ROI calculators are used to market veterinary digital radiographic equipment. These calculators are used to show veterinarians how affordable digital radiography is compared to film radiography. Unfortunately, many ROI calculators distort the data they generate and make a digital radiography purchase seem less expensive than it really is.
The following article highlights the erroneous assumptions and errors of omission that plague some veterinary digital radiography ROI calculators. At the end of the article we look at the ROI calculator that was included in a recent issue of a veterinary trade journal.
Part 1: Erroneous assumptions, misguided practice management advice, and errors of omission:
Erroneous Assumption 1: More films: Many veterinarians will take more films after they go digital. The causes vary but our research shows that this is true. How many extra films will you take? That is hard to tell. In my consults it seems that the practices that are having trouble in radiology (i.e. get bad films before the transition) will take more films after the transition. Many of the veterinarians I work with take about 10-20% more films after the transition. The erroneous assumption is that you will always take a HUGELY increased number of films. One vendor ROI calculator estimates a 30- 50% increase in the number of films. Be conservative and estimate 10% more films.
Erroneous Assumption 2: DR imaging requires ZERO minutes to obtain a study: Many DR calculators include estimates of how much time your technicians will save with digital radiography. Some of these estimate the time to obtain digital radiographs at ZERO minutes. In reality, DR will save time but only the time of processing. Barring repeats, a good estimate may be 2-3 minutes per study. Digital will save time on repeats but CR will save you the same amount of time as DR in this regard. Bottom line: Digital will save you time but don’t overestimate how much time you will save with digital radiography. CR is equivalent to film but you will have fewer repeats. DR will save you 2-3 minutes per study but you will have fewer repeats.
Erroneous Assumption 3: Times savings are directly converted to dollars saved: What will your technicians do with that 2-3 minutes they save in radiology? Are they going to clock out and save you money? Will they take an extra minute when walking a dog? Will they take a smoking break? Unless you are guaranteed that the technicians will take that 2 minutes and do something productive you have not really saved any money. You will have to pay them whether or not they are in radiology. In my experience, if technicians are busy, they become more efficient. If they are not busy, the efficiency suffers. Bottom line: unless you are a busy practice and your technicians are already working in an efficient manner and they are busy from the start of their shift to the end, you might not see any “soft cost” savings from increased efficiency.
Erroneous assumption 4: Overestimating the cost of film/processor: Many vendor ROI calculators overestimate the costs associated with film. Many vets service their processors every 6 weeks (ROI calculators estimate monthly) and the film and processor fees are not always as expensive as listed in ROI calculators. Use real numbers from your practice.
Misguided practice management advice 1: The more you spend the more you save: With the Section 179 tax deduction for capital equipment purchases, in theory, the more you spend, the more you can deduct. Some vets use this line of thought to justify purchasing a more expensive digital system than they need. The main problem with this reasoning is that more expensive digital systems will (many times) carry a more expensive service contract. The 179 deduction does not cover future software upgrades or maintenance costs. These can be significant. The question I ask is why not purchase a digital system that is appropriate for your practice and use the additional money to buy a different piece of equipment that you also could use in your practice?
Misguided practice management advice 2: Raise your fees: Many vets raise their fees if they go digital. This fee increase is almost always included in the ROI estimate. I contend that if you can increase your fees after you go digital you could have increased them before. You do not need to spend 100K to give you an excuse to raise fees. Many vets I work with raise their fees for several months before implementing digital to see if they can get away with it. None of them report any complaints fromthe staff of clients. Bottom line: if you can raise fees after you go digital, you probably should have done it a long time ago.
Error of omission 1: Maintenance contracts: Almost no vendor ROI calculators include the cost of maintenance contracts. Maintenance contracts are part of life with digital radiography. Some systems have maintenance contracts as high as $6000-8000 per year. The cost of the maintenance contract is also not fixed. Many machines have a one year or extended maintenance contract. Be sure you understand the costs after the honeymoon period ends. Even if you dont get a maintenance contract and go with "parts and labor" from your local distributor, there will be costs in the future. Bottom line: estimating ZERO maintenance costs for a digital installation is irresponsible.
Error of omission 2: Film was not free – neither is digital: There are clear costs associated with film radiography. Namely, processor fees and film fees. Digital is not free. There will, in all cases, without question, always, no room for discussion, be software upgrades and hardware costs. Unless software upgrades are included in your service contract, they will not be free. All computers crash. You will have hardware and IT costs.
Part 2: A case study
The following is a link to a veterinary digtal radiography ROI calculator that recently appeared in veterinary trade journal. This example seems to say that by spending 72K on a digital system, the practice will increase revenues by about $1500 per month. On closer inspection, it appears that this ROI calculator includes many of the issues discussed previously. For example:
- The number of studies increases by a whopping 30% after the digital transition.
- They fail to include any mention of service contracts or future maintenance costs. Estimating the cost associated with digital radiography as ZERO is misleading
- They estimate that the time in radiology will decrease by a whopping 80%. We know better.
- They estimate an increase of 18% in the fees charged to the client. This really is not a benefit of digital radiography and is misleading.
What if we use this same calculator and take a more rational approach by:
- Estimating a more modest increase in the number of films to 10%
- Keep the price of the films static because we know that if we can increase fees we can do so without buying a digital radiography system.
- Include an estimate of $6000 per year in the cost of a service contract. This is common with many systems that cost about 72K.
- Estimate a more modest (although still wild) 50% decrease in technicians time and assume that this tech wont ever use their extra minutes to take a smoking break
Based on these estimates, this practice would LOSE $1125.00 per month in revenue. If they didn’t take any more films – yikes. Remember, this does not include the cost of future software upgrades, hardware upgrades, and other costs that may be associated with a digital radiography installation.
So what does all of this mean to the practicing veterinarian?
There are many reasons for veterinarians to buy a digital radiography system. Most veterinary practices who purchase a digital radiography system are very happy that they did. If you have good reasons to buy a digital system, by all means do. Just be sure that you buy a system in your price range that will achieve your goals and understand that, in many cases, digital systems might not pay for themselves as some ROI calculators would have you believe.
As Mark Crootof states " Great vet practices don't buy equipment to make money, but to provide state of the art medicine for their clients. If one always provides the best medicine and the best,compassionate, high quality service, the money will follow. We don't buy tonometers to save money or make money, but to make the process both more reliable and easier for us to utilize."
