Case studies: Make sure new equipment earns its keep

It's easy to fall in love on the trade show floor. He's tall, dark, and chrome-colored. She's petite, shiny, and would fit perfectly on the countertop in your lab. Under the bright lights of the exhibit hall, you may be irresistibly drawn to sign a long-term contract for the one you adore. But before you tie the knot, ask yourself if you're spending all that money for a machine you'll never use. After all, clients need to be willing to pay for the service. Your associates need to know how to use the equipment. That glossy model that's so alluring on the exhibit hall floor could be gathering dust in a few months in some forgotten corner of your surgery suite. You want a love that will last.

So don't make this big purchasing decision for emotional reasons, says Gary Glassman, CPA. Glassman, a Veterinary Economics Editorial Advisory Board member, is a partner with Burzenski & Co. in East Haven, Conn., and specializes in veterinary accounting and tax planning. He says many successful equipment purchases are marriages of convenience. In other words, you pulled out your pencil and did the math. If this sounds like a passionless approach to a process that normally sets your heart racing, it is. But Glassman says an analytical attitude will save you a boatload of heartache.

Some practices even wait until they've got the clientele to support the service before they buy the equipment. Consider the case of Dr. Michael Farber and his ultrasound machine.

ULTRASOUND MACHINE

Estimated cost: $10,000 for small portable unit; $35,000 for larger unit

Charge per ultrasound: $350

Frequency of use: 20 to 25 times per week

Dr. Farber, owner of West Chelsea Veterinary in New York, used to employ an outside ultrasonographer who traveled from practice to practice to perform ultrasounds. But when one of Dr. Farber's associates, Dr. Jennifer Mlekoday, expressed an interest in learning ultrasonography, Dr. Farber did the math. At the time, 10 to 15 clients a week were paying for the recommended sonograms. So Dr. Farber purchased a small portable ultrasound unit for $10,000, and Dr. Mlekoday used her continuing education budget to start taking classes. Her education included training with a traveling ultrasonographer, attending several intensive learning programs, and lots of practice. In a few years, she was proficient.

As Dr. Mlekoday's skills and interest grew, Dr. Farber invested in a larger unit for $35,000. Now his associate performs about 20 to 25 in-house ultrasounds a week, and Dr. Farber's practice keeps a larger share of the profits. "This equipment really paid for itself quickly because of the demand we had and the commitment Dr. Mlekoday showed toward training," Dr. Farber says.

An important point: Dr. Farber says taking and interpreting ultrasounds is a very skilled task, so it requires a lot of training. He couldn't have afforded to purchase the equipment for someone to dabble in it. The practice needed a doctor who was committed to the education.

As a bonus, now the doctors don't all need to schedule ultrasounds on the same day for a traveling practitioner. "Now we can use it in cases of emergency, and some of the other doctors feel comfortable picking it up to look for pyometra or fluid in the abdomen," Dr. Farber says. He estimates that other doctors in the practice use the machine an additional six to 12 times a week.

How do you know if you're ready for an ultrasound? Dr. Farber says in his case the numbers spoke for themselves. He was paying an outside ultrasonographer about $200 an ultrasound. "So when you're doing 20 to 25 a week, it adds up pretty quickly and it starts to make sense to do it yourself," he says. ?

DENTAL DIGITAL RADIOGRAPHY UNIT

Equipment: Wall-mounted, floor, or handheld; direct or indirect digital; requires laptop and digital plates

Estimated cost: $3,000 to $12,000

Estimated charge: $50 to $200 for a full mouth series, depending on practice finances and the size of the patient

Frequency of use: Daily for cleanings

If you're not doing dental digital radiography, you're seeing only part of the pet's healthcare picture, says Dr. Brett Beckman, FAVD, DAVDC, DAAPM, president of the American Veterinary Dental Society. Dr. Beckman sees countless pets with mouths that appear normal—until he reviews the radiographs. This simple step can uncover serious problems and pain in pets, and treating these patients helps you offer better medical care. It also offers a profit center if you're willing to invest in the time and training to learn how to treat dental problems.

"A dental digital radiography machine is the most profitable piece of equipment in a clinic," says Dr. Kate Knutson, owner of Pet Crossing Animal Hospital and Dental Clinic in Bloomington, Minn. "There are few patients that don't need dental radiographs. And I can't imagine doing dentistry without them. Just as I wouldn't be able to diagnose how badly a leg was broken without a radiograph, I can't understand a patient's potential periodontal disease without a dental radiograph."

To get started, Dr. Beckman recommends formal instruction. Training is often included in the cost of the equipment. Some companies will include education as an adjunct or refer you to experienced professionals for training. The equipment is easy to use, he explains, but positioning the patient to get good images takes practice. At a minimum you'll likely need at least three to four hours' training on positioning, and possibly another half-day of training on basic image interpretation.

Technicians are often the drivers for dentistry in the practice, Dr. Beckman says. So it's a great idea to train technicians to take images too. Just remember, dental care needs to take place under the supervision of a veterinarian to stay in accordance with your state's laws.

DIGITAL RADIOGRAPHY UNIT

Estimated cost: $45,000 to $100,000

Estimated charge: $120

Frequency of use: 5 to 10 times daily

"Before I bought a digital unit I felt like my film processor was nickel-and-diming me on repairs," says Dr. Fred Metzger, DABVP, owner of Metzger Animal Hospital in State College, Pa. "Then I considered my technicians' time processing film and performing retakes. Those are hidden costs when you don't take digital radiographs."

When Dr. Metzger made the leap from film to digital, he increased his fee by $15 because the equipment gave better information. He also cut his film, repair, and labor costs, which made the switch even more profitable and helped him offer better patient care.

"When I look back on it now, we took some radiographs on film that were difficult to interpret," he says. "We couldn't look at bone and soft tissue on the same radiograph. The image we took was what we got—we couldn't improve the image or change it." Dr. Metzger says now that he's had a digital unit for a number of years, the radiograph quality is 10 times better. "We see so much more because we can change the contrast to see bone clear to soft tissue," he says. "Our retakes are down, and we want to take more radiographs because we get such great information from them."

SURGICAL AND THERAPY LASERS

Estimated cost: $30,000 to $40,000

Estimated charges: Additional fee for laser surgery: general, $55; intermediate, $74; extended, $90

Charge for therapy laser: one session, $48; package of three sessions, $130; package of six sessions, $260

Frequency of use: Daily

When Dr. Metzger bought a surgical laser two years ago, he received a therapy laser for free with his purchase. Little did he know the therapy laser would help him launch a new profit center in his practice—a 1,000-square-foot rehabilitation center.

Dr. Metzger's practice performs a lot of orthopedic surgeries, so he decided to try the therapy laser first on patients recovering from this type of surgery. The practice's surgeon, Dr. Robert Rider, tried it for two weeks—and saw positive results. So Dr. Rider and the other doctors began to expand its use. And now they use it every day.

Success with the therapy laser encouraged Dr. Metzger to consider offering other rehabilitation services. Launching a new healthcare program is not a decision to take lightly, but laser therapy lets you take rehabilitation services out for a spin before you walk down the aisle with a $40,000 underwater treadmill, $10,000 in certification training, and a hospital addition to make room for the new equipment.

"What I like about the therapy laser is that it lets you get started in rehabilitation right now," Dr. Metzger says. "And it might help you decide whether you want to do more rehabilitation or whether you have the caseload to make rehabilitation work."

A half-day training session is all it takes to get started with a therapy laser, Dr. Metzger says. And technicians can be trained to do the treatments.

But, Dr. Metzger warns, you need to make sure you buy a high-quality laser with the power to work quickly. His laser can do a treatment in about four minutes, while a lesser-quality product might take 20 minutes—a waste of your team's valuable time.

The surgical laser has also been a profitable purchase. Dr. Metzger owned a laser before that wasn't powerful, and he didn't use it. But his new surgical laser is high-powered, and he says his practice uses it for more surgeries, which has enabled him to pay off the equipment purchase in about a year and a half. Clients have been receptive because Dr. Metzger explains the benefits effectively: The laser means less pain and swelling and improved patient outcomes.

SAVE YOUR FAILED RELATIONSHIP

If you carry a new piece of equipment over the threshold of your practice and then neglect it, the relationship will fizzle and the value of the unit will plummet. What do you do with the machine then? Glassman says you have two options: Accept that you've made the wrong decision or rethink the way you employ the equipment in your practice. "Is there a doctor who's willing to step up to the plate and make it work?" Glassman asks.

Before you get to that point, make sure any new machine you buy is something all of the doctors believe in and will promote, Glassman says. If everyone doesn't buy in, you're not going to get enough opportunities to offer the service. You also don't want only one doctor knowing how to use the equipment. If that associate leaves, the machine ends up gathering dust.

And you guarantee an ugly breakup with your equipment if you buy a tool for a service you don't promote and clients won't comply with. "For example, say a practice that doesn't do a lot of surgeries buys an endoscope," Glassman says. "You don't have the skill, you don't do enough of the surgeries, and you're not going to have enough procedures to recommend it."

Dr. Farber says one of the biggest mistakes he sees practitioners make is failing to recognize the training they'll need to use their new equipment. Then, he says, they end up using the equipment to get urine samples or look for pregnancies. "You can't really pay for the equipment if that's all you're using it for," he says.

If you can make a case for the service to clients and invest the time to learn how to use a new tool, your chances of success will soar. "Doctors often will look at the purchase from a cost perspective, but not from the perspective that it might generate revenue," Glassman says. "If an equipment purchase ultimately costs you money, I strongly suggest not making that purchase. Because from a financial perspective, if you can't break even, why are you doing it?"

Portia Stewart is a freelance writer and former editor of Firstline magazine.

The inside track

Checking the receipts

Gary Glassman, CPA, says the biggest trends in equipment purchases recently have been conversions to digital products, such as digital radiographs and dental digital radiographs, as well as an increase in in-house blood testing equipment.

Starting point

4 prepurchase questions

Dr. Fred Metzger, DABVP, says you should ask yourself these questions before you buy a new piece of equipment:

1. Will the manufacturer be around for servicing after you buy the unit?

2. Does the company offer training?

3. Will a sales representative visit you to see how the equipment is working?

4. What do your colleagues say about the equipment you're considering?

Hitting the next level

Use it well, use it often

An equipment purchase is a fixed cost, says Gary Glassman, CPA. If you spend $25,000 on lab equipment, the cost is the same whether you do 1,000 tests or 2,000 tests. So you incrementally decrease the cost per test with every test you perform. The result: greater profit.