8/13/2019 End of Year Purchases - A look at the metrics that drive practices buying decisions

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End-of-YearP"rchae

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 talk-

ing to other practices throughout the year. If they decide to pur-

chase 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 effi-

cient 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$ DeferralAmber 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 tax-

able net income. (Note: This deduction cant cause taxable income

to fall below $0.) This helps cash flow in 2013. However, when an

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

THE REENGINEERED PRACTICE

A look at the metrics that drive practices buying decisions.

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8/13/2019 End of Year Purchases - A look at the metrics that drive practices buying decisions

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asset is financed, a practice must consider the cash flow issue that

will be created by making principal payments on debt with no cor-

responding tax depreciation against net income in future years. It

was all used in the year of purchase. Many physicians are surprisedthe following year when they receive their 2014 K-1 and their taxable

net income is quite a bit higher than their distributions.

3. Re#en"e: An!icipa!ed ROIBrett 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 optimiza-

tion 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 organiza-

tions 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 pur-

chasing decisions. Devices have the potential to increase both prof-

its 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 reim-

bursed for surgery.Susan: The EPIC system is something thats part of our discus-

sion 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 antici-

pate adding another unit.

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 com-

bined 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 potentialof 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 dif-

ference 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

The Value ofSpeed and Accuracy