2. Medical Equipment and Property

Medical equipment consisted of the following as of June 30, 2013 and December 31, 2012 (in thousands):

Depreciation expense for medical equipment for the three and six months ended June 30, 2013 was $1.3 million and $2.4 million, respectively, compared to $1.3 million and $2.6 million, respectively, for the same prior year periods. This was recorded in cost of revenues – pump depreciation and disposals.

Depreciation expense for property and equipment for the three months and six months ended June 30, 2013 was $0.1 million and $0.2 million, respectively, compared to $0.1 million and $0.3 million, respectively, for the same prior year periods. This expense was recorded in general and administrative expenses.

Medical equipment held for sale or rental contains approximately $0.5 million of pre-owned equipment received from a financial institution with such equipment coming off lease. Under the Company’s arrangement with the financial institution, the Company does not pay for the equipment until it is sold. The liability for this equipment is shown in other current liabilities for a similar amount. The Company assumes risk of loss and accounts for the disposition of such equipment as a sale.