Get X-ray vision on new equipment purchases
Introducing part one of a three-part series all about maximizing your use of the top three pieces equipment you said you were adding to your practice (according to the 2013 Veterinary Economics Business Issues Survey). This month, we'll focus on financing.
If team members and clients often refer to your veterinary equipment as "old school," it may be time for an upgrade. We know what you're thinking—you'd add digital radiography, laser therapy and new imaging tools in a heartbeat, but not without first asking, "How much is the equipment going to cost me?"
Turns out, that's the wrong question to ask, according to Gary Glassman, CPA, a Veterinary Economics Editorial Advisory Board member and partner with Burzenski & Co. in East Haven, Conn. He says practice owners should be asking, "How many times will I be able to use the equipment?" and "How will it provide a return on investment to the practice?"It's easy to look at the $25,000 price tag on a therapeutic laser and think you could never afford it. However, it's important to remember you don't have to pay for the machine in one year, Glassman says. A reasonable payback period—the time it takes to recover the equipment's cost resulting from annual net cash flow—is anywhere from three to five years, he says. You should also consider the machine's life span and determine its potential use. (For an easy way to make these calculations for your practice, http://veterinarybusiness.dvm360.com/vetec/article/articleDetail.jsp?id=821516.)
Embracing new equipment
Veterinary Economics Editorial Advisory Board member Dr. Andrew Rollo has always been an advocate for digital radiography—he says the diagnostic capabilities make the purchase a no-brainer. However, he become an associate at Madison Veterinary Hospital in Madison Heights, Mich., in 2008—right when the economy tanked—so he understood the practice's reasoning for holding off.
"The increase of problems with our old unit seemed to coincide with business improving and that created discussions of what would be best for the practice going forward," Rollo says. "I thought we were within a year or two of purchasing digital radiography equipment, but the practice owner surprised everyone by giving it to the staff at the end of last year's Christmas party."
Dr. Rollo says when deciding on whether to purchase a new piece of equipment, you need to weigh the machine's advanced capabilities against the cost involved. He recommends considering the more tangible issues and asking the following questions in regards to your current equipment:
> How much money am I spending on the upkeep of a 20-year-old film developer?
> How much am I paying staff to develop radiographs?
> How much am I paying staff to retake radiographs?
"These costs of the old system don't come with a huge daily price tag, but can certainly add up over time," Dr. Rollo says. "As old processors and developers get older and break down more often, the huge price tag for a digital system may not end up seeming so big."
Veterinary Economics Editorial Advisory Board Member Dr. Jeff Rothstein, MBA, agrees. He says you'll also save $100 to $200 a month because you'll no longer need to pay for chemicals or a film developing system. Plus, you can snap as many pictures as you want at no extra charge. He says this saves your team the headache of calling the client back for retakes, which is a waste of everyone's time and money.
"It's also easier to send digital radiographs to a radiologist—the process is essentially instantaneous and results can often be had within hours," says Dr. Rothstein, president of the Progressive Pet Animal Hospitals and Management Group in Michigan. "We do better medicine when we are able to send images digitally."
Dr. Rothstein does recommend increasing your fee per radiograph once you go digital. However, don't forget to talk up this new addition to your practice.
"By spending a little more time showing the pet owner the vastly improved images, they won't notice the $10 to $15 increase," Dr. Rollo says. "In most cases a patient will only be radiographed once or twice in its life, so most pet owners are likely not aware of the previous price to compare. Exam fees—well, that's another story."
After making the switch to digital radiography, Dr. Rollo says many practices end up taking more radiographs and the added diagnostics can help pay back the purchase. However, he admits he was skeptical this increase would happen at his veterinary practice.
"I felt I always recommended and took X-rays when I thought they were necessary—regardless of how frustrating the old equipment could be on a given day," Dr. Rollo says. "However, since adding digital radiography last December, we're taking 30 percent more X-rays so far this year with the digital unit."