By Victoria Houghton, assistant managing editor

From iPads, to hair-removal devices, to patient portals, there’s no shortage of technologic add-ons for medical practices. However, the question remains: is the product truly worth the expense? Keith C. Borglum, CHBC, CBB, medical practice management consultant, appraiser, and broker at Professional Management and Marketing in Santa Rosa, California, suggests that while physician practices experience a wider profit margin than many small businesses, when it comes to spending, physicians should do so conservatively. “You have to start thinking like a supermarket that has a 3 to 5 percent profit margin,” Borglum said. “One percent counts.”

Indeed, take a look at any budget, and it’s clear: even the smallest expenses can add up. As such, it would behoove physicians to take a closer look at the costs and benefits of investing in various practice technologies. The following questions can help physicians determine whether the new technologic addition to the practice is a necessary expense, or simply a shiny object.

• How much is the technology going to cost?
• What are the opportunity costs?
• How much is the technology going to earn?
• How will the technology benefit your productivity?
•  Is there an immediate need?
•  How will the technology improve patient care and experience? 

Q: How much is the technology going to cost?

Enter any grocery store, car dealership, or clothing store, and more often than not, the price tag of the purchase in question will be up front and center. Many practice-related technologies are similar in that they are one-and-done purchases — pay one price upfront and walk away with the product. For example, many physicians have purchased iPads that link to their electronic health record (EHR) systems so when patients fill out their information it automatically updates their electronic file. Additionally, “Some physicians have scanners that will scan the front and the back of the insurance cards as well as the drivers’ license. It will use optical character recognition to insert the information into the correct fields in your EHR,” said Marc Darst, MD, chair of the Academy’s EHR task force. “It’s a fairly nifty technology that if it’s already integrated with your EHR it’s not going to cost you that much.”

However, for other practice technologies, particularly medical devices, the overall price may be a little murkier because, according to Borglum, there are often several payment options to choose from. “A rough rule of thumb is, if you can use the equipment three full days a week or more, it makes sense to buy it. If you’re going to use it less often than that, it might be better to rent until you can prove the need.” According to Borglum, when you rent, the device companies will truck the equipment to your office for use for consecutive days each week. They will then pick it up to bring to someone else renting the equipment. As a result, while physicians won’t be paying the full purchase price for the device with the renting option, Borglum warns, “When you rent you’re going to pay more per unit for service delivered because the rental agency needs to make a profit on it too.”

Similarly, the price of EHR systems is not always straightforward. “Each EHR company is different. Some will charge you less on the front end to purchase the rights to the system and then they charge you a monthly fee,” said Dr. Darst. “Others are much more expensive on the front end, but less per month.” Additionally, physicians should confirm that the EHR company in question can integrate with other devices — such as iPads and insurance card scanners — and at what cost. “If you have to pay your [EHR] company to sit down and integrate the technology, it becomes expensive very quickly,” Dr. Darst said. “We have four iPad Pros sitting in my manager’s office that are somewhat worthless at this point in time because we were told the technology integrates with our EHR but then learned that they were not integrated — but could be for several thousand dollars.”

There are additional maintenance costs that physicians may need to take into consideration. For example, Morris Stemp, CPA, MBA, CPHIMS, CFO and partner at StratX IT Solutions, says that many of his clients are weighing the cost differentials between cloud-based EHR solutions and traditional server-based systems. “In terms of practices looking at new or evolving technology, certainly the cloud is less expensive in initial cost outlay.” In fact, each in-house server can cost $5,000 or more. Additionally, “If you’re having internal systems, they need to be patched on a regular basis. It’s required from a HIPAA standpoint and also required from a good business and security standpoint,” said Stemp. “You need to have a good IT company and spend money for the monthly service to keep your systems up to date.” On the other hand, the server-based infrastructure does offer some advantages over a cloud-based system. “On a server-based system, the IT department controls the infrastructure. In the event of some outage, you rely on yourself to get back up. Of course, this is a double-edged sword,” Stemp said. Also, “Performance of a cloud-based system is constrained by internet connection. A server-based system is generally communicating to the workstations at the fastest rate of 1 gigabit.”

Whether it’s an iPad, a hair removal device, or a cloud-based EHR system, to determine the product’s ultimate price tag, Borglum recommends utilizing the following formula to estimate how much the technology will cost per day or each time it’s used:

Q: What are the opportunity costs?

The price of a new technology is certainly a critical component for physicians to consider when making a purchase. However, there are other costs that physicians should take into account when investing in technology, such as time and labor, as practices will need to devote time to setting up the new technology and possibly maintaining it.

For example, for some physicians, investing in an EHR system may not be worth the time. “Dermatologists still utilizing paper charts, especially those approaching retirement, are unlikely to adopt an EHR system,” said Peter Accetta, MD, from Orchard Park Dermatology in Orchard Park, New York. “I know the world is moving toward EHRs, but I’m going to be 60. Guys like me, we’re still using paper charts.” Many of Borglum’s clients are in the same boat as Dr. Accetta and have found that the hit they would take for not participating in the Merit-based Incentive Payment System (MIPS) — which assigns credit for providers’ use of a certified EHR and replaces the requirements of the current Meaningful Use program — is not worth the time spent setting up an EHR system. “To earn 4 percent on Medicare patients with the risk of 15 to 20 percent of reduced productivity overall is not economically viable,” said Borglum. “Time is time. I don’t care if you’re an MD, RN, or an MA. You only get 24 hours in a day. No extra.”

Whether it’s an EHR system or a new printer, Borglum advises that it’s helpful to first determine the actual opportunity costs associated with purchasing a new piece of equipment or technology. To do so, Borglum recommends calculating the cost of staff labor by utilizing the following equation:

Similarly, physicians can determine their own labor costs:

Knowing how much a staff member’s and physician’s time costs can be eye opening when making decisions about roles and responsibilities when technologic purchases are made. For example, when setting up an insurance scanner, the costs of the office manager’s labor will be drastically less than that of the physician. “Some physicians will say that they can do it themselves because they have the extra time. No, that’s a cost. Would you pay another physician to do that?” Borglum said. “As a physician if you have enough time to be able to do this, maybe you need to do more marketing or look at your business plan.”

Q: How much is the technology going to earn?

In any industry, the decision to purchase new technology or equipment is often driven by the hope of earning additional profit. In the medical world, revenue can come from increased reimbursements, more patient access, and payment incentives.

Reimbursement will likely be top of mind when adding a new technology-based service to the practice. When it comes to investing in medical equipment that would broaden the physician’s scope of services, Borglum recommends that physicians ask, “Is it a cash service or is it covered by insurance? If it’s covered by insurance, is it covered by all insurance?” Additionally, if a new service is added, will there be additional referrals from other physicians and will the practice have time for additional patients?

Technologies that can improve patient access to services also hold the potential for increased revenues. Hon Pak, MD, chair of the Academy’s Health IT Committee, has recently incorporated store-and-forward telemedicine in his practice in Hagerstown, Maryland for some follow-up visits. “I think it’s becoming more and more part of many practices,” Dr. Pak said. “I think that’s clearly growing as part of virtual health or retail medicine.” Of course, reimbursement for telemedicine services remains touch and go depending on the state law and insurer. However, by improving access to follow-up care via telemedicine, in-person appointments can be freed up for other patients. “Obviously, it won’t be for everyone, but for select patients I think they will benefit. It will improve access,” Dr. Pak said.

To calculate additional potential profit, Borglum recommends calculating the increased reimbursement per procedure or patient:

Reimbursement and increased patient volume aside, for those physicians who are not staring down retirement in the near future, investing in an EHR system, for example, may be well worth the expense. From 2019 to 2022, physicians have the potential to earn up to a total of 25 percent in payment bonuses for successfully participating in the MIPS program. To do so, physicians will need to have a certified EHR system. “They’re all expensive. If you are older and within a few years of retirement, I would not take the plunge. If it were me making that decision, I might look and say I’ll just take the hit on my reimbursement if I’m only going to practice for another three to five more years,” Dr. Darst said. “However, if you’re a young dermatologist, basically you have no choice other than going to an EHR unless you are 100 percent cosmetic or cash only.” For more information on how to make the most out of MIPS, visit the Academy’s MACRA Resource Center at staging.aad.org/macra.

Q: How will the technology benefit your productivity?

The purchase of basic office tools, such as scanners and iPads, won’t likely bring in extra revenue. However, these technologies may have the potential to improve productivity by saving time. “Time is your most precious commodity,” Dr. Darst said. “If something saves 30 seconds worth of my front office’s time per patient, it may be well worth it to purchase it.” Dr. Darst purchased new scanners that were much faster than his previous scanners. “They were around $800, but instead of slowly scanning the information, it scans multiple pages per second. Instead of just waiting 20 to 30 seconds for the patient’s information to go in, in a few seconds you’re done and you’re moving on to another project.”

Dr. Accetta utilizes the iPad for more than its camera to document biopsy sites for surgery. He and his nurses use the device to review photos from prior patient visits. “The advantage of the iPad is that every nurse can carry an iPad. We no longer have to go to the computer to find that image. The images are automatically backed up to the cloud each day,” Dr. Accetta said. “It definitely saves time. We can access a biopsy photo from any iPad at any time without leaving the treatment room and/or email an image to our Mohs surgeon directly without ever transferring an image to a computer.” Similarly, while the patient portal may be an expense, Stemp argues that it can be a timesaving game-changer for physicians and their staff because these systems can streamline tasks such as refilling prescriptions and filing patient forms. “How much time is that saving…if they can just go to the patient portal and just do it themselves? Patient portals are a huge productivity tool. In the end, the purpose of all of this technology is to improve productivity.”

Borglum recommends that physicians calculate the minimum number of minutes needed to be saved per day or times the equipment is used to justify the cost of any new technology by utilizing the following formula:

At the end of the day, while many technologies can save money and time, Peter Lio, MD, from Medical Dermatology Associates of Chicago, argues that the value of many technologies goes beyond the bottom line. “There are some basic metrics that all of us use: will this result in significant savings or increase in productivity to justify its cost? I think we have to calculate things like this, of course, but I want to point out a much more difficult-to-quantify benefit: mental health and wellbeing.” Indeed, a recent Mayo Clinic Proceedings study found that burnout among dermatologists increased from 32% to 57% from 2011 to 2014 (2015;90(12): 1600-1613). As a result, Dr. Lio argues, physicians may want to look beyond dollar signs and productivity levels to determine if a technology is truly worth it. “Sometimes doing something in a certain way is more expensive and may actually result in increased costs, but helps us in other ways that are very important.” Read more about physician burnout in Dermatology World at staging.aad.org/dw/monthly/2017/september/feeling-the-burn.

Q: Is there an immediate need?

For some physicians, they may not have a choice but to invest in new technology, particularly when it comes to EHR systems. Many of Stemp’s clients are currently in what he calls the ‘refresh cycle.’ “For many physicians, it could be six or seven years since they first put in technology. Either they’re in love with it or they’re fed up with it,” Stemp said. “Now it’s time to re-evaluate and upgrade. Things are starting to break. They’re getting emails from the software company saying the software that they’re using is no longer supported.” For these physicians, the need for new technology is clear. “Frankly, they don’t really have a choice.”

For technology that is not necessarily required for the practice to function, physicians will need to gauge the true need. “One of the first things to consider when adding any kind of technology is, is this what the patients are asking for, do you see it as a true unmet need in the practice, or is it just some sexy new technology?” said Borglum. “I had a few clients that were going to add a hair removal laser to their mix of services. I told them that I didn’t see the demand, but they added it anyway. I got a call from them two months later saying that they were losing money on the thing but all of the doctors and staff are hairless. Is it worth it?”

Additionally, physicians need to consider their competition when adopting a new technology-based service. “Some of these services, like hair removal, get into state law. Does it require a physician in your state to do it, or can any MA or RN set up shop and do it?” Borglum said. “You have to look at entry barrier thresholds. You want to stay on the MD/DO side of the barrier where you have to have an MD/DO license to conduct the service. That is an advantage that you need to strategically consider with technology.”

The formula for calculating need will require physicians to conduct an in-depth analysis of what they want out of their business. “Do you need more referrals? Are you looking to focus on a certain type of patient or disease state? Or are you busy enough, but want to make things more efficient or cost effective?” Dr. Lio said. “Sometimes a technology is compelling to us but does not actually meet a real need.”

Q: How will the technology improve patient care and experience?

All things considered, when it comes to purchasing new technology for a practice, Dr. Lio argues that it is incumbent upon physicians to keep the patient top of mind. “For those who love technology, it quickly becomes clear that there is an inherent danger of simply falling in love with ‘neat’ applications, websites, and devices that delight us but may actually impede patient care.”

For example, while patient portals often come as a supplementary add-on for many EHR systems and have the potential to increase office productivity, for Dr. Pak, the value of the patient portal from the patient’s perspective remains to be seen. In Dr. Pak’s practice, patients have the option of filling out their health forms online ahead of time so they don’t have to come in well before their appointment. However, “I think what we’re seeing is a challenge with patient adoption. Some of the older patients, they just don’t want to do that or they don’t have the incentive to do that. From a patient perspective, they’re asking ‘Why should I do that? What’s in it for me?’” Borglum agrees. “One of the main reasons practices did not get their Meaningful Use bonuses is because they could not force even 5% of their patients to use the portals. That tells me that most patients really don’t care about your portal.”

When investing in technology, the small things can also add up and contribute to a favorable patient experience. “For example, having a coffee or tea maker available to patients is certainly a cost: consumables, cleanup, maintenance, etc.,” Dr. Lio said. “In addition, I would argue, it is very difficult to actually quantify a benefit in terms of revenue. Do patients really seek you out because of the wonderful lattes at your office? I doubt it! But it is a detail that shapes the environment and adds to the overall experience for patients and staff. It’s the type of calculation that the accountant might not understand, but that still could be worth it to you.”

Beyond patient experience, there are technologies that can improve patient care as well. “Every dermatologist regularly faces the challenge of identifying the precise biopsy location in a patient whose follow-up might have been delayed and the original biopsy site healed,” said Dr. Accetta. “So the photograph is invaluable for helping us to at least hone in on the spot.” Thanks to technology, physicians have access to portable, smart devices that take quality, high-resolution photographs that can be stored safely and are easy to access. “I think the iPhone and iPad have been unbelievable convergence devices,” said Dr. Lio. “What used to take an entire desk full of equipment is now held in the palm of the hand. Our EHR, like many others, allows us to use the iPad or iPhone camera to take clinical photos and even dermoscopic photos that are stunning, publication quality.”

When justifying an expense for the sake of patient care and experience, Borglum recommends surveying patients on their interests and needs. “You can run a quick survey down at the reception window. When patients are filling out their health update and check-in forms, you put a question in there. For example, ‘If we put in a patient portal, would you use it?’ The answer choices are: ‘yes,’ ‘no,’ and ‘what?’” For Borglum, those responses should give physicians a true sense of patient interest.

All told, investing in technology doesn’t necessarily have to turn the practice or its finances upside down. It simply requires a thorough look at expenses, opportunity costs and advantages, potential revenues, and need. Additionally, while poring over spreadsheets, financials, and surveys can help guide decisions about which technologies to take or leave, nothing beats pure, old-fashioned word of mouth. “Your own professional associations, your specialty, and your peers are your go-to resources,” said Stemp. “That’s a great way to make your choice on what technology you should be investing in.”