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An analysis of the cost differential of setting up a new office with or without digital records.

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An analysis of the cost differential of setting up a new office with or without digital records.

by Dr. Brad Dykstra

For more on this topic, go to www.dentaleconomics.com and search using the following key words: "digital records," EMR, "electronic dental records," "cost differential," Dykstra.

If you're thinking of starting a new office, does it make financial sense to invest in the present technology of totally digital clinical records from the outset, or is it better to begin conventionally and add the newer technologies when the cash flow is more certain and the technology more affordable? This is a dilemma many dentists face when deciding to set up their own practices, whether coming out of dental school, the military, public health service, or an associateship.

A first step is to acknowledge the fact that in the next several years, electronic dental records will become the standard of care, and even possibly become mandatory. The momentum for this is coming not only from the vendors promoting the benefits of their technologies, but also from insurance company requirements and mandates from the federal government. President Bush has instituted an agenda of transferring all medical records to electronic medical records (EMRs) by 2015.

To aid in your decision-making process, we will first look at the pieces of technology that are necessary to utilize totally digital patient records or, in the medical field, EMRs. Next, the traditional pieces that can be avoided will be discussed. Finally, a comparison of the costs will be analyzed.

For demonstration purposes, here is a sample scenario: A dentist may be coming from an associateship, directly out of dental school, education, public health service, or the military. This dentist is going to open a new practice from scratch without buying an existing practice or patient list. The planned office will be 1,800 square feet with room for four operatories with two initially equipped, a reception area, a consultation area, a two-person front desk station with room for file cabinets or shelves for 3,000 active patient records, a business office, private doctor"s office, central sterilization, panoramic X-ray area, dark room, HVAC room, and necessary restrooms. The staff will consist of one front desk person, one hygienist, one chairside assistant, and the dentist. A major financial dilemma is whether to install a traditional or digital X-ray system. The dentist will need to evaluate which direction will cost less, both in the short run and the long term. The initial short-term setup costs will be analyzed first, followed by a longer-term view.

The initial assumption will be made that the office square footage, treatment room equipment, sterilization and lab setup, and hand instruments will be the same except for the space saved by going digital right from the start (no darkroom or file storage). The only other difference will be in the addition of the digital components and subtraction of the traditional ones that are eliminated. These assumptions can easily be changed to reflect your specific case, but the underlying principles still apply.

The doctor gears up and gets busy

The doctor will work 192 days the first year (12 months x 16 days per month). The office will be off to a phenomenal growth pattern and see 500 new patients the first year and then stabilize at 240 (20 per month) new patients each year thereafter. The hygienist will also see six patients a day the first year and then eight per day the subsequent years. The rate of price increases, or inflation, will be pegged at 4 percent annually. Although the national inflation rate has been running between 2 percent and 3 percent, dental costs have been going up much more rapidly. Costs will also be based on average cost of setting up in West Michigan, which is on the low side of the national average. It is easy to adjust these assumptions for your particular area. The lease rate will be $15 per square foot plus $80 per foot for leasehold improvements.

Another assumption is that the front desk will be computerized with one active workstation, the business office will have one computer, and the doctor will have a laptop in the private office. These will all be networked to a small server. The office will also have a basic major-player practice management (PM) software package such as SoftDent, EagleSoft, Dentrix, or PracticeWorks for front desk functions such as patient financial information, electronic scheduling, and insurance submission purposes. They will also have Internet access to electronically submit insurance forms. Some form of backup system, such as external hard drives or online services, is also included. These assumptions are based on statistics that more than 95 percent of dental practices have at least some of the front-desk functions computerized.

The first additional cost will be to upgrade the software to the level of supporting EMRs. Cost is in the range of $1,000 to $2,000 (we will use the average of $1,500) and will add the capabilities of creating totally digital records. It is essential to have this in place before adding any of the other pieces.

A second necessary addition is the placement of the technology infrastructure, which includes computers in the treatment rooms and the networking system. For treatment rooms, this necessitates at least one monitor (although two is becoming the standard because of efficiency, effectiveness, and HIPAA issues), a computer, keyboard, and mouse. The "horsepower" needed and therefore the cost of these computers is determined by the capacity requirements of the software. The cost for a basic computer workstation and two monitors is normally in the range of $1,600 to $2,400, but can go much higher if one adds more monitors or specialized systems.

Once the infrastructure is in place, the next logical addition is digital intraoral radiography. Its type can be either the phosphor plate system or the direct wired sensors, and the difference is worthy of another discussion. The cost of a phosphor plate system ranges from $20,000 to $25,000. The cost of a two-sensor, direct-wired system, which includes imaging management software, ranges from $15,000 to $20,000. That price includes the software, which captures the images, organizes them, and allows image enhancements. This system offers increased time savings, but it must integrate with the main practice management software for greatest efficiency.

The final additional costs include a larger server to handle the larger network, and possibly a larger router to network all of the additional computers. The cost of the upgraded server, wiring, and larger router for the server are minimal ($7,000) if planned for ahead of time and installed initially in the new office.

Will it last forever?

A reality is that even digital equipment has an average lifespan. The replacement of maintenance contract costs are set at 20 percent per year. This allows for an average lifespan of five years for computers, sensors, and cameras. This amount should be set aside each year for continuous upgrading as newer technology becomes available. In our scenario, the assumption will also be made that the third operatory will become operational in year two, which will entail the addition of another computer and two monitors.

What can be eliminated?

A lot more than you may think.

• The most obvious deletions from the front desk include the need for paper charts, paper forms, and file cabinets, either built in or premanufactured. The initial cost of setting up paper charts with forms is approximately $2 per chart. For 500 patient records, the initial cost is at least $1,000. The cost of basic file cabinets for that number of records can reach $2,400. The hidden cost savings is the elimination of the floor space for the file storage, whether in file cabinets or custom-built shelves. This space often approximates 36 square feet. The future cost of space for long-term storage of old records is also eliminated. The time needed to put charts together also adds up. To view Cost differential table, click here

• What are the savings associated with 36 square feet of floor space when the paper file storage area is eliminated? Annual rental savings of $540 (36 x $15) plus build-out costs of $2,880 amounts to $3,420 the first year alone. The annual savings of $540 will continue to increase as rental rates increase.

• The next eliminated item is the darkroom and its associated plumbing costs. Because of the ADA (American Disabilities Act) requirements, this space occupies a minimum of 65 square feet. Because of its specialized needs — plumbing, lights, and venting — the build-out cost of the darkroom is about $7,000. The annual rental cost saved for this space is $975 the first year.

• Moreover, the automatic processor is no longer necessary, saving $5,100, nor is it necessary to purchase an inventory of film, mounts, or processing chemicals. The initial set-up cost for this inventory for the first year approximates $20,000 for the average office (100 films or pano equivalent per day at a cost of $1 per film, which includes each retake and film not charged for, such as endo, crown seats, etc.). The cost of tracking and disposing of hazardous chemicals is also eliminated ($20 per month). The need for a film duplicator ($250) and duplicating film is also eliminated since digitally captured originals can be printed or e-mailed as needed.

• An often overlooked item in this scenario is an intraoffice communication system to alert the clinical staff that its next patient has arrived or to alert the doctor that the hygiene patient is ready for an exam. The number of personnel needed for this office will be about 12: two for the front desk, four for the treatment rooms, one each for the business office, consultation area, sterilization area, lab, and doctor's office. The cost for a 10- to 12-station communication system is about $10,250, which includes hardware, wiring, and installation. In the digital office, this function is easily accomplished by sending these messages over the computer to the desired location, which eliminates this cost.

The savings add up

Aside from the many other benefits of digital radiography, including better diagnostics, reduced radiation, and time savings, the ongoing cost savings of the incorporation of digital radiography, both intraoral and extraoral, is phenomenal. At a minimum savings of $1 per image taken, the savings add up quickly, which then allows the addition or updating of other technologies to improve the patient experience.

How about digital vs. traditional film-based cameras, both intraoral and extraoral? The initial cost, whether digital or film based, is similar. The ongoing cost of using digital cameras is clearly more cost effective because of the elimination of film and photo paper. The cost of film, photo paper, developing, and storage can easily reach $1 per print.

Assuming three intraoral images per new patient (40 per month), the total is 120 intraoral prints per month — on new patients alone — in the first year. The initial exam will also include three basic extraoral photos for each patient: full-face, smile, and profile views for an additional $120 per month savings. So far, this totals $240 per month in savings.

The hygienist will capture two images per re-care patient for a total of 192 prints per month (six patients per day x 16 days). The total savings per month the first year approximate $432 a month in material costs. It is obvious why digital photography has quickly entered the mainstream.

In subsequent years, this number may increase even if the number of new patients decreases, as the benefits of more captured images becomes more apparent. Assuming three intraoral images per new patient — 60 films (20 per month x three), 60 extraoral films (three per patient), and three intraoral images per re-care visit — 384 films (eight per day x 16 days per month) totals a minimum of $316 dollars saved per month on intraoral photos. This totals just over 500 images per month or a savings of $6,000 per year.

When the two options are placed side by side and all the costs considered, it is easy to see why digital is the only way to go, not only initially with a first-year savings of $18,000, but especially for the ongoing savings of $20,000 annually. The added benefits of a digital system for the office and the patients make the decision a slam dunk.

Dr. Bradley Dykstra is a general dentist in private practice in Hudsonville, Mich., where he employs state-of-the-art dental technology, including digital radiography, dental lasers, intraoral and extraoral cameras, digital imaging, and clinical practice management software. He is a graduate of the University of Michigan"s dental school and later received his MBA from Grand Valley State University. Dr. Dykstra speaks across the United States on digital radiography and integrating technology into the dental office, as well as consulting through his company, Anchor Dental Consulting. Reach him at (616) 669-6600, or by e-mail at drdykstra@anchordentalconsulting.com.

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