When you're considering new equipment for your practice, among the things you need to look at is the ability of the equipment to yield a positive return on the investment you make in them. Some equipment and technologies do not produce an immediate return, and others definitely do. Digital radiography offers a rapid ROI, or “Return On Investment.” I’d like to walk you through the process of determining ROI starting with some of the factors involved in gaining the ‘bottom line.’
One way of calculating ROI is by using the ‘direct cost’ method. If, for instance, you're buying equipment that will replace a function you currently perform in your practice, it's a fairly straightforward process to compare their costs. You determine how much you’re spending to perform the specific function with your existing equipment, and then you can compare those costs to what you calculate you'll be paying for the same function after you install the replacement technology.
Tax considerations
In addition to direct cost comparison, there are also tax considerations. Taking advantage of the 179 deduction can help you realize an additional and even more significant return on your investment through reducing your tax obligation, or can help offset your cost even when the equipment purchased might not otherwise improve your ROI. Deductions can be taken even if you borrow the money to buy the capital goods or, in some instances, even lease the equipment. In any case, you will want to discuss this with your accountant.
One of the arguments I often hear regarding the purchase of a digital radiography system is that they're "too expensive." I want to demonstrate that not only are digital radiography systems not "too expensive," in fact, they'll actually save you a great deal of money over film-based radiography. Let’s crunch numbers and you will see why you should consider replacing your existing film system with digital technology.
Dental practitioners often overlook the fact that there are significant out-of-pocket costs associated with film. They repeatedly pay for film, chemicals, processor equipment service and maintenance, and mounts, consumable supplies for which there is no return. Those costs amount to approximately 50¢ per X-ray, a conservative estimate. In a practice that averages 50 X-rays per day, this translates into $25.00 per day, and for a 4-day week, that’s $400.00 per month. Think that you aren’t taking that many X-rays? Think again; 50 X-rays is the equivalent to 2 FMX series, 3 BWX series, and 2 PAs a day, not including retakes.
Opportunity cost
Personnel costs are another thing you must consider. Your assistants and hygienists can spend up to four minutes to process a single film, between the travel back and forth to the darkroom, locating and labeling an envelope or mount, etc. However, since you process each film of a series consecutively, typically running eight to 18 minutes for developing and mounting, the average time per X-ray is two and a half minutes.
So, for the 50 films taken in a given day, your practice spends two hours related to the handling of these films. Two hours times $28.00 per hour (or the average of what you pay your assistants and hygienists) totals to as much as $56.00 a day, or $896.00 a month, for your staff to develop and mount film X-rays, tasks not required with digital. Again, this does not take into account retakes or even processor maintenance.
When you total the expenditures of consumable supplies and staff time, film-based radiography costs the typical practice about $1,300.00 per month. On the other hand, the typical investment for a digital radiography system is less than $400.00 per month. If you subtract the $400 from $1,300.00, you’ll see that your return on investment is $900.00 per month.
Now, let’s take a look at ‘cash flow’ involving this scenario to calculate exactly when during the month you start gaining a positive cash flow. Using the previous daily totals for supplies and time of $81.00 for a film-based system, you will have saved $400.00, the amount of one monthly lease payment, in 4.9 days. In other words, if you begin using digital radiography on a Monday, the following Monday afternoon, your positive cash flow begins and continues for the rest of the month.
In other words, on day five you’ll begin realizing your return on investment. That’s one of the fastest returns you’re ever likely to get for your money.