What is a "good"return on investment for Dental equipment and Technology?
One of my long time clients and I were discussing the potential return on investment ,or ROI, of his upcoming purchase of a CBCT system. This led to the question, "what is a good return on investment" for any investment in his dental practice, or any business for that matter.
It's difficult to provide a specific benchmark for a good return on investment (ROI) on dental technology as the ROI can vary depending on the frequency of use, billing per procedure,
and patients' response to the technology. If patients are impressed with an up-to-date, high tech practice , and refer others due to their experience with the technology, it is difficult to quantify the positive impact. However, in the case of CBCT, if the practice is able to charge $250.00 per scan and 20 scans are taken monthly, than it is easy to calculate a direct benefit of $5000.00 revenue monthly due to scans being taken. If the machine was purchased to scan for treatment planning implants or doing more in-house endodontic procedures, for instance, then a portion of the revenue from the increase in implant and endodontic procedures is a direct result, or correlation. Attributing revenue from the ability to do more of a specific procedure to offset the expense of an investment is highly subjective. And, if you are able to charge a fair fee for the use of the CBCT, the fee is offsetting the cost of the machine and giving positive ROI regardless of treatment, mitigation of risk, days to start treatment, etc.
Calculating return on investment (ROI), on dental technology involves comparing the costs of implementing the technology with the benefits gained from its use. Here are the general steps you can follow:
Determine the cost of the dental technology and the period of time that you will calculate to amortize the investment. This includes the initial purchase cost, installation costs, and any ongoing maintenance or upgrade costs. In the calculation of a CBCT's price, any service or maintenance plan would have to be taken into account. For our example let's use a total cost of $75K over five years for the cost of the CBCT. Since we are looking at the investment over 5 years or 60 months, the cost of the investment is $1250.00. Monthly Cost of CBCT.
Determine the benefits of the technology. This can be in the form of increased productivity, improved patient experience, or better clinical outcomes. Quantify these benefits, if possible. In this instance, we will only quantify being able to take scans and charge for the scans. We know that all of the additional benefits, such as being able to plan accurately and demonstrate the treatment plan to the patient are benefits that will be appreciated and likely offer ROI. However, if the fees from use can cover the investment, the additional "gray-area" benefits will be additional return after the cost of the CBCT has been covered. In this case, we will be conservative and say that the practice will be able to take three scans per week and charge $250.00 per scan. So, the total revenue from twelve scans per month is $250.00 x 12 = $3000.00. Monthly Revenue from CBCT.
Calculate the net benefit of the technology. Subtract the costs of the technology from the benefits gained to determine the net benefit. $3000.00 billable scans monthly - $1250.00 monthly cost = $1750.00. Net Benefit From CBCT.
Calculate the ROI. Divide the net benefit by the cost of the technology and multiply by 100 to get the ROI as a percentage. $1750.00 Net Benefit from CBCT/$1250.00 Monthly Cost of CBCT = 140% ROI From CBCT Scans.
A common benchmark for the cost of capital for small businesses is around 10% to 15%. Therefore, a good ROI on dental technology would be greater than 10% to 15%. In the example above, the ROI is well over 100% monthly. In determining the full ROI, it is important to consider other factors such as the technology's impact on patient care, staff productivity, and the overall practice's growth potential. A favorable influence on these aspects can result in secondary financial advantages, including enhanced patient contentment and loyalty, as well as heightened staff enthusiasm and commitment arising from operating in a state-of-the-art dental practice.
It makes sense to consider a fair cost for each CBCT use and bill the scan just as any other procedure code. Including scans with treatment and giving scans away makes it more difficult to determine the specific ROI of CBCT technology. If you are an office considering CBCT, consider evaluating the fees that you will charge for scans and your prospective usage prior to investing in the technology. Having a easy to understand path to positive ROI will make you sleep easier knowing your investment is paid for every month.
If you have CBCT and are struggling with integrating the technology into your practice, Dental TI can help. If you are looking to replace a CBCT or purchase CBCT as a new user of the technology, Dental TI can help make that process as painless as possible.