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.
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.
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:
- OCT. The new generation of instruments that perform optical coherence tomography are very quick and easy for both technicians and patients. They provide a wealth of valuable data that will help the practitioner manage and monitor macular and retinal diseases and glaucoma.
- Digital retinal camera. These are fantastic devices that assist in the examination of the fundus in routine cases and are also helpful in documenting abnormalities. The only reason this idea may not be much help is that you probably already have one. A recent survey of large optometric practices showed that 82% have a retinal camera. If you don't, I think you should strongly consider acquiring one.
- New macular technologies. There are a few new instruments that show promise in evaluating risk factors and in quantifying macular degeneration. These include devices for highly specialized central visual field tests to devices that measure macular pigmentation. Of course, the aging population trend places these devices in a strong position.
- Visual field instruments pay for themselves, but they are generally a requirement for practice so a new instrument would not provide a new service or result in more procedures. Visual field screeners are excellent tools but I would not charge an additional fee for this test.
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:
- Procedure code. While you don't have to have a procedure code associated with the test to make it generate a profit, it is helpful. Once the code is known you can find out the approved fee by Medicare and private medical plans in your area. Since the procedure is covered by Medicare and by private insurance, you will generally concern yourself with how many patients you see who have corresponding diagnoses and how often you will run the test.
- Screening vs. full test. Will you use the instrument as a screening device or will you only use it only when medically necessary – or both? Screenings are often run on large groups of patients; in many cases it's offered to every patient presenting for a routine exam. Typically, a fairly nominal fee is charged on a private pay basis, not covered by insurance. Digital retinal photos offered as an optional screening generally result in a 60 to 80% patient acceptance rate. Most coding experts feel that using a device as a screening tool is a different test than when it is used as a medical procedure (including interpretation and report) and it can be used both ways.
- Include in exam fee vs. offer at additional cost. Instruments can be used as a screening, but rather than offering it as an option, you could simply include the test on every routine exam and raise the exam fee. The advantage to this method is that every patient benefits from the service and experiences the wow factor. The doctor also gets the advantage of the data and efficiency in every case.
- Vision plans. Vision plans generally permit providers to offer a special technology to patients at an additional fee as long as the service is not considered part of the routine exam requirements. The special test must be offered and the fee explained in advance and it must be optional. Document the record by using an educational handout initialed by the patient to indicate his preference. Practices with a high concentration of vision plans might do well to offer the special test as an option for an additional fee. Practices with low participation with vision plans may do better to just include the advanced test in the exam routine and raise the fee.
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:
- Be sure to investigate the networking capabilities of the device and any additional costs if you intend to view the test results in exam rooms after the test is done by a technician in a pretest room. This is strongly preferred for imaging procedures.
- What changes in the instrument are expected in the near future? Will software upgrades be included in the purchase price?
- What is the warranty and what are the costs of future maintenance agreements?
- Will your technicians be able to operate the instrument; is training included?
There are some exciting instruments on the market that can perform multiple functions, such as:
- Autorefractor/keratometers that can also do non-contact tonometry (NCT) and even pachymetry.
- Autorefractors that are also wavefront aberrometers and corneal topographers.
- NCTs that do pachymetry.
- Retinal OCTs that have an anterior segment OCT feature.
- OCTs that also have a non-mydriatic fundus camera.
Consider these pros and cons of combination instruments:
- Smaller footprint. Many offices struggle with bringing in new technology because they simply do not have enough space for more instruments.
- Having the technician seat the patient, adjust the chin rest, explain the fixation target, and focus the device takes time, so it is very efficient to collect more data at one sitting.
- There is often a cost savings over buying separate instruments to perform all the functions.
- If the device breaks down, you may lose the ability to perform several tests.
Best wishes for continued success,
Neil B. Gailmard, OD, MBA, FAAO
Chief Optometric Editor, Optometric Management