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Can You Afford a Femto Laser?
Buy, lease or outsource? Here's a quick economics lesson.
Stephen Sheppard
Publish Date: January 7, 2015   |  Tags:   Ophthalmology
Femtosecond laser machine EYE ON THE FUTURE Femtosecond laser machines are catching on fast, and manufacturers are coming up with creative financing options.

As a natural-born skeptic, I figured it would take a long time for femtosecond lasers to make a significant dent in the cataract market. I never imagined that in a few short years, hundreds of practices would be using them. Clearly, the market is embracing the potentially profitable technology and more and more providers are trying to decide whether they can — or should — find a way to incorporate the $350,000-to-$425,000 equipment into their practices.

For manufacturers and outsourcers, femtosecond lasers obviously represent a huge opportunity. They're fighting tenaciously for market share. Not only can you buy, lease or rent a mobile laser (have a machine delivered to your practice for a pre-designated number of days each month), but within those primary categories there are scores of subcategories. As one industry consultant insists: "Nothing's definitive. The options are basically endless."

That may be true, but if you're thinking about going the femto route and wondering how best to do it, several questions can help point you in the right direction.

1. Have you made, or are you prepared to make, the foray into "retail medicine"?
If you're already offering premium procedures — presbyopia-correcting and toric lenses, for example — you've undoubtedly developed the needed processes, and identified employees who have the ability to communicate options to patients. The ability to explain features, benefits and costs is crucial when you're dealing with premium, non-Medicare-covered offerings.

But if you haven't, it may not be as easy as it sounds. I was once the administrator of a fairly traditional and very successful ophthalmic practice. When I gave our 24 employees the short form Myers-Briggs personality test, it turned out only 2 of us were extroverts — the optician and I. Had I wanted to get into retail medicine, my technicians would have been very uncomfortable in sales roles. And the last thing you want is to have the doctor in that role.

So if you have a more traditional cataract practice — one in which, say, 70% of surgical cases are Medicare cataract cases and no premium procedures are offered — the first thing to decide is whether you want to change your character and start selling premium services. Doing so is akin to starting a whole new venture. In that situation, I'd recommend either daily rental with a commitment that can be terminated without a huge financial loss, or taking advantage of some of the new leasing structures that some manufacturers have come up with. Some, for instance, will let you lease the machine for 6 months to a year, so you can see if it's possible to build to a monthly volume that makes it cost-effective to continue.

outsource or lease laser machine ONE DAY AT A TIME? You can gauge potential business by outsourcing or entering into a short lease.

2. If I decide to try outsourcing, how many cases will I need to make it cost-effective?
If you're serving a community with a small population base and figure you'll be able to count on 10 to 15 procedures a month, but no more, outsourcing is the way to go. A mobile laser company will deliver the machine on a designated day each month, set it up, then come and get it when you're through. As long as you can schedule all your cases on that same day each month, daily rental is a very good option. Incidentally, minimum daily case requirements vary by company.

3. At what point does it make sense to think about leasing or buying instead of outsourcing?
Assuming you're going to have a facility fee in the range of $600 to 700 per case, to be financially successful, you'll need to be able to count on 20 to 25 cases a month. But since you first have to build the infrastructure and see whether you're going to be able to generate the volume it takes to be financially successful, you're better off not making a long-term commitment with big financial implications right away.

4. Does that factor in other associated costs?
Yes. The biggest additional expense has to do with the patient interface, also known as the per-click fee. It's the connection between the laser and the eye and it's a one-time-use device. I've seen the cost as low as $275, but it can be as much as $375, depending on committed volume. The other significant component if you're leasing or buying, is the maintenance contract. Depending on the manufacturer, you'll likely have a 12- or 18-month warranty. After that, a service contract might be $40,000 or $45,000 annually. Other costs aren't nearly as significant, for the most part. The additional property and casualty insurance is likely to be $4,000 or $5,000 a year. If you're paying a technician $30 an hour in salary and benefits and can do 2 femtolaser cases an hour, labor costs are only about $15 per hour.

5. What about facilities that are already offering other premium services?
Even if you've already successfully integrated toric lenses, presbyopia-correcting lenses, refractive surgery, LASIK and PRK, and femto is going to be just another offering, it still doesn't make a lot of sense to start out by buying, given what manufacturers are offering. I'd recommend entering into a lease for 6 months to a year. You still need to know you can get to 25 or so procedures a month. Once you're satisfied you can, then it might make sense to purchase the equipment.

6. If I know I have the patient volume, what are the advantages and disadvantages of buying vs. leasing?
With a capital lease, the difference between leasing and buying really comes down to who's going to lend you the money. Really, there's no fundamental difference between getting the money from a bank and getting it from a leasing company. Either is going to want to make a market rate of return. You can get into some pretty esoteric tax arguments between purchasing and leasing, but those are unpredictable and depend on the tax situation of the borrower or lessor. In most cases tax implications will be relatively minimal.

With a capital lease, there's usually a $1 buyout at the end of the lease, and you end up owning the asset. So either way you're paying a fixed monthly rate and are going to end up owning the machine.

TOO NEW TO KNOW?
Is Femtosecond Laser Surgery Really Better?

—\ BETTER OR NOT? The final jury is still out, but many practitioners think laser surgery is safer and more precise.

Expense aside, some practitioners question whether femtosecond surgery really improves outcomes. The short answer is that it makes intuitive sense, but no one can really say for sure.

And it's certainly true that cataract surgery done without lasers has come a long, long way in the last 30 or 40 years. It's an amazing surgical procedure with an extremely high success rate. It's almost a modern miracle.

As with any new technology, there isn't a lot of peer-reviewed clinical evidence that quantifies improvement with femto laser. To this point, the discussion has been mostly anecdotal. But a lot of thought leaders use the technology and are convinced it's better, safer and more precise. Still, if you're contemplating acquiring the capability, the first question you need to ask yourself is whether you believe it's better, and if so, whether it's enough better to justify the expense.

You can study, you can talk to peers, you can talk to patients, but the fact remains that hard evidence is lacking. The one thing we know for certain is that properly utilized, what a laser does is more precise than what even the most highly skilled surgeon can do manually.

— Stephen C. Sheppard

7. What other kind of lease might I consider?
An operating lease, if you can find a leasing company willing to provide one on a femtosecond laser, would make a difference. It comes down to a judgment call as to what you think is preferable. With an operating lease, you'll pay less per month, because at the end of the lease, ownership goes back to the leasing company.

But is that a good thing? It may come down to whether you think the technology will be obsolete after, say, the end of a 3-year lease, or whether you think you'll be able to buy it outright in 3 years and then keep using the machine for a few more years without having to make a monthly payment. It's similar to a car lease. The downside is that if you keep trading your vehicle in at the end of every lease, you keep making monthly payments forever. But the upside is that you're always driving a pretty nice, relatively new car.

For now, however, femtosecond technology is so new that there may not be an aftermarket for femto lasers, so a leasing company might be puzzled as to how to underwrite an operating lease. Eventually, however, this should be an option.

8. What should we expect in terms of durability and improving technology?
We really have little or no idea how long we should expect these machines to last. But we do know that, for example, excimer lasers don't wear out in 3 years and that laser equipment in general doesn't have a lot of mechanical components that can wear out. The laser head can wear out — we see that in other types of lasers — but not the whole device. The real question is whether game-changing technology will come about, and whether there will be game-changing performance improvements. I happen to think it's likely that if so, it will be the result of a software upgrade, and that any other improvements will be incremental.

Talking is free
The industry consultant I referred to earlier points out that ultimately, manufacturers and mobile laser vendors are extremely eager to see practices succeed with femto lasers and inclined to be very creative when it comes to financing options.

"You're going to be pleasantly surprised at how much innovation there is with packages and options," he says. "Even if you think they're out of reach, you never know until you talk to a manufacturer. More times than not people are going to find it makes sense for them."

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