THE REENGINEERED PRACTICE

End-of-Y ear P"rcha e

A look at the metrics that drive practices buying decisions.
B Y E R I N M U R P H Y, C O N T R I B U I T I N G E D I T O R

re you weighing whether or not to make a capital equipment purchase by the end of the year? When we asked three professionals to tell us what they considered before making this big decision, they offered these three key factors.

1. Timing: Ne$! Year% B"dge!

Brett Chambers, CEO & Senior Consultant at KoreNetics in Dallas: The majority of the time, clinics make purchasing decisions at the end of the year based on the development of next years budget. Theyre looking at what has given them the most bang for their buck and what their incremental cash flow looks like. They buy strategically to save time and increase revenues in the coming year. Doctors and administrators are looking at equipment and talking to other practices throughout the year. If they decide to purchase something, its based on solid trends in the industry. Amber Grubb, CFO at Key-Whitman Eye Center in Dallas: Its common for practices to consider major purchases at the end of the year. Decisions are usually based on cash flow or the practices tax situation. If money is left over at the end of the year, then many practices decide to hold on to the money, particularly if they want to take a wait-and-see approach with their financial future. Those who do make purchases are planning ways to enhance patient care, replace obsolete equipment or provide new services.

For example, we recently replaced a visual field device because it was obsolete. The parts were no longer available. If the machine were to go down, we wouldnt be able to fix it, and wed lose a week or two of efficiency and quality care for our patients without the equipment. The new device is reliable, and its so much more efficient that weve actually accelerated patient throughput. Susan Thomas, Key Whitman Eye Centers Director of Operations: As we plan for next year, we like to think ahead to whats going on in the field and where we want to go. For example, we look at whats worked for us in the past, what kind of return we received on recent investments, and we think about how we could apply those successes to other practice locations.

2. Deal : Ta$ Deferral

Amber Grubb: Salespeople promote huge tax savings for capital purchases based on Section 179 of the tax code, a deduction that has been high for years in an effort to stimulate the economy. This doesnt create a savings, but it does create a timing issue as to when the tax reduction occurs. Section 179 allows a company to take the tax reduction in the year the asset was placed in service instead of spreading the tax liability over the tax life of the asset. An example of this would be the purchase of $500,000 in assets in 2013. If Section 179 is used, there is an immediate tax reduction of $175,000 (utilizing a 35% tax rate) as the full $500,000 is deducted from taxable net income. (Note: This deduction cant cause taxable income to fall below $0.) This helps cash flow in 2013. However, when an

asset is financed, a practice must consider the cash flow issue that will be created by making principal payments on debt with no corresponding tax depreciation against net income in future years. It was all used in the year of purchase. Many physicians are surprised the following year when they receive their 2014 K-1 and their taxable net income is quite a bit higher than their distributions.

The Value of Speed and Accuracy

With autorefraction, a good deal of emphasis is placed on the time it saves, and with good reason. But fast is only good when something is done fast and well. Marcos EPIC system enhances clinical outcomes while it saves time, increases revenues and integrates seamlessly with our EHR. One physician told me that EPICS are inexpensive because they pay for themselves quite readily, and Ive certainly found that he was right. Charles M. Collins, MD private practitioner in Middletown, R.I. My practice has been using the EPIC for 2 years, and we now have six workstations in three locations. In one combined unit, the EPIC gives us a wealth of information, makes refraction easier and more reproducible, and saves time. It not only shows us the benefits that premium lenses can offer our patients, but it also keeps us from stepping into the minefield of problems that could be caused by picking the wrong lens. Jeffrey Whitman, MD, chief surgeon for the Key-Whitman Eye Center in Dallas From a business perspective, to ensure continued growth, we need to make choices like the OPD-Scan III that enhance both the clinical outcomes and the profit potential of our practices. Cynthia Matossian, MD, FACS, owner of Matossian Eye Associates based in Doylestown, Penn., and Pennington, N.J. With patient expectations so high, we have to deliver the best possible vision. The OPD III and the latest IOLs make that an attainable goal. We can show patients the difference that premium IOLs will make before surgery and let them compare the results after surgery. Theyre making a major investment in their vision, and the OPD-Scan III shows them that it has worked and that it was worth it. Farrell Toby Tyson, MD, FACS, refractive cataract/glaucoma eye surgeon at the Cape Coral Eye Center in Florida

3. Re#en"e : An!icipa!ed ROI

Brett Chambers: With declining reimbursements, reduced volumes and increased focused on quality, its essential to manage costs, and medical technology is one of the highest costs in health care. As a consultant, I work to give practitioners the best possible data on which to base those decisions. I create detailed predictive modeling with unique software that paints a thorough, objective picture of processes inside a practice, helping identify opportunities to optimize throughput or technology integration. That optimization and integration is sometimes best achieved with an equipment purchase. Before a practice commits any funds, we can use the data to identify the optimal quantity of devices based on the organizations operations. For example, one practice is considering the purchase of five Marco EPIC workstations. We can tell them what the new schedule should look like, how it would affect patient flow and when they would see an anticipated return on their investment. Amber Grubb: Potential ROI is a huge factor in a practices purchasing decisions. Devices have the potential to increase both profits and productivity. But ROI is hard to predict. We have one expensive piece of equipment that we thought would have an 18-month ROI, but now we know we may not see it for 3 years. In contrast, our Marco EPIC systems actually pulled devices from multiple rooms into a single room and a single sitting. Its fast, accurate and efficient, and it documents a patients complaint of glare, which increases the number of patients who can be reimbursed for surgery. Susan: The EPIC system is something thats part of our discussion of ROI today. Were about to start construction in our primary location, and were modeling how to use the rooms to get the best ROI. If we add another piece of equipment, how will that affect staffing, throughput and our bottom line every day? The EPIC allows us to have more lanes in less space, its more efficient, and workups are accurate and consistent, interfaced easily with the EMR system. The EPIC lets us see two to four more patients per hour. We anticipate adding another unit.

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