaction delivers a large upfront booking with limited recurring revenue. An outcome-based contract requires upfront investment in the asset and in operating infrastructure, with recurring revenue that builds over time.
This cash-flow pattern is known as the Fish Model, originally developed by the Technology & Services Industry Association (TSIA) to describe the transition from transactional to recurring business models. The initial dip below the capital baseline, the body of the fish, is temporary. The recurring revenue tail that follows is structurally more durable and valuable than any single transaction.
Conceptual, not to scale. Source: Technology-as-a-Service Playbook 2016 (TSIA), adapted.
Source: Technology-as-a-Service Playbook 2016 (TSIA), adapted. Useful lives: AHA estimated useful lives as reported in Frontiers in Public Health, 2022 (CT 7 years, MRI 6). Crossover point depends on contract size, financing structure, and cost-to-serve efficiency. Providers with tighter governance and lower technical risk reach crossover earlier.
The crossover point, where cumulative outcome-based revenue exceeds the equivalent capital-sale stream, typically falls between four and seven years, depending on contract size, financing structure, and cost-to-serve efficiency. In the worked example, the asset-only contract overtakes the capital sale in year seven. With attached software and consumables, it does so in year five. In MedTech that window is tight: imaging systems are commonly depreciated over five to seven years, so the contract has to reach crossover within the asset's useful life, or include a planned technology refresh. The Fish Model is not a reason to avoid the transition. It is a financing design challenge to solve.
Financing appendix
Self-funding the first three to five contracts builds the operational track record, and the real usage and uptime data, that external financing partners require before committing capital. When: pilot phase.
Accessible once the track record exists and contract revenue is demonstrably predictable. Medical equipment lives are short, typically five to seven years for imaging, so debt tenor must match the device, not the length of the customer relationship. (Source: AHA useful lives, via Frontiers in Public Health, 2022.) When: early scale.
Ring-fences contract portfolios off the main balance sheet, isolating the contracted asset base at fleet or multi-site scale. When: full scale.
Financing appendix
Illustrative only. Round numbers chosen to show the mechanics, not market data. Financing cost, tax, and inflation are excluded.
Assumptions: system list price €1.5m; OEM build and installation cost €0.95m. Capital route: sold for €1.5m, plus a service contract earning €0.04m margin a year. Service route: OEM keeps ownership and charges €0.36m a year for seven years (access, service, upgrades); cost to serve €0.09m a year. Attached value: software and consumables add €0.10m a year of margin that the capital route does not capture.
Illustrative only. Financing cost, tax and inflation excluded. Year 0-7; exact values below.
| Year | 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 |
|---|---|---|---|---|---|---|---|---|
| Capital sale + service | +0.55 | +0.59 | +0.63 | +0.67 | +0.71 | +0.75 | +0.79 | +0.83 |
| As-a-Service, asset only | -0.95 | -0.68 | -0.41 | -0.14 | +0.13 | +0.40 | +0.67 | +0.94 |
| As-a-Service with attached value | -0.95 | -0.58 | -0.21 | +0.16 | +0.53 | +0.90 | +1.27 | +1.64 |
Cash breakeven falls in year four on the asset alone, and in year three with attached value. Until then the OEM is funding the customer's asset, which is why the first contracts need dedicated financing, not working capital.
On the asset alone, the service route overtakes the capital route only in year seven, at the end of the asset's practical life. With attached value it does so in year five, well inside the asset's useful life.
The case is won on what sits around the asset: a renewal or technology refresh in year eight, consumables and software attached to the contract, and the residual value of a returned system that can be refurbished and redeployed. Each of these moves the crossover earlier. Stretching the term beyond the device's useful life without a planned refresh does not fix the economics. It creates a contract the customer will renegotiate and an asset the OEM cannot refinance.
The P&L tells a different story from the cash. Revenue is recognised over the contract term, so reported revenue and EBIT dip in years one to three while the asset base grows. Prepare the board and investors for this before the first contracts are signed.
Bring your answers to the five checks to a free short call with one of our partners.