Practice Productivity By Roger P. Levin, DDS, MBA

WHEN TO BUY EQUIPMENT

The equipment in a dental office is as important as the skills of the dentist. Like any production company, we are dependent upon our equipment to provide the desired services. In our practices, this is for our patients. If equipment breaks down, is inefficient or cannot provide specific service, then the office will be limited in its ability to provide a wide range of diagnostic and treatment options.
    Needless to say, most dentists purchase the equipment they need. However, there are times when decisions must be made as to which equipment to buy, how much to spend and when to make the purchase. Obviously, if you are opening a new practice from scratch, you will need to purchase mostly new equipment. But every equipment buying decision still requires consideration of how much equipment, which is right for different points in your career and when the purchase should be made.

Consider the Return on Investment
    I recommend the philosophy of viewing equipment and other in-office materials from a return-on-investment standpoint. This means that you do not simply go out and purchase equipment for a new operatory because it feels good on a given day. Instead, dentists should sit down and evaluate the potential production that can be acquired by putting equipment in that new operatory. If the cost of the operatory is $18,000 and appears that it will require three to five years in order to produce $18,000 more dentistry, then the decision to place the order now or wait another year or two is one that should be well thought out. Conversely, if the $18,000 can be produced within six months to a year, then it is prudent to invest in the equipment without delay.
    This is not to say that some equipment does not require a multi-year period in order to provide a return on investment. Dentistry now has some extremely fine, modern technology available, such as computerized porcelain inlay/onlay systems. It is well worth the cost for the practice that performs an extensive number of cases in this area. At this point, you no longer can think in terms of the actual cost of the equipment. Instead, the return-on-investment should be evaluated based on monthly cash flow. In other words, if your purchase requires a $1,000 monthly lease payment, and the practice is able to produce $2,000 per month, then you have a positive cash flow of $1,000 a month. If, however, the lease payment is $1,000 per month and the practice can produce only $500 per month, there will be a loss on the investment of $500 per month.

Make Wise Choices
    Another consideration must be the cost of the equipment. As you are well aware from these columns, I believe in tightly controlled magnets of overhead and expenses. However, I also believe that the modern dentist should not be "penny wise and pound foolish." There are many times when the more expensive piece of equipment has a quality, dependability and longevity commensurate with its cost. In the long run, it will become obvious that this equipment is more cost-effective and will return savings over a period of perhaps five years. It is unfortunate when a dentist looks at equipment and simply searches for the lowest price tag available, not realizing that it could become more expensive as time goes on.
    The ability to discern when it is worthwhile to spend a little bit more depends on each piece of equipment. It will be necessary for you to evaluate carefully the equipment by talking to other dentists who have purchased it, relying on expert sales personnel and using good, old-fashioned common sense.
    There are times when it is hard to ascertain a dollar return on investment for equipment. There are factors that are equally as important. Some equipment reduces stress or makes staff members happier. Infection-control factors also must be considered today to protect the dentist, staff and patients. These all deserve consideration from an investment viewpoint, even though the return on investment cannot be calculated solely in total dollars. If equipment allows you to provide better dentistry, it should, in the long run, also be cost-effective.

Enhancing Your Practice Image
    It is important to invest regularly in updated equipment in order for your patients to recognize that you are up-to-date. A practice that is characterized by old equipment that appears to be in poor condition will not be the practice of choice by people seeking the finest dental practice for their care. Since so much of dentistry has shifted toward esthetic services, it is important that your practice be esthetically pleasing as well. A pretty reception room is not enough. Your operatories, x-rays and business office also play a factor in how your practice is perceived. This is equally as important to your long-time patients as it is to new patients.
    One of the best investments we can make is in our own practices. Make your investment wisely and timely!

Dr. Levin is president of Health Care Advancements, a dental practice-management consultation firm in Baltimore. He is a practicing dentist and lecturer on management and marketing.

    "Reprinted, with permission, from the July 1991 issue of Dental Economics Permission is not be construed and as an endorsement of any product or service."