Six Questions to Ask Before Purchasing Testing Equipment
Is this purchase feasible or not? Better to know before you buy.
When I was a practice administrator, I was part of the leadership team responsible for the profitability of my practice. I learned that the purchase of new testing equipment has the potential to have a great impact on the profitability of a practice. Based on my experience, I strongly recommend that significant due diligence be done to determine whether the investment is worth it before a purchase is made.
To ensure that you make the best business decision possible, a methodical approach to purchasing new testing equipment is required. This article details six important questions to ask before taking the plunge.
Question No. 1: Is the equipment needed?
It is important to understand why a purchase is being considered. Is the equipment needed to care for patients properly? Is it needed to remain competitive with other practices in the area? Or is it more of a luxury purchase, a piece of equipment that will rarely be used? Determining the necessity of the equipment being considered will help you determine if the cost is worth it.
Even if the numbers are initially unattractive, there may be times when you have to make the purchase and integration of a new technology work. This is especially true if it improves the quality of care for your practice’s patients.
If a purchase will serve as an attraction for new patients, it must make financial sense from the beginning, based on your business plan and on your ability to adapt all related workflows and processes to the new equipment. Remember, new technology purchases are strategic in nature, affecting the direction and finances of the practice.
Question No. 2: Which features are necessary?
With many technology purchases, there may be more equipment features available than you will need or use. There are usually several models or software packages to choose from when making an equipment purchase. To ensure that you get only what the practice needs, solicit input from all potential users of the equipment. Have them review the models and features of the equipment you are considering to ensure that what is finally purchased meets everyone’s needs.
There is no need to purchase add-on software that applies to another subspecialty if it will not be used in your clinic. If you think you may add subspecialties to your practice at some point, however, find out whether those features can be added later. Do not spend the money unnecessarily up front.
Question No. 3: How will reimbursement be affected?
When considering the purchase of expensive equipment, you must be cautious and inquisitive. Take the manufacturer’s reimbursement information and return-on-investment modeling and carefully research it for yourself. Yes, the manufacturer’s sales team wants to help you, but its members also want to sell you the equipment. Therefore, they may present an optimistic picture compared with the reality of what your actual reimbursement will be. Additionally, your marketplace may have a reimbursement structure and coverage guidelines different from those the manufacturer’s team used to provide its estimates for you.
It is also important to research coverage by Medicare and private insurers, paying close attention to the covered diagnoses they list in their guidelines. The most common diagnosis for which your physicians plan to use the testing equipment may not be routinely covered yet. This is common with new technologies. Due to the rapid availability of advanced technologies and ongoing development of new applications for existing technologies, carrier coverage determinations often have not caught up with the evolving standard of care. Until payers are current with this new standard, you may experience a period when an advance beneficiary notice or similar document signed by the patient is necessary for the practice to bill the patient for the test.
Question No. 4: How long will it take this
technology to pay for itself?
Negotiating the best purchase price is important, but it may not tell the full financial story. To get an accurate financial picture, assess the number of patients who will receive the new test, service, or procedure each day, as well as any additional staffing and supply costs needed to perform the work. A feasibility analysis spreadsheet tool can be helpful in gaining an accurate financial picture.
In some cases, the best financial option may be to lease rather than purchase. This is especially true when the equipment’s useful lifespan is expected to be short. Most computerized equipment—including the bulk of today’s office and clinic technology—outdates itself in about 3 years, requiring updated versions via trade-in or purchase of new software. It might be easier to return leased equipment and obtain a newer model than to try to sell your purchased model. You may also do better financially by trading it in for purchase credit when a newer model comes out.
Question No. 5: Is a service contract needed?
In my experience, relatively few equipment service contracts are cost-effective. If you can negotiate a warranty extension as part of the original equipment purchase price, it is often worth the effort. Software upgrades are usually included in service contracts, and these can be frequent with new technologies, so lengthening the warranty up front is advantageous.
Question No. 6: Can the new equipment be easily incorporated into your clinic flow?
Your daily clinic flow is likely a highly orchestrated sequence of events. The clinic’s scheduling goals are to minimize patient wait times and maximize physician and staff productivity. Determining how best to add a new test, service, or procedure into the clinic flow may require some modeling adjustments using the production data you’ve gathered during the purchase evaluation process. It is important to determine whether the equipment can be incorporated into the existing clinic flow or if it should be placed alongside your clinic with its own schedule and staff.
Optical coherence tomography (OCT) and visual field testing are good examples of the two sides of the scheduling-staffing coin. OCT imaging is generally incorporated into the workflow in the clinic, as there are many new patients who need the test (which cannot be fully anticipated in advance). Returning patients who require a test before they see the doctor are being tested regularly throughout the day. By contrast, visual field testing is more easily scheduled on its own and staffed separately from the physician’s clinic.
Arm yourself with information
By honestly assessing and answering the important questions detailed above, practice leaders can make informed recommendations and sound purchase decisions that support the practice’s goals, objectives, and strategy. Thoughtful preparation and strategic planning can lead to the smooth integration of new equipment for physicians, staff members, and patients.
Laurie K. Brown, MBA, COMT, COE, OSA, OCS, OSC, CPSS
• senior consultant, BSM Consulting, Marana, Ariz.
• financial interest: none disclosed