By Steve Sunder
Feb. 26, 2020
Acquiring new instrumentation can be a key to providing better care and growing a practice. You have to determine first, however, the most financially sensible way to acquire each instrument.
Here are important questions to ask yourself to ensure you acquire new equipment the smartest way possible.
What Are My Options?
Advanced technology like OCTs and optomaps cost thousands of dollars, making the outright purchase of one of these instruments a steep challenge for most practices.
Fortunately, you have at least several other options for acquiring an instrument, including using a loan to make a purchase and purchasing via lease agreement. You also can secure a lower price by purchasing a used or demo unit.
What Will Provide Best Patient Outcomes & What Is My Purchasing Power?
The decision of whether to buy used/demo, lease or loan, depends on your practice’s financial strength and the level of care you require to obtain the best outcomes for patients. Are you in a position to pay cash for this new technology, which will generate income with a reasonable break-even, or is leasing with a lower monthly expense a better option?
Lease or Loan?
Leasing can increase your purchase power giving you the ability to acquire higher-priced equipment. Leasing also preserves your capital and existing lines of credit, which can allow you to use that capital for other investments that offer a high return. A lease potentially frees up monthly cash flow more than a conventional loan does.
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Next, you will need to generate revenue to use to apply for credit for either the lease or the loan. If you elect to apply for a loan, understand the approval process can be extremely rigid. The approval process for securing a lease is much more flexible. Both processes take into account creditworthiness, but the process for securing a lease is simpler as the collateral is tied to the equipment. To secure a loan, you will be required to provide a down payment of up to 25 percent.
How Good is Your Credit Rating?
An excellent credit score will make it easier for you to obtain a lower interest rate. You should also be prepared to show positive net cash flow, as well as net income from your statement of cash flows and income statement. These documents may be required, in addition to tax returns. You want to be able to show a stable credit history and creditworthiness.
What Patient Fees Will Be Necessary to Profit?
Your practice will need to set a service fee for the tests being performed by the equipment that will help you profit from the instrumentation investment. You also will need to assess your fees schedules to ensure you are billing at the highest level per the insurance fee schedule for the highest reimbursement with the appropriate code.
Can Your Vendor Rep Help You Secure a Better Deal?
Your equipment vendor reps can provide you with the best purchasing options for your practice. It is in their interest to enable to you acquire the instrument and become a happy customer. Reps can be especially helpful in providing projections of monthly payments for lease agreements.
A good rep will also be able to provide the names of satisfied practice owners who can talk to you about their experience buying from the company and using the equipment.
What Does Your CPA Say?
Seek advice from your certified public accountant (CPA), as there are different tax advantages to consider when acquiring new equipment. For example, a CPA may recommend using the IRS Section 179 tax deduction in the same year of the equipment purchase. In that case, a faster payoff of the instrument may be the best financial decision.
Steve Sunder is a health-care consultant with over 20 years of experience in the eyecare industry at a multi-location practice, and as a consultant to other practices. To contact him: firstname.lastname@example.org