"When is the Right Time to Acquire New Technologies & Tools?"
Determining the appropriateness of making a purchase.
Gil Weber, MBA
Adapted with permission from Ophthalmology Management
© Copyright, 2005. All rights reserved.
One manufacturer announces the introduction of the latest and greatest laser for refractive surgery. Another announces an electronic medical records system that will make your office more efficient and allow the practice to generate increased revenues through more accurate claims submissions. You may find yourself asking the following: Do I need all of this to be competitive? What do I need to survive? Can I afford a major purchase in today's world of decreasing Medicare and managed care reimbursement?
If your practice does not have a plan to analyze purchasing decisions, then you are at risk of spending money on technology or tools that may be of little or limited use and may not provide a good return on investment. The following are suggestions for deciding when, and if, it is the right time to acquire the latest and greatest in technologies and tools.
Sometimes the decision is obvious
Once in a while making a purchase is an easy decision. In order to deliver a new service, you must have the proper tools, and nothing less is acceptable for proper patient care. Whether purchased or leased, you must lay out the funds in order to start delivering the new type of care.
For example, in the past, a simple millimeter ruler was sufficient for measuring PDs (interpupillary distance) in a dispensing ophthalmologist's optical shop. Then, along came progressive lenses requiring monocular PD measurements at the visual axis. A corneal reflex pupillometer was needed. In order to dispense the new lens technology and benefit from the higher revenues and profits of premium lenses, it became a requirement to update the dispensary's equipment.
Buying too much technology
It is easy to get caught up in the overwhelming "hype" of new technologies, tools and toys. I have seen this firsthand when a practice felt it was the right time to buy new computers and jumped right in without proper pre-analysis. After an effective sales pitch, the physicians purchased workstations for every desk in the front and back offices. To be fair, the price negotiated was certainly attractive given the equipment and its capabilities. Though, upon reflection, it became clear these purchases were "overkill."
In this practice the computer stations were fed from central servers on which all software programs were loaded, and to which all data was saved. There was no need for the new computers to have a hard drive, CD/DVD player, or even a floppy disk drive. The practice could have saved money by purchasing simple "thin clients" - stripped-down workstations consisting, essentially, of nothing more than a monitor and keyboard.
In addition, if they had not purchased CD/DVD and floppy drives at each station, the practice would have taken an important step toward protecting itself against unauthorized downloading of potentially infected software or data, and the less innocent removal of the practice's financial data and patient records.
When current technology or tools adversely impact productivity
Consider investing in new technology or tools when there is compelling evidence that productivity (e.g., office operations) is being adversely affected. One administrator described a problematic situation with the cohesiveness of her practice's software programs. "We were continually plagued by crashes that essentially crippled us and brought productivity in the business office to a standstill until we could get the system rebooted and restored. At the same time, the crashes also affected tech productivity in the clinic."
The problem was that the software programs were memory hogs, and the single server could not handle the simultaneous resource allocation needs of the users. The problem was remedied, she said, "when the frequent crashes and the resulting downtime and lost productivity finally convinced the physicians that we had to get a second server and allocate discrete functions to each. Things have been much better since we made this investment in a system upgrade. Everyone is happier, productivity has increased, and stress levels have decreased."
When lesser skilled staff is able to accept additional tasks
One of the best reasons for investing in a newer, improved technology or tool is when it will bring down the cost of doing business. Such a purchase might well prove to be a cost-effective alternative to adding more staff.
An example of this is the exam work-up tasks delegated to technicians. Typically, a practice might restrict certain tasks such as applanation tonometry or use of the phoropter to the most skilled techs. But, it makes little sense for those higher paid techs to be doing tasks that clearly do not require a greater level of experience or expertise. In this case, many practices have found that auto-refractors and auto-keratometers justify their expense.
It then becomes an accounting exercise; figuring the cost to purchase or lease the equipment against the cost to hire new staff, or against the productivity decreases that result when more skilled techs are diverted from other patient-care responsibilities.
When looking to increase patients and revenues
Maybe your practice is considering adding a laser to provide more complete and comprehensive care - perhaps a YAG for post-cataract patients. The purchase would allow you to see patients who are currently being cared for elsewhere. It would mean more patient visits, and added revenues at the end of each month. However, the cost/benefit decision may not be that simple.
It is necessary to consider the physician's fee, and the "use" fee for the equipment as separate accounting issues. If the potential YAG volume is so high that the "use" fees could be recouped quickly, then it may be a worthwhile investment.
On the other hand, if you are a solo practitioner or part of a two-physician group with smaller procedure volume, it may also be possible, and ultimately smarter, to profit from doing the YAGs without a capital investment in the equipment. For example, a physician I know practices near the facility where he does his cataract surgery. There is a YAG in that facility and patient insurance pays him the professional fee for each YAG he does there. But because the laser is conveniently located, and assuming that he has reasonable access to it, the investment no longer makes sense.
When an investment will increase the standard of care
There are times when a technology can be considered as a clear advancement in the standard of care. In those instances, a practice is obligated to investigate an acquisition. One example is the improvement in care brought about by the OCT, GDx, HRT and RTA machines.
In the past, an ophthalmologist would measure a glaucoma patient's field of vision loss with a visual field machine. The problem was that the loss was being measured too late in the game. With newer technologies, it is possible to catch the damage earlier in the progression of the disease. This new technology has also allowed a leap forward in other types of diagnosis. For example, previously, if a patient had cataract surgery and the surgeon thought there was a problem with cystoid macular edema (CME) it was difficult to certify that finding. Now, an OCT will certify the diagnosis with a simple 5-minute, non-contact scan.
When circumstances force your hand
On occasion you may put off acquiring new technology or tools hoping that circumstances will fix themselves and that the expense can be avoided. Typically, after much procrastination, you come to a point where a change cannot be put off any longer. I often see this problem exerting adverse effects upon the staff. The administrator may have gone to the physician repeatedly with an issue only to be told to work it out without the practice making a capital investment.
One administrator told me how her practice's patient records were stored in six different places in the building, including the lounge and back room. In fact, there was no longer room in the front office for the current year charts. "It had passed the time to consider electronic medical records." she commented. "The situation was very inconvenient for clinical operations, and it finally forced my physicians to think more seriously about the move. We simply could no longer manage the charts properly given the practice's physical plant constraints. We've finally started the process of researching EMR systems."
Another administrator told me that her practice was stuck with a practice management system for years because her physician would not consider change based on the system's obvious limitations. He only considered change once the system's customer support disappeared. She summed up her frustrations saying, "Sometimes physicians forget that the computer is to the office what good surgical instruments are to them. They wouldn't want to use a rusty, dull blade, and we can't use a slow, tired computer."
When a purchase "just makes sense"
Even if your current equipment works well and does everything expected of it, there are situations where upgrading to the latest and greatest makes sense. For example, with digital fundus photography it is easy to see the immediate and impressive benefits of making a purchase.
If you have shot with 35 mm film, then you know the cost and logistical issues associated with this older technology. There is the considerable and constant cost of the film, developing and printing the film, in addition to the wait for the photos if sent out. If developing your own prints, then you need to add the costs of chemicals and developing and printing gear. Additionally, there is the square-footage dedicated to the photo lab, plus expenses such as a ventilation system to address OSHA concerns. Lastly, there is the salary going to a film processor rather than to someone who could be taking care of patients.
When you can avoid all of those in-house or outsourced expenses and get instantaneous results by going digital, how can it not be the right time to invest? The quality of your care certainly must improve by having immediate access to those electronic images that can be shared more easily.
When it is not the right time to invest
"This is a great investment in your practice. You can bill patient insurance for the service and recover the cost in just (fill in the blank) years." This represents the famous last words from certain equipment sales representatives. Before making any investment in capital equipment or (non-enforced) physical plant improvements, it is essential to analyze the return on investment potential. How long will it take to recover the amount spent, and how long will it be before the investment actually increases profitability?
If you are adding new technology or tools weighted heavily on the assumption that you can recover the cost by billing insurance, do not. You must first confirm that your patients' insurance companies will, in fact, pay for what you are considering.
This advice from American Society of Ophthalmic Administrators' member, Michael Lockard is on target. "I was always looking for the medical policy from each carrier if we were getting a new technology. Just because the current procedure terminology (CPT) code was there, did not mean it would be approved for payment. I would want to know which ICD9s were linked to the CPT, and if there were any exclusions or limitations for the procedure."
Over the years, I have seen many instances where, after a practice invested in new equipment, insurance programs did not pay for the procedure. Recently physicians across the country experienced years of frustration over Aetna's refusal to pay for CPT 92135 (SCODI -- scanning computerized ophthalmic diagnostic imaging) that Aetna deemed "experimental" or "investigational" despite the fact that other insurance companies routinely paid. In some parts of the country where Aetna was the dominant third-party payer, this meant that insurance payments for a considerable patient population were not available to pay down the cost of the equipment purchase. In some instances physicians were told by insurance that they could not bill the patient even though the payer deemed the service to be non-covered. This added financial insult to injury, especially when the new technology clearly raised the standard of patient care.
Who will change old lamps for new?
The bottom line is, that it is time to invest in a new technology or tool when you have identified a real need, researched the potential ROI, and confirmed that "potential" has a real chance of becoming an actuality.
Ask yourself the following questions:
- Why do we think the practice needs to make this purchase?
- What will it help us do that we can't do now?
- Can our practice get (reasonably) reimbursed by the insurance companies covering most of our patients?
- Is the technology or equipment readily available to us off-site, and is it convenient for our patients?
- Do we really need the new technology or equipment to do the job right?
- Will our current problematic situation continue if we fail to invest in capital equipment or improvements?
Few practices have the money to toss at equipment or physical plant upgrades in the hope that things may work out, or the hope that change will be for the better. In today's world of decreasing reimbursement and increased practice costs be as certain as possible before committing to laying out what could be a sizeable chunk of money.
Gil Weber, Ophthalmology Management's Consulting Editor, is a nationally recognized author, lecturer and practice management consultant to practitioners and the managed care and ophthalmic industries, and has served as Director of Managed Care for the American Academy of Ophthalmology.