Article

Avoid the biggest purchasing mistakes

Before adding expensive new equipment to your practice, know your numbers and understand your business.

Rushed and impulsive equipment purchasing can result in the dreaded buyer’s remorse, especially if the equipment turns into an expensive piece of furniture without a solid return on investment. Poor equipment acquisition management can lead to low margins, compromise the quality of patient care, create unnecessary barriers to operational workflows and increase unexpected equipment failures that were otherwise preventable.

Technology advancements are one of the largest investments made by ophthalmology practices, ranging from $5,000 up to $600,000. Therefore, equipment purchasing tactics should extend beyond the excitement of adding the latest piece of ophthalmic technology to your practice. Ideally, equipment purchases should be driven by the problems they will solve, whether they will improve the patient experience and the revenue they will generate.

This article will focus on the five most common equipment-buying catastrophes. More importantly, it will highlight simple techniques to minimize the financial risk of technology implementation, using examples from The UCHealth Sue Anschutz-Rodgers Eye Center in Colorado.

MISTAKE NO. 1: SILOED EQUIPMENT PURCHASING DECISION-MAKING

The decision to invest in new equipment should not be made in isolation by an administrator or a physician. Soliciting feedback from the clinicians, vendors, business administrators and the support staff allows a practice to make thoughtful buying decisions that minimize the chance of failed technology implementation. Issues that arise in the absence of a collaborative buying process include:

  • Non-reimbursable services without a self-pay implementation package.
  • Multiple pieces of equipment that could have been consolidated into one piece of equipment, with capabilities to support multiple sub-specialties. This can also result in unnecessary consumption of valuable clinic space.
  • Equipment that does not align with the skillset of your ophthalmic technicians or photographers.
  • Equipment that will be obsolete before it is paid off.
  • Equipment that does not integrate well with existing equipment.

MISTAKE NO. 2: FAILING TO PLAN FOR THE FUTURE

Poor planning can be costly. Equipment repairs are expensive, and an unexpected emergency should not result in a financial nightmare. Every practice should have an annualized capital and operating expense budget as well as a list of existing equipment — especially crucial when operating a multi-specialty or multiple location practice. The list should include anticipated lifespan and associated operating expenses (ie, license fees, maintenance agreements, disposable expenses, etc.). This allows the practice to better evaluate any opportunities to consolidate equipment, track the equipment that will become obsolete and, more importantly, plan for the future.

Details that should be tracked include:

  • Name and manufacturer
  • Age and life expectancy
  • Depreciated value
  • Estimated replacement cost
  • Sub-specialty it supports

MISTAKE NO. 3: IS IT ADDING VALUE, OR JUST TAKING UP SPACE?

While the clinical advancements in technology can have everyone racing to be the first to try it, this excitement should not overshadow the reasonable expectations to provide an economic and operational benefit. For instance, the competitive prices and exclusive lens formulas of “Biometer A” may seem attractive at first glance. However, making this type of purchase without a planned approach to how this technology will fit into your existing cataract service line equipment can lead to unintended consequences.

For instance, before purchasing a new biometer, be sure it can transfer lens data directly to your current OR equipment. Other questions to ask include:

  • Have you consulted with all of your surgeons?
  • Can this technology be integrated into your EMR?
  • Can the information from your old equipment be transferred to the new one?
  • Are you heavily dependent on a specific brand for your operating room equipment? If so, how does the new device fit into these existing practices?
  • If there is a high probability that your practice wants to consider switching lens calculations technology, have you asked your vendor for a loaner?
  • Have you checked with other physicians using the device you want to buy?

An example of efficient new technology acquisition was demonstrated in my practice’s glaucoma service recently. We experienced clinic delays of approximately 10 to 20 minutes due to a bottleneck in the visual field testing. In this case, while the same data analysis was performed, the answer was not to add an additional visual field machine, especially because practice real estate was a barrier. Instead, we explored the new model visual field machine, which promised faster visual field testing. A half-day trial revealed a time saving of about five minutes between the two machines per patient, which totaled to a 67-minute time savings per day per machine (see Table 1, below). Considering the existing visual fields were approaching end of life, we made a decision to start a trade-in process on the older visual field machines over a 12-month period.

Table 1. A sample analysis of time saved through upgrading visual field machines.
Machine Number of patients per visual field per half day Average minutes per patient per test
Old model visual field 13 15.92
New model visual field 13 10.75
Total number of minutes saved per patient 5.17
Total time savings by minutes per machine per day 67.21

During this transition process, we made alterations to templates associated with the older visual field machines to minimize the testing delays. Ultimately, this new technology implementation will allow us to add three additional visual field appointments per machine.

MISTAKE NO. 4: OVERLOOKING TRAINING

Under-communicating new technology implementation is another reasons for new technology failures. You should have a well-defined implementation plan for your new equipment that includes the entire office. Are all staff members (including front office staff) kept up to date on new technology so they can be prepared to speak to patients? Is your new technology aligned with the skillset of the clinical support staff? Are you partnering with the vendors to provide the right training and implementation tactics? If not, visit other practices and partner with your vendors to gain first-hand experience with these technology advancements in order to see how it works in a real environment.

Further, staff members are often the first and last people your patients speak with. Therefore, they hold a great deal of influence on patient’s willingness to try new technology. Staff members offer some of the most valuable feedback for these types of decisions. With their intimate understanding of clinical workflows, they can offer creative solutions for equipment placements to minimize disruptions to existing workflows.

Lastly, setting milestones for your staff to work towards increases their engagement in wanting the new technology to succeed. These milestones should align with the size of your practice and the demographic of your patients. The rewards for reaching these milestones can be simple — a small incentive bonus, pizza party or allowance to attend a national meeting.

MISTAKE NO. 5: DATA DOESN’T SUPPORT THE PURCHASE

Consistent data tracking and analysis guarantees smart and informative decision-making. This best practice is vital regardless of the size or complexity of an ophthalmology practice. Some key data measures, as they relate to equipment purchasing, include patient access to specific appointment types, visit volume by provider, patient demographics, visit volume by equipment resource and number of templated appointment slots per provider. Understanding the trends revealed by data management can ease the pain and anxiety of equipment purchasing decision-making.

For example, patient appointment durations for the retina service at The UCHealth Sue Anschutz-Rodgers Eye Center increased by 45 minutes in 2018. A five-day time study of patients, starting from check-in through check-out, revealed the source of the bottleneck occurring at the diagnostics center — specifically, the fluorescein angiogram. It further revealed that each fluorescein angiogram took approximately 22 minutes. However, the average patient wait-time to receive a fluorescein angiogram was about 30 minutes. Still, this information alone would not be sufficient to make a decision to add a fluorescein angiogram. Following this discovery, a data analysis was performed on the number of fluorescein angiograms performed in the previous two fiscal years per provider, the number by photographer (to determine if we also needed more staff) and the time-to-next-appointment for a fluorescein angiogram. With this investigation, we determined we would have to purchase an additional fluorescein angiogram machine and hire an a photographer to sustain the increased visit volume of fluorescein angiograms.

TIPS FOR RETURN ON INVESTMENT (ROI)

Now that you know the mistakes to watch out for, let’s talk about getting the most from your new equipment. Before you make an equipment purchase, you should always know how long it will take to pay it off, which will depend on financial effects such as interest rates, length of loan, direct cost and life expectancy, just to name a few. Although I can write an entire dissertation on ROI, for the purposes of this discussion, I will provide general tips on how to develop tangible and attainable financial analysis before writing that big check.

  • Tip No. 1: Understand insurance reimbursements vs. self-pay services. First, determine if the equipment offers billable services; understand which CPT codes and ICD-10 codes are reimbursable and how each payer will react to these charges based on your insurance contracts. This will allow you to run reports on anticipated revenue based on your current demographic of patients and your projected visit volume. If these services are not covered by insurance, research the fair market value (in your community and in our industry), then calculate your margins before establishing a competitive self-pay package.
  • Tip No. 2: Understand cash vs. profit. Knowing that these terms are not interchangeable is key to calculating an accurate ROI. While calculating the profit (revenue minus expenses) is essential to these buying decisions, it never represents how much cash is actually in the bank or the outstanding balances on your patient accounts. Therefore, it is vital to run frequent account receivable reports to evaluate timely billing and payments for these outstanding account balances. If these balances are high, it might be a good opportunity for you to reevaluate your practices for collecting copays, deductibles, co-insurances and self-pay services before services are rendered.
  • Tip No. 3: Calculate direct and indirect cost. There are always additional costs with implementing new technology. Reviewing the equipment contract can be agonizing; nonetheless, a careful review of each line can reveal hidden cost. Below is a list of items that can have a significant impact on your margins.
    • Training and installation
    • Buying options, including interest rates and length of loan
    • Supplies
    • Staffing — required skillset of clinician performing the test
    • Length of time to perform each test
    • Maintenance fees
    • Life expectancy
  • Tip No. 4: Always evaluate an alternative. Researching an alternative to your desired equipment is worth the time, even when you think you are confident about the purchase you want to make. You will be surprised by what this type of comparison will unveil. For example, Table 2 compares two fundus cameras. While Fundus Camera A might appear to be the less expensive investment at first glance, other factors make Fundus Camera B an attractive option.
    Table 2. Variance in direct cost between Fundus Camera A and Fundus Camera B largely due to the fact that Fundus Camera A requires the skillset of an ophthalmic photographer (which requires a higher hourly rate than an entry level ophthalmic tech) and takes twice as long per patient.
    Fundus Camera A Fundus Camera B
    Price of equipment $45,000 $75,000
    Finance options 3-year loan with 6% interest 5-year loan with 6% Interest
    Total interest $8,100 $22,500
    Installation and Training $5,000 $0
    Direct cost per patient (supplies, staff, etc.)* $50 $20
    Staff skillset Certified Ophthalmic Photographer Entry Level Ophthalmic Technician
    Length of time to perform each test 30 minutes 15 minutes
    Maintenance agreement $1,000 per month Covered for first 2 years then $500 per month
    Life expectancy 5 years 7 years

CONCLUSION

The continued growth in life expectancy has a direct impact on the increased demands for ophthalmic care in our geriatric population, thus increasing the innovations in ophthalmic technology. Also, these clinical treatments and innovations in ophthalmology change rapidly and are driven by world-leading clinical researchers. Part of the ongoing effort to effectively manage this rapidly growing specialty compels us to adapt these technology advancements into our clinical practices. On the other hand, dodging the multimillion-dollar equipment graveyard requires periodic reevaluation of existing workflows, data management, staffing models and business needs before committing to an expensive technology investment.

As a final thought, it’s important that our industry invests in the upcoming generations of ophthalmologists and integrates these types of practice management concepts into their clinical training. I draw attention to this because running ophthalmology practices requires a dyad leadership structure that includes both administrators and ophthalmologists — each of them providing valuable perspectives.

With rapidly evolving clinical practices and reduced insurance reimbursements, it’s imperative that we utilize clever clinical and financial justification for expensive technology purchases. Doing so will create an avenue to sustain our future ophthalmology practices. OM

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