This article originally appeared in the Ophthalmology Business section of EyeWorld in February 2014.
Pride of ownership or wisdom of renting?
Considering whether to rent or purchase high tech ophthalmic laser equipment
by Rand Larson
When considering whether to rent versus purchase surgical equipment and diagnostic technology, practice decision makers must take a long list of factors into account. The decision is not only a matter of estimating how many procedures you may perform in a month versus what your purchase and financing costs would be; you must also think about the long-term commitment you are willing to make to equipment and maintenance, and what level of support you might find beneficial down the road. This article will describe some of our findings from our 14 years of experience in laser vision correction.
Upfront costs
Estimating the upfront costs of a purchase is one of the more straightforward parts of your calculation. Any piece of equipment has its purchase price, and it is possible in some cases to negotiate a better price than you are initially quoted, or to buy used. The rental model, however, works differently. The outsourcing company that my office contracts with, Sightpath Medical (Bloomington, Minn.), charges a fee per procedure. For practices with sufficient case volume, the rental company can leave the equipment onsite indefinitely, or for smaller practices, the equipment can be brought in periodically. In either case, the facility pays for the service according to how many procedures are performed. Therefore in order to compare costs between renting and purchasing, it may be beneficial to look at a projection of your case volume for the next several years. However, this provides only one piece of your comparison, and costs of ownership can be significantly more than the purchase price when other factors are taken into account.
Maintenance
Acquiring equipment, whether via purchase or rental, is only the beginning of the process. Once you have a piece of technology in your practice, you also have a responsibility to maintain it. As with many other things in life, ophthalmic laser technology requires both preventive maintenance and occasional unforeseen maintenance. This is one area where it’s important to remember that ownership comes with additional costs and challenges. I have personally observed that in some practices that own their lasers, service intervals may be extended by one to two months in an effort to be more cost efficient. In my mind, this is problematic when dealing with the very minute tolerances of laser technology, as postponing maintenance denies patients from receiving the laser’s very best treatment. With renting, on the other hand, the rental company is responsible for servicing the equipment and has a strong motivation to keep it running at its peak performance and therefore performs maintenance on a very regular basis. In the event of an unplanned service outage, the ability to get the laser back up and running quickly is invaluable. When you have between 15 and 22 patients scheduled on a surgery day, rescheduling those procedures after equipment goes down can be very difficult and costly. In our 14 years of experience renting a laser, we have had only one occasion in which the equipment went down and wasn’t back up the same day. This took place on a Friday, and thanks to our rental company’s commitment to service, we were able to treat those patients two days later, on a Sunday. This highlights an additional advantage of renting equipment—the rental company has much more buying power with manufacturers, and can therefore demand faster servicing and maintenance when it is needed. Compare this to the buying power of a solo practice that only has one laser and may have to wait longer for service availability. Very large practices may have more clout and negotiating power on maintenance agreements but it is unlikely to rival that of the rental company. I believe the majority of practices performing under 1,500 to 2,000 cases annually will have a hard time profiting from ownership once maintenance costs are factored in.
Upgrades
Practices should also consider the frequency of upgrades with the equipment they are considering purchasing or renting. Having the latest equipment is a vital piece of providing patients with the best possible care, so practices are obviously motivated to stay on the cutting edge of technology. One serious drawback of purchasing a laser is its potential to someday end up as what I call a “boat anchor.” Practices that purchase a laser must continually invest in upgrades, but even then may still find their technology obsolete after the introduction of newer technology.
Renting offers many advantages in this area, allowing practices to upgrade to new equipment as they see fit. Our rental agreement gives us the option to upgrade to any new technology within 30 days of its availability. It is a very valuable benefit in terms of practice marketing to be able to assure patients that our laser technology is truly “cutting edge.”
Access to expertise
One final aspect to weigh in a decision between purchasing and renting equipment is your practice’s ability to consult with the rental company’s panel of expert surgeons. This can be invaluable when evaluating and planning surgery for problematic patients whose conditions or complications fall outside a surgeon’s experience. Through our rental arrangement, we have access to a quality assurance team that provides clinical support, surgeon consultations, and access to operational support personnel. While our refractive surgeon is very experienced, we know that every patient and every case is unique, so having the ability to call on outside expertise from some of the most respected leaders in our industry is simply priceless.
Focusing your time
I believe that physicians should concentrate on doing what they do best—practicing medicine. This is the reason that our practice utilizes a specialized billing agency, as well as a full time business manager, in addition to renting our laser technology. Outsourcing services that can be handled by experts outside of your practice can free up staff time and resources, and allow employees to truly focus on their primary tasks. In the choice between owning and renting laser technology, practice administrators must carefully examine not only the financial costs, but also the time investment required for each path. For our practice, and for most practices with one or two locations, renting equipment turns out to be the more sensible and economical choice, and also brings the patient advantages that come from offering the latest and most advanced technology as it becomes available to the market.
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