Financial Analysis of Technology Acquisition Using Fractionated Lasers as a Model

ABSTRACT

Ablative fractional lasers are among the most advanced and costly devices on the market. Yet, there is a dearth of published literature on the cost and potential return on investment (ROI) of such devices. The objective of this study was to provide a methodological framework for physicians to evaluate ROI. To facilitate this analysis, we conducted a case study on the potential ROI of eight ablative fractional lasers. In the base case analysis, a 5-year lease and a 3-year lease were assumed as the purchase option with a $0 down payment and 3-month payment deferral. In addition to lease payments, service contracts, labor cost, and disposables were included in the total cost estimate. Revenue was estimated as price per procedure multiplied by total number of procedures in a year. Sensitivity analyses were performed to account for variability in model assumptions. Based on the assumptions of the model, all lasers had higher ROI under the 5-year lease agreement compared with that for the 3-year lease agreement. When comparing results between lasers, those with lower operating and purchase cost delivered a higher ROI. Sensitivity analysis indicates the model is most sensitive to purchase method. If physicians opt to purchase the device rather than lease, they can significantly enhance ROI. ROI analysis is an important tool for physicians who are considering making an expensive device acquisition. However, physicians should not rely solely on ROI and must also consider the clinical benefits of a laser.

KEYWORDS

Return on Investment (ROI) - return on investment analysis - financial analysis - ablative fractional lasers

REFERENCES

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Editor's Note

Carniol and authors have developed an economic model, using fractional ablative lasers as an example, to analyze the purchase of capital equipment in a facial plastic surgery practice. Though some might think their conclusion intuitive, their analysis describes, delineates, and helps quantify the economic factors that affect the decision to make a large capital expenditure. One oft-heard claim by equipment sales staff is that a particular model, given the quality of its results or its name recognition in the public's mind, is worth its higher price because of the greater number of patients who will seek treatment by its use compared with that seeking treatment by use of other manufacturers' models. The form presented by these authors facilitates analysis of these statements and others to determine the realistic financial expectations with purchase of these high-cost instruments.