Like kids set loose in a toy store, ophthalmologists today find themselves confronted with a continuous stream of appealing new high-tech equipment.

Advanced technology can quickly grab your attention. And some technologies may indeed prove to be welcome and profitable additions to your practice. But before you commit to any new technology, you need a plan to evaluate its potential for your specific situation.

Start by asking yourself the following questions:

�         Will the technology benefit my patients; which of them will benefit most?

�         What special training do I need to perform the new procedure?

�         Who pays for the procedure -- and at what price?

�         How many patients do I routinely see who may qualify for the procedure?

�         If the patient is to pay for it, what is the profile of the patient who will have this procedure?

�         How can I attract more patients with this procedure -- and at what cost?

�         What is the "per use" cost of the new technology?

�         What are my additional costs in facilities, equipment, supplies and people?

�         Which of my competitors is likely to offer the service?

�         Will there be new competitors, and what are their value propositions?

�         How does the technology fit into my practice?

The Hyperion laser as a case study

You can answer these questions both objectively and subjectively, with the overall conclusions helping to guide your decision to acquire any new technology. Of course, not all practices will answer these questions the same way.

To illustrate how to evaluate a new technology, the remainder of this article will follow a hypothetical multispecialty ophthalmology and refractive practice, Ophthalmology Associates, as its doctors complete the process of deciding whether to bring in Sunrise Technologies' Hyperion LTK laser, a new treatment for hyperopia. They'll determine whether buying, leasing or passing makes the most sense for them by answering these questions:

�         Will the technology benefit my patients? Which of them will benefit most? And what special training do I need to perform the new procedure?
These first clinical questions concern basic issues regarding the procedure itself. What's its value to patients? What additional training may be needed to perform it?
On both counts, Ophthalmology Associates is convinced that the Hyperion LTK laser procedure is effective (though not a permanent fix), safe and easy to use. The practice has been performing refractive surgery for a number of years -- including radial keratotomy (RK), photorefractive keratectomy (PRK), and laser-assisted in situ keratomileusis (LASIK) -- and views the Hyperion LTK laser procedure as being about as effective and less risky than the other procedures.

�         Who pays for the procedure -- and at what price? The Hyperion LTK procedure is refractive surgery and as such is almost always paid by the patient.
Our hypothetical market ranges from $1,000 to $2,000 per eye, with the most common figure being $1,500 per eye. The Hyperion LTK procedure would normally be offered at a similar price as LASIK, but the apparent simplicity of the procedure (it only takes 3 seconds per eye) makes it difficult for Ophthalmology Associates to ask patients to pay the same price as they would for LASIK.

�         Which patients will opt for the procedure? Candidates for this procedure are also slightly different than the typical refractive patient because the FDA has approved the Hyperion LTK laser for treating hyperopia patients older than 40 who are +0.75D to + 2.5D diopters.
Many of these patients may opt for monovision as a way to avoid using bifocals in the future. By only treating one eye, the economic threshold to have the procedure and gain a satisfactory result is drastically lowered.

�         How many patients do I routinely see that may have the surgery? In the example of Ophthalmology Associates, a very large number of its patients are between 40 and 55 years old and have a household income greater than $65,000. The practice has a large number of patients who are schoolteachers, attorneys and other professionals who are more likely to opt for the procedure for work-related reasons.
The incidence of hyperopia in this demographic segment is approximately twice that of myopia.

�         How can I attract more patients -- and at what cost? Ophthalmology Associates has an ongoing advertising campaign and it's also supported by a number of co-managing providers (both ophthalmologists and optometrists). This procedure could easily be incorporated into current marketing campaigns at very little additional cost. In fact, most of the additional cost would be for brochures and collateral materials for patient education.
The procedure could lend itself well to co-management for a number of reasons. There is the original screening and evaluation and the possible contact lens trial for adaptability to monovision that can be performed by co-managing providers (optometrists or ophthalmologists). Also, postoperative management of the case is necessary to track patients' visual results.
The number of postoperative visits is assumed to be more than for LASIK patients, but less intense and complex when compared to LASIK follow-up.

�         What is the "per use" cost of the technology? This is the most difficult question, and the one that holds the key to potential profitability, in making a decision to lease, purchase, or pass on the Hyperion LTK laser system.
Both the lease and the purchase options require the payment of per-use ("click") fees, called enablements. These enablements are priced on a "stair-stepped" scale based on the term of the contract and the actual monthly usage.
The analysis to decide whether to lease or purchase the Hyperion LTK laser system is made all the more difficult because the per-use enablements and the equipment costs of the technology are bundled together in the lease payment under the lease option.

Making the choice

To fully evaluate the lease vs. purchase options, Ophthalmology Associates creates three scenarios to model the economic differences.

In the first option, the practice compares the monthly costs of a 60-month purchase (using bank financing at the prime rate plus a quarter percent) with the monthly costs of a 60-month operating lease, both with the assumption that 50 procedures per month will be done.

The analysis produces these numbers:

Option 1:

The purchase option is slightly more expensive than the lease option in this first scenario. This is because the additional costs for maintenance and software upgrades must be added to the purchase option. These costs are included in the lease option.

In a world that's constant and predictable, a lease that assumes a steady 50 cases per month for 5 years is the better deal. However, what if the demand and usage of the Hyperion LTK laser system fluctuates widely month-to-month? To answer this question, Ophthalmology Associates now assumes that 80 procedures will be performed in one month. All other assumptions remain unchanged.

This analysis results in these numbers:

Option 2:

The third scenario assumes that Ophthalmology Associates would purchase or lease the equipment over a 36-month period.

The rationale for shorter-term purchase is that refractive surgery is a rapidly changing market whose future is unpredictable. Therefore, it would be prudent to pay off the equipment quickly because the equipment's useful life might be shorter than what might normally be expected, particularly if there's a new technology that renders the Hyperion LTK obsolete. A shorter purchase period also reduces the interest that would be paid, and changes the depreciation and tax implications in the purchase option, complicating the analysis.

Most importantly, a shorter purchase term would dramatically lower the costs required to provide the service after the 36-month term, at a time when increased competition and price reduction for the procedure is more likely. Option 3 assumes a 36-month term at 50 enablements per month and actual monthly volume at 80 cases per month.

And here are the numbers:

Option 3:

As illustrated in Options 2 and 3, underestimating the monthly usage (enablements) in the lease option creates a possibility of dramatically increasing the monthly cost per case.

�         What competitors will likely offer this service? What is their value proposition? Six potentially significant refractive surgery competitors practice in the hypothetical market. Most of them are expected to purchase and incorporate the Hyperion LTK laser within their practices.
One concern is that at least two of these competitors' value propositions are based on low cost. That means they may price this service aggressively.
There's also a fear that these competitors will devalue the procedure by stressing its safety and speed (only 3 seconds to better vision) in their media advertising. This may create an impression in the patient's mind that the quality, safety and effectiveness of the procedure, and the likelihood of getting a good result, is so automatic that the only remaining purchase decision is based on price.
Therefore, it's assumed the practice that's first to feature the Hyperion LTK laser in the market has the best chance to establish and create recognition in the public mind for providing the service, and secure a market position as the technology leader.

�         How does the technology "fit" my current practice? The real question here: does your practice already offer refractive surgery, or are you thinking of introducing refractive surgery via the Hyperion LTK laser?
If you're currently involved in refractive surgery, and actively promoting and growing that part of your practice, the Hyperion LTK laser is an extension of services. You already have the facility, the people, the marketing, advertising and the network developed. To add the Hyperion LTK laser you need to change some of your collateral materials and probably add one full-time employee.
The market for hyperopia is larger than for myopia. According to one study, nearly 40 million Americans in the over-40 age bracket have hyperopia in the range of +0.75D to +2.5D, part of a large wave of baby boomers who will be in the vision care marketplace for years to come. Many of these individuals may opt for monovision, which actually lowers the economic threshold for their procedure.

The choice is made

In the final analysis, Ophthalmology Associates decided to purchase over a 60-month term for two reasons:

�         Based on an estimate of 80 procedures per month, this option will assure the lowest cost per procedure for at least the initial 3 years.

�         With lower monthly payments for the equipment, Ophthalmology Associates will be able to fund an aggressive advertising/marketing campaign to gain a larger share of the local refractive surgery market.

A plan for high-volume practices

On the other hand, a refractive practice currently performing more than 120 LASIK procedures per month should consider a 36-month lease agreement (with a buyout option at the end of the lease), based on the expectation that volume will build to 100 Hyperion LTK laser cases or more a month after a start-up period.

At that level, the practice should be able to achieve a relatively low cost per case while completing the acquisition of this new technology before market conditions change.

The Hyperion LTK laser offers an excellent opportunity to provide an alternative to reading glasses and bifocals to a large segment of primarily baby boomers. Because the procedure may be perceived as being so safe and effective, there is a real risk that the service will rapidly become a commodity where the patient's decision is primarily driven by price.

With this possibility in mind, it's imperative that you put a high priority on containing the costs associated with this trreatment. Explore and evaluate all of the financial options available to you when deciding whether the Hyperion LTK, or any new technology, has a place in your practice.

Michael J. Parshall is a principal consultant with The Health Care Group, Inc. Mark E. Kropiewnicki, J.D., LL.M. is a principal consultant with The Health Care Group, Inc. and a principal and president of Health Care Law Associates, P.C. Located in Plymouth Meeting, Pa., they advise physicians on a wide range of practice management issues. They write and lecture extensively on a variety of practice management and healthcare topics. They can be reached at (800) 473-0032.