Bonus Depreciation Section 179 (Column A in sidebar,
page 84). The first year expensing increases from $100,000 in 2001 to $102,000 in
2004, adjusted for inflation. In 2005 the annual amount will again be adjusted for
inflation ($102,000 + Cost of Living Adjustment).
Section 179 allows taxpayers
to expense the cost of qualifying equipment
and includes "off-the-shelf" software purchases rather than depreciating the cost
over a period of several years, subject to a threshold. This threshold represents
the maximum dollar amount of equipment that you can purchase each year before the
write-off is reduced dollar for dollar. The stimulus plan increases the 2004 threshold
from $400,000 in 2003 to $410,000 in 2004. In 2005, the phase-out threshold will
again be adjusted for inflation ($410,000 + Cost of Living Adjustment).
This deduction is effective for purchases
in the tax years that began in 2003. For any remaining amount above the $102,000
allowance, you're entitled to take the Bonus Depreciation (outlined below) and first
year depreciation (also outlined below). If there is a remaining amount after these two deductions, it
can be depreciated over three, five or seven years, depending on the equipment/software
Bonus Depreciation (Column B in sidebar, page 84). Taken
after Section 179 deduction. The 2003 Jobs and Growth Act contains provisions that
allow taxpayers to claim an additional first-year depreciation allowance equal to
50% of the adjusted basis of "qualified property." Qualified property is tangible
personal property with a MACRS recovery period of 20 years or less. You can take
this additional 50% depreciation for equipment placed in service after May 5, 2003,
and before January 1, 2005, provided that no written binding contract to acquire
such property was in effect before May 5, 2003.
First Year Depreciation (Column C in sidebar, page 84). Taken after Section 179
and 50% Bonus Depreciation. Under the tax rules (MACRS, five-year life, 200% declining balance half-year
convention) for the first-year depreciation, 20% may be deducted the first year
the equipment is placed in service.
First Year Tax Deduction (Column D in sidebar below). The deduction is the total
of Section 179, 50% Bonus Depreciation plus the 20% First Year Depreciation, based
on the investment you've made in your business.
Year Tax Savings Assuming a 35% Tax Bracket (Column E and F in sidebar below) The
amounts shown reflect what you may save by making the investment in your business.
Your particular tax situation may change these figures.
Buying equipment and taking advantage
of all tax breaks is critical to proper purchasing philosophy.
#2 Improve Recall
How can instrumentation increase
recall efficiency? Recall efficiency is defined as the percentage of patients who
return at the time you recall or request. The national average is only 15% to 20%.
This does not mean that 80% of the previous patients are leaving your practice.
It screams that the eye care field has not educated the public that vision care is preventive like
dentistry. Patients who wear visual aids seek out their eye care practitioner every
How can equipment assist in raising
your recall efficiency rating to as high as 60%? Envision instrumentation that is
"health" oriented. Simple things like glucometry (blood sugar) and sphygnomanometry
(blood pressure) evaluations are a minimal cost, yet they yield huge patient care
and financial returns. If you script properly, the patient will understand the preventive
health benefits of your comprehensive examination. More sophisticated and expensive
pieces such as optic nerve analysis and imaging are an option.
Only if you script (educate, motivate
and create enthusiasm) will equipment make a difference in practice building and
raising recall efficiency. The instruments and intra-office education used in tandem
will achieve the growth, professional image and recall efficiency that you desire.
Separately, you will not achieve the desired effect. Buying equipment without doctor
and staff using specific internal marketing techniques will not improve recall.
the right image
Consumers identify optometrists with
products (glasses and contact lenses). They are not aware of the professional advances
in therapeutic and diagnostic medicine. However, you can create any image you want
in your practice. Purchasing instruments and educating patients about the medical
nature and necessity of each test on an annual basis changes the patient's perception
of the optometrist. This approach emphasizes health and the need for annual preventive
Produce more income
Certain tests like
glucometry, sphygnomanometry, retinal imaging, retinal photography, topography, evaluation of
cartinoid levels, etc., could be added to any comprehensive vision regiment. Many
offices charge additional fees for their specialized tests and inform patients in
writing prior to their entering the clinic. The patient is informed as to the medical
necessity and fees for services for these health tests. They understand that the
fee is due the day services are rendered.
sends a message
Doctors should strive to add some
new instrument, technique or service annually. This is a message to your patients
that you are reinvesting in your practice, that you care about offering your patients
the finest in eye health care. Practices are built on this type of planned improvement
in equipment and services.
#6 Delegation made
The use of almost all of the new
equipment purchases can and should be delegated to ancillary personnel. If 2,000
patients purchase an informed consent procedure at $40 per patient, the result is
$80,000 of additional revenue generated by technicians. This mode of practice is key to increasing net income
in a managed care environment.
Focus on the service
Practices have increased gross income
by hundreds of thousands of dollars by changing the emphasis in the practice from
the material (product) to the service arena. Remember, from a return-on-investment
perspective, it's not how much you invest in equipment that is important. What is
critical is that you meet all the internal marketing techniques that were covered
in this article.
As doctors, we have an obligation
to render quality care and to sell it. Both of these obligations can be met by purchasing
the proper equipment in combination
with scripting to emphasize its medical necessity. Don't misinterpret my comments
by thinking that I'm suggesting that you downplay your optical or contact lens departments.
The message is simple: As a profession, optometry has made the majority of its income
from products to the extent that we have "hidden" our professional fees in the materials.
If we are to thrive financially
in the future and provide patients with the best care, fee for services
is the answer. This approach is in direct correlation with proper medical
equipment purchases and internal marketing to support the cost.
is president and founder
of two management and consulting companies. For information, call (800) 745-eyes
or e-mail him at email@example.com.