Optometric Management Tip # 376   -   Wednesday, April 22, 2009
Instruments That Pay, Directly or Indirectly

Some advanced clinical instruments can be added to existing practices at virtually no cost. I consider these investments as no-brainers because they improve the level of care that is offered, they provide a wow factor for practice building and they increase net income.

Projections

The basic premise to determine the break-even point of an instrument is to project how many times you will likely use it in a month and multiply that by the typical additional fee you will receive. That dollar amount represents your gross revenue from that instrument. The next step is to determine the monthly cost of the instrument, assuming you finance it. You can find out by asking the instrument sales rep for leasing terms or by asking your local banker to determine the monthly loan payment for you. If your gross fees exceed the monthly cost, you have a no-brainer decision and you should buy the device.

If you are close to a break-even situation it is still a smart move to buy the instrument in most cases because you will still have all the benefits of the new device, and when you pay off the cost in a few years you will generate a profit at that time. Besides, the chances are good that your practice will grow and your utilization will increase, which would result in a profit even sooner.

Be sure to review the tax benefits of buying or leasing instruments with your tax advisor. Section 179 deductions are still available which basically create an effective discount of about 33% off the cost of instrument within the first year of use.

What instruments

There are several great devices that I consider to be in the direct profit category, if you have sufficient patient demand, and there are other good ones that provide an indirect return on investment. I'll cover the direct paybacks in this article and the indirect ones next week. I consider the following to be the top candidates:

How will you charge?

There are several good ways to charge a fee for your new service, often depending on the instrument and on your practice. Here are some considerations:

How many will you do?

If there is a procedure code associated with the test you can research the diagnosis codes that are approved by your medical plans. Most state carriers for Medicare will have a section on its website that will list the diagnosis codes. (This is usually referred to as local coverage determination or LCD). Once you know the diagnosis codes, consider if you would really need and use the test for those types of patients. I would never recommend doing a test just because it will be paid by third party. Run a data search of your office computer system to determine how many patients you saw last year with the diagnoses on your list.

You may be able to correlate your future usage of a test based on other test procedures you currently use. For example, some experts feel the average practitioner will perform an OCT twice as often as threshold visual fields. If that is true, you can simply look up how many visual fields you performed last year and you can get an estimate of OCT usage. If you have a device that you currently use for glaucoma only, consider that adding macular degeneration and diabetic retinopathy patients which may easily double the number of patients who need the test.

If you will use the instrument as a screening test, estimate your usage based on 60% of your average number of exams per month. Multiply the fee you will charge.

Can you offer too many patient options?

I think it's important to not go overboard with screening tests. I'm all for using technology in innovative ways, but I think one optional upgrade is enough. Patients can be confused with too many options and may have a difficult time making a decision.

Things to ask

If shopping for high tech instrumentation:

Combo instruments

There are some exciting instruments on the market that can perform multiple functions, such as:

Consider these pros and cons of combination instruments:


Best wishes for continued success,

Neil B. Gailmard, OD, MBA, FAAO
Chief Optometric Editor, Optometric Management