Article Date: 4/1/2006

cover story
Got Cash?

... or a solid credit score and a need for new technology? Here's how to know what to buy and when to buy it.
By Gil Weber, M.B.A.

YOU'RE FINALLY the owner, or perhaps co-owner, of a private practice. The lanes are fully equipped, and your patient load is comfortable. Life is good.

But the constant deluge of promotional materials for new equipment creates uncertainty. You wonder if you have all the tools you need to offer the best care and still compete with nearby practices and maximize revenue.

This question begets more questions. Do you need all the latest technology to be competitive? Do you need some of it to survive? Can you afford any of it in today's world of decreasing Medicare and managed care reimbursements?

You need a plan to analyze when it's prudent to make purchase decisions. Without a plan, you risk spending money on technology that may have little or limited use and may not provide a good return on investment (ROI).

Here are some suggestions to help you decide what to buy and when to buy it.

Sometimes It's a No-brainer

Every once in a while, deciding whether or not to buy an instrument is easy, such as when you plan to deliver a new service. In this case, nothing short of an upgraded tool is acceptable for proper patient care, and you must spend the dollars.

For example, in years past, a simple millimeter ruler costing less than a dollar was sufficient for measuring pupillary distance (PD) in the optical dispensary. Then, along came progressive lenses requiring monocular PD measurements at the visual axis. Without a new tool, the corneal reflex pupillometer, it was virtually impossible to fit progressive lenses properly. To successfully dispense the new lens technology and benefit from the higher revenues and profits of premium lenses, updating your dispensary equipment was mandatory.

Sometimes, however, the decision isn't so simple and clear-cut.

Facilitate Delegation

One of the best times to invest in new, improved technology is when it will reduce the cost of doing business. Such a purchase might be a cost-effective alternative to adding more staff.

Practices typically delegate work-up or pre-testing tasks to technicians, reserving the more technically challenging tasks, such as applanation tonometry or retraction, to the most skilled technicians. But it makes little sense for your highly skilled, highly paid technicians do work-up tasks that clearly don't require their expertise, especially if the right equipment is available. This is an area where you might justify the purchase of an autorefractor or an autokeratometer — or both.

In this situation, the decision process becomes an accounting exercise whereby you measure what you'll spend to buy or lease the equipment against your staff costs, and then consider the additional revenue you could accrue by seeing more patients each day.

Increase Standard of Care

Although cost is always a factor, you know it's time to buy new technology when it clearly will increase the standard of care in your practice. One good example is the improvement in glaucoma care brought about by optical coherence tomography and retinal nerve fiber analyzers. Pachymetry is no longer an
optional investment in many practices.

Of course, manufacturers introduce new technologies every month, all of which promise "newer and better" performance. But sometimes, a new instrument clearly advances the standard of care. In those instances, you should look into the feasibility of the acquisition.

Buying Just Enough

It's easy to get caught up in the hype of advertising or anecdotal evidence supporting new technology. For example, a compelling sales pitch (especially when accompanied by favorable pricing), may tempt you to buy workstations for several locations in the front and back offices.

Upon reflection, however, you'd probably realize that full-blown workstations at every location would be overkill and that you could save money by forgoing all the bells and whistles. Simple "thin clients," which are stripped-down workstations consisting of nothing more than a monitor and a keyboard, would be the more cost-effective choice.

In most practices, computer terminals can and should be fed from central servers on which all programs are loaded and onto which all data are saved. In such a set-up, there really is no reason for each workstation to have a hard drive or a CD/DVD player/burner, or even a floppy disk drive.

As a bonus, by not having CD/DVD and floppy drives at each station, you're taking an important, money-saving step to protect against the unauthorized downloading of potentially infected software or data, or the removal of private financial data and patient records.

When It Just Makes Sense

Occasionally, you know it's right to purchase new technology or tools simply "because." Even if older technology works well and meets expectations, situations arise where the immediate benefits of the latest and greatest are obvious. Digital photography is one example.

Digital photography eliminates the cost of film, developing and printing, as well as time spent waiting for photos to come back from the lab. If you currently process photos in-house, digital photography will save equipment and staff costs as well as space.

When digital photography can help you avoid all these in-house or outsourced expenses and provide instantaneous results, isn't it the right time to move up? The money you save on film and processing can offset the cost of a good quality digital camera and color printer. Immediate access to electronic images (which, by the way, are easily shared with other practitioners), also improves quality of care.

When Not to Invest

"This instrument is a great investment. You can bill insurance for the service and recover the cost in just (fill in the blank) years." Ask your senior colleagues how many times they've heard this pitch.

Before investing in capital equipment or non-enforced physical plant improvements, it's essential to analyze the potential ROI. How long will it take to recover the purchase price, and how long before the investment actually increases profitability?

If you think you can recover the cost of new technology by billing insurance, do some research before you buy. Confirm that patients' insurance companies will pay for the new service. How many patients whose insurance won't pay for the service can you reasonably assume will pay out of pocket? Over the years, I've heard about quite a few practices that had a nasty surprise when they invested in new equipment, only to learn some insurance companies wouldn't pay for the service.

Eyecare practitioners across the country experienced years of frustration over Aetna's refusal to pay for CPT 92135 (scanning computerized ophthalmic diagnostic imaging [SCODI]). Although other insurance plans routinely paid for this service, Aetna deemed it "experimental" or "investigational." In areas where Aetna was the dominant third-party payer, insurance reimbursement for a considerable patient population was not available to pay down the cost of the equipment. In some instances, insurance companies informed doctors that they could not bill patients for SCODI, even though the payer deemed the service non-covered.

Ask Yourself This

When do you know it's time to invest in new technology, tools and toys? When you've identified a real (not perceived) need, when you've done the requisite research into potential ROI and when you've confirmed that "potential" has a real chance of becoming actuality. Ask yourself:

• Why do I think we need this instrument?

• What will this instrument do that we can't do now?

• Will insurance companies cover this service and will some
noncovered patients pay out-of-pocket?

• Do I really new equipment to do my job right?

• Will a current, problematic situation continue to deteriorate if I don't invest in capital equipment or improvements?

Few O.D.s can afford to buy equipment or upgrade their physical plant because they hope "things may work out." In today's world of decreasing reimbursement and increased practice costs, you must be as certain as possible before spending your hard-earned dollars.

But when, in the final analysis, investing in your practice makes sense, by all means, move forward.

Gil Weber, a contributing editor to Optometric Management, is a nationally recognized author, lecturer and practice management consultant to practitioners and the managed care and ophthalmic industries. He has served as director of managed care for the American Academy of Ophthalmology. You can reach him at (954) 915-6771, gil@gilweber.com or at www.gilweber.com.



Optometric Management, Issue: April 2006