In this GUEST CONTRIBUTOR article Greg Stoutenburgh, of Symphony, Inc. presents his take on Getting a Positive Return on Your Digital Radiography Investment. Followers of Animal Insides will note that this article presents some points that are contrary to our previous ROI article. Greg was invited to write this article because our research has shown that in many cases, ROI works according to our previous article and in many other cases ROI works as described in this article. This should not confuse you. Rather, it is important to realize that with digital radiography, nothing is black and white. We asked Greg to write this article because we wanted you to have both sides of the story so...without further adieu..Greg, the floor is yours
We make our large purchasing decisions for a myriad of reasons. Sometimes we chalk it up to quality of medicine, sometimes it is a fun toy, or to keep up with Jones’ Veterinary Clinic. In the end, you are running a business and your equipment should not only pay for itself, but also yield a profit.
The revenue you collect from use of a piece of equipment, after all costs for the purchase, use, and maintenance of the equipment are considered, is your Return on Investment (ROI). Before any capital equipment purchase you should always run an ROI analysis to consider all of the costs and benefits of a purchase. That analysis should include all expected gains in revenue, along with any savings in hard goods or labor, and costs of the new system including lease payments, service and maintenance, disposables, and warranty.
The sales reps that approach you with pitches to purchase their equipment are seasoned professionals, all with strong stories. But buyers beware. Generally, the rep will tell you his system is the best because that is what he has to sell. While it isn’t always possible, it is much safer to trust a rep that has multiple products in his stable so that you can work with him to find the product that is best suited for your practice. Due diligence in understanding the system and running a solid ROI analysis will yield positive results. It is also important to verify that a purchase does not limit your choices to make good decisions with other products later.
Even if a product seems to have a positive ROI, a proprietary system or lack of open standards may remove your ability to add future services, or force you to buy from a specific vendor later. And whatever they offer will eventually likely have a negative effect not only on your bottom line, but also on the quality of your care.
Finding the Roots of ROI: As mentioned previously, to achieve positive ROI means generating revenue and decreasing costs in excess of new costs.
Increasing Volume:
In order to generate revenue, you must change the behavior of your doctors and staff. In the case of Digital Radiography (DR), revenue can be generated by increasing the study count, increasing the number of images per study, and increasing the amount charged per film and study. In order to increase the study count, we need doctors to order more studies. Therefore we need to remove the inhibitions and increase the rewards for ordering radiographic studies.
What are the inhibitions to shooting a radiographic study? The main inhibition is that studies take too long. It is rough to tell Mrs. Smith that it will take three hours for the x-rays so she should come back to pick up her dog later. We have all seen that once one or two exams stack up, knowing that each exam takes about 45 minutes can make a doctor think we ‘can get away with’ not shooting x-rays. Obviously this is not best medicine, but it is a practical reality. However, if your digital radiography system was simple and fast enough to have an error free exam in 5 minutes or so, that inhibition is removed and doctors’ behavior changes as they more readily order studies. 
The rewards to shooting a radiographic study definitely include a yielding of diagnostic information. Many radiologists have said that most DR and CR systems have adequate diagnostic image quality. Truth be told, radiologists are incredibly skilled at what they do and they can get massive amounts of information from an adequate or even poor image. Non-radiologists are not quite as adept and tend to benefit substantially from better image quality. Some DR systems have image quality that is consistent and significantly better and easier to read than conventional film. Better image quality thus yields more diagnostic information, greater diagnostic confidence and thus more benefit from a study. If a tool is more useful, it will get used more.
The combination of reducing the inhibition and increasing the reward definitely changes behavior. For this to occur though, the DR system you purchase must actually produce consistently great images, incredibly simply and quickly. Surveys have shown that practices that have purchased systems of this standard have seen a volume increases commonly upwards of 30%. The purchase of a DR system without this workflow benefit combined with image quality however, fails to cause behavioral changes and thus increases in volume.
Increasing the Value:
Clients pay veterinarians money so they feel they have done the best for their pet. We can give clients this sense of value in many ways and we can prevent them from experiencing the value in just as many. The perception of value is fostered most effectively by providing the client with an understanding of how we are helping their pet combined with great service. We feel okay about charging clients money because we know we are helping the pet.
In the case of Digital Radiography, an investment by the practice has the potential to produce tremendous value for clients. A client experiences service benefits from a study that takes 5-10 minutes rather than hours to complete. Following this, they can see a beautiful image on the screen with the doctor, which they can also see at home. This is a tremendous value over conventional film. Additionally, if the doctor gains diagnostic confidence, outcomes can improve along with client communications. Therefore, if a DR purchase allows you to shoot consistently better radiographs much more quickly and share them with the clients, the clients perceive more value. If the client perceives value because of an investment you made, it is right to charge more.
If there is no additional value perceived by clients because service does not improve, diagnostic confidence does not improve or images are not actually shared, it is tough to push a substantial price increase.
If you have a system that is tremendously faster and better and shares images, and you decided to increase radiography prices by 25%, how many of your clients will get upset and say “no”? The correct answer is none.
Doing More with Each Study:
In addition to doing more studies, certain features in a DR and PACS system can allow you to get more out of each study. The first method is to use exam protocols. Use of exam protocols merely means that we get away from the notion that we should charge per ‘film’ and rather charge for a study. For instance, usually when doctors order a study they request a VD and Lateral of the region of interest. However, best medicine on a thorax study might require both a left and right lateral. An elbow study should include a cranial-caudal, lateral and flexed lateral of each side for a total of six. If doctors get used to ordering studies rather than a VD and Lateral the practice benefits by gaining better diagnostic results, more standardization and efficiency, and shooting more total radiographs which should result in higher average revenue per study.
Some DR systems have the ability to shoot exam protocols. On its own or combined with a practice management software system that allows for DICOM Modality Worklists, studies can be ordered by protocols that are custom programmed in to the system. With this feature the technicians are lead through the study, shot by shot, the same way every time without ever going back to the computer to select new anatomy or view. Working with protocols is a great way to increase medical standards and efficiency while increasing revenue simultaneously.
The other method of generating more from each study is to involve specialty over-reads of your studies by a radiologist. A radiologist can produce a written report that serves to improve your diagnostic ability while protecting you from any liability created by missing something diagnostically significant. In addition to improving medicine and limiting liability, these radiologist over-reads can generate significant revenue. For instance, if a telemedicine service charges $45 per study and you charge the client $65, the practice generates $20 additional dollars of gross margin per study. Note that in order to experience this medical and financial benefit, you must have a PACS (Picture Archival Communications System used to store and distribute your images) that is capable of seamlessly sharing your images with the telemedicine service.
Savings:
Savings in certain areas will occur with any digital radiography system. Film and processor maintenance are eliminated saving most practices between $350 and $600 per month.
Systems with workflow advantages will also save significantly in labor costs. For example if your practice devotes two technicians to a study and the average salary of $12 and you cut the average study time by a half an hour, the practice will yield a savings of $12 per study. Many practice owners would argue that this is not a legitimate savings since they will not lay off employees when they suddenly have more time on their hands. However, this will allow your technicians time to do other revenue producing things such as shoot more x-ray studies that are now being ordered.
Lastly, we should consider that every dollar you spend on a DR system is a tax deduction either as a capitalized expense or as a monthly lease expense. Therefore every dollar you don’t spend on your system is not a dollar savings, it is more like 60 cents.
Capturing Charges:
A claim can be made that using a system with the practice management system integrated with the radiography system can reduce missed charges and thus increase revenue. The first step of such integration is the Modality-Worklist, which will eliminate the ‘forgetting’ that can occur in entering radiography charges. The second part of the process involves returning charges on additional shots taken after the order. These charges tend to make up less than 10% of radiographs with DR and missed charges average 15%. Therefore without the return functionality you may miss up to 1.5% of your radiography charges. Using protocols mitigates the significance of this issue.
Calculating ROI
Let’s then walk through two sample ROI calculations. In the first calculation we will look at continuing use of film. In the second we will consider a $45,000 purchase of a CR system with no significant improvement in workflow or image quality and thus no behavioral changes. We will assume the ability to share images with clients is worth a $5/study increase. In the second scenario we will consider a $75,000 DR purchase with significant workflow and image quality improvement. For all cases we will assume the practice initially is performing 30 studies monthly and doctors are paid 20% of gross production with a 60 month, dollar buyout lease.
In this scenario, after all expenses are considered, including the lease payment, the CR yields a $193.85 monthly cash flow benefit from CR and a $1,153.25 monthly benefit from DR. This does not take into consideration the additional benefit of a $1,535.25/month tax deduction for DR and $921.15 monthly tax deduction for CR.
If we then take the monthly radiography operating margin and extend it over 5 years with a 5% annual growth assumption, we see that after all expenses CR has a $12,853.72 net or ROI and DR has a $76,469.21 ROI.
Even though the CR system cost $30,000 less, the workflow and image quality advantages of the more expensive DR system make the DR a substantially better investment.
Warranties:
Virtually any piece of capital equipment should offer service/warranty contract for up to 5 years. Usually the first year is included. Sometimes vendors provide these contracts as ‘included’ in the purchase price. Beware and be sure that the vendor has the financial stability and expertise to back up the obligation of supporting a customer base over years to come with no additional revenue paid for it. Service/warranty contracts may range from $3,500- to as much as $9,000. The typical range of $3,500-$5,000 does not eliminate the positive ROI of the DR system.
Conclusion:
Before purchasing any piece of capital equipment make sure to perform your due diligence. Ensure that the equipment you are considering has the features and benefits necessary to support actual behavioral changes in your practice necessary to effectively utilize the equipment and experience positive ROI. Then use a spreadsheet to analyze all of the costs and benefits from a financial perspective using reasonable assumptions about your practice and changes in behavior.
About the Author:
Greg Stoutenburgh works with Sound-Eklin and has managed, consulted for, directed, built, overhauled, and/or owned over 100 veterinary practices over the past 20 years. Greg is also the President of Symphony, Inc. and VetSymphony.com.VetSymphony.com is a comprehensive practice management utility to allow every practice to be simply, effectively and professionally managed. For less than the cost of a latte a day, VetSymphony.com provides complete training resources, a community of peers, intra-management team communication, expert advice, management reporting tools, complete strategic planning support and automated budgeting with benchmarks. VetSymphony.com provides everything you need to optimize the success of your practice, without the excuses.
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