Looking to purchase new equipment for your practice but not sure it makes financial sense to do so? Let’s review how to calculate “Breakeven”? for? equipment you purchase by working through an example with these assumptions:
Revenue:
- Each exam with this new equipment is reimbursed at $40 each
- Attainable capacity is 4 exams per hour
- Demand is 20 exams per week, or 1,000 exams per year
Fixed Costs:
- The equipment costs $55k
- Its useful life is 10 years
- A loan for $55k, at 5% interest and a 10-year term, is $7k per year
- Maintenance and other costs run at $3k per year
Variable Costs:
- The cost of a MA, RN or Tech to operate the equipment is $60 per hour
Breakeven
Assuming your practice can schedule patients to treat 4 patients per hour, then the revenue from exams using this equipment will be $160 per hour.? The only variable cost is labor of $60 per hour, so that leaves profit of $100 per hour, or $25 per exam.? With fixed costs running at $10k per year ($7k for the loan payments and $3k for maintenance and other costs), your practice will breakeven after the 400th exam of the year.? The remaining 600 exams all represent profit.
What happens if your practice only ends up treating 2 patients per hour?? Revenue dips to just $80 per hour while the variable cost for labor remains steady at $60 per hour.? That leaves a profit of just $20 per hour, or $10 per exam.? Breakeven jumps to 1,000 exams, which means there would be no profit from adding this equipment to your practice and treating just 2 patients per hour.